Winding up proceedings do not bar cheque dishonour prosecution where liability under the Negotiable Instruments Act has already arisen.

Pendency of a winding up petition, or even a subsequent winding up order, does not by itself bar prosecution of a company and its directors for dishonour of cheque under the Negotiable Instruments Act, 1881. Where the cheque was dishonoured, statutory notice was issued, and the payment default under section 138 had already arisen, winding up proceedings do not create a legal disability that defeats penal liability. The later winding up order does not erase an offence that was complete on failure to pay within the statutory period after notice. Quashing on the ground of pending winding up proceedings was therefore not maintainable.

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Issues: Whether the pendency of a winding up petition or a subsequent winding up order bars prosecution of a company and its director for dishonour of cheque under the Negotiable Instruments Act, 1881.

Analysis: The cheques were dishonoured and statutory notice was issued before the winding up order. The Court held that the mere presentation of a winding up petition does not create a legal disability preventing payment so as to defeat liability under section 138 of the Negotiable Instruments Act, 1881. Relying on the Supreme Court's authoritative pronouncement, the Court held that a company and its directors cannot avoid penal liability under section 138 on the ground that winding up proceedings were pending during the relevant period. The subsequent winding up order did not erase the offence that had already arisen on failure to pay within the statutory period after notice.

Conclusion: The pendency of winding up proceedings did not bar prosecution under section 138, and the petitions for quashing were not maintainable.

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