Court dismisses criminal writ petitions challenging Section 138 NI Act, emphasizes payment obligations during winding-up.

The court dismissed all criminal writ petitions, ruling that proceedings under Section 138 of the Negotiable Instruments Act could not be quashed solely based on winding-up petitions. It held that there was no legal bar for the companies to make payments during the winding-up process, and failure to pay within the notice period constituted an offense. The court directed the accused to appear before the Metropolitan Magistrate Courts on specified dates.

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Issues Involved:
1. Whether the proceedings under Section 138 of the Negotiable Instruments Act should be quashed.
2. Whether undertakings given by the petitioners to the Metropolitan Magistrate Courts to pay amounts should be quashed.
3. Interpretation of Section 536(2) read with Section 441(2) of the Companies Act in relation to Section 138 of the Negotiable Instruments Act.
4. Whether the presentation of a winding-up petition creates a legal bar to payment under Section 138 of the Negotiable Instruments Act.
5. The effect of a subsequent winding-up order on the proceedings under Section 138 of the Negotiable Instruments Act.

Detailed Analysis:

1. Quashing of Proceedings under Section 138 of the Negotiable Instruments Act:
The petitioners argued that the proceedings under Section 138 of the Negotiable Instruments Act should be quashed because, under Section 536(2) of the Companies Act, any disposition of property after the commencement of winding up is void. They claimed that making payments would be void under Section 536(2), thus there was no "failure to make payment" under Section 138. The court held that Section 536(2) does not create an immediate bar on making payments upon the mere presentation of a winding-up petition. The transactions become void only upon the passing of a winding-up order or the appointment of a Provisional Liquidator. Therefore, there was no legal disability preventing the company from making payments within the 15-day notice period under Section 138.

2. Quashing of Undertakings Given to Metropolitan Magistrate Courts:
The petitioners also sought to quash undertakings given to the courts to pay the amounts due. The court noted that the companies had made payments to some creditors even after the presentation of winding-up petitions, indicating that they did not consider themselves legally barred from making payments. The court found no basis to quash the undertakings, as the companies had voluntarily given these undertakings and had made payments despite the pending winding-up petitions.

3. Interpretation of Section 536(2) and Section 441(2) of the Companies Act:
The court examined the interpretation of Section 536(2) read with Section 441(2) of the Companies Act. It concluded that these sections do not create an immediate bar on making payments upon the presentation of a winding-up petition. The dispositions of property become void only upon the passing of a winding-up order or the appointment of a Provisional Liquidator. The court emphasized that the company could continue its business and make necessary payments for its survival during the pendency of the winding-up petition.

4. Legal Bar to Payment under Section 138 of the Negotiable Instruments Act:
The court held that there was no legal bar preventing the company from making payments under Section 138 of the Negotiable Instruments Act merely because a winding-up petition had been presented. The court noted that the company and its directors could have applied to the court for an order protecting such payments even after a winding-up order was passed. The failure to make payment within the 15-day notice period under Section 138 constituted a "failure to make payment," and the offence was deemed committed.

5. Effect of Subsequent Winding-Up Order on Section 138 Proceedings:
The court rejected the argument that a subsequent winding-up order would absolve the company or its directors from the offence under Section 138. The court held that the offence was complete on the 15th day after receipt of the notice due to non-payment. A subsequent winding-up order or the appointment of a Provisional Liquidator would not affect the proceedings under Section 138, as the offence was already deemed committed before such an order was passed.

Conclusion:
The court dismissed all the criminal writ petitions, holding that the proceedings under Section 138 of the Negotiable Instruments Act could not be quashed merely because of the presentation of winding-up petitions. The court emphasized that the companies and their directors were not legally barred from making payments during the pendency of the winding-up petitions and that the offence under Section 138 was deemed committed due to non-payment within the 15-day notice period. The court directed the accused to appear before the respective Metropolitan Magistrate Courts on specified dates.

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