2015 (3) TMI 1424 - HC - Indian Laws

Petitions dismissed, court clarifies on staying criminal proceedings under Negotiable Instruments Act

The court dismissed the petitions, directing the lower court to address the jurisdiction matter following the Supreme Court's guidelines and consider the ... Dishonor of Cheque - seeking stay on proceedings - whether proceedings under section 138 of the Negotiable Instruments Act has to be stayed under section 446 of the Companies Act, 1956, which is replaced by sections 279 and 280 of the Companies Act, 2013? HELD THAT:- This question has been considered by the Division Bench of this court in Jose Antony Kakkad v. Official Liquidator, High Court of Kerala [2000 (1) TMI 866 - HIGH COURT OF KERALA] and observed that, the proceedings under section 138 of the Negotiable Instruments Act cannot be stayed invoking the power under section 446 of the Companies Act, 1956. As regards the second accused is concerned, if the petitioner can convince the court below that, he is unable to move on account of his illness and he is unable to understand things, then court below is directed to consider that application and consider the question of jurisdiction, if it is raised in view of Dashrath Rupsingh Rathod v. State of Maharashtra [2014 (8) TMI 417 - SUPREME COURT] in his absence and he may be permitted to appear through counsel and pass appropriate order on that aspect in accordance with law. As regards the third accused is concerned, if she surrenders before the court below and moves for bail, then court below is directed to recall the warrant and after granting bail, permit her also to represent through counsel and consider the question of maintainability in view of Dashrath Rupsingh Rathod v. State of Maharashtra [2014 (8) TMI 417 - SUPREME COURT] decision of the hon'ble Supreme Court. Petition dismissed. Issues Involved:1. Applicability of Section 446 of the Companies Act, 1956, and Sections 279 and 280 of the Companies Act, 2013, to criminal proceedings under Section 138 of the Negotiable Instruments Act.2. Jurisdiction of the Magistrate Court in light of the Supreme Court decision in Dashrath Rupsingh Rathod v. State of Maharashtra.3. Consideration of the health condition of the accused regarding court appearances.Detailed Analysis:1. Applicability of Section 446 of the Companies Act, 1956, and Sections 279 and 280 of the Companies Act, 2013, to Criminal Proceedings under Section 138 of the Negotiable Instruments Act:The petitioners, accused Nos. 2 and 3, argued that under Section 446 of the Companies Act, 1956, and Sections 279 and 280 of the Companies Act, 2013, no proceedings can be initiated or continued against a company under liquidation without the leave of the company court. They contended that the Magistrate had no jurisdiction to entertain the complaints as the allegations pertained to the company's actions, and they were merely acting as representatives.The respondents countered that the 'suit or other proceedings' mentioned in Section 446 of the Companies Act, 1956, and Section 279 of the Companies Act, 2013, do not encompass criminal proceedings under Section 138 of the Negotiable Instruments Act. They cited the decision in Jose Antony Kakkad v. Official Liquidator, High Court of Kerala, which clarified that criminal proceedings under Section 138 are not in relation to the assets of the company and therefore, cannot be stayed under Section 446.The court reaffirmed this position, stating that criminal proceedings under Section 138 of the Negotiable Instruments Act are not in respect of the assets of the company and thus cannot be stayed by invoking Section 446 of the Companies Act. The court referred to the Division Bench's decision in Jose Antony Kakkad, emphasizing that the proceedings under Section 138 are aimed at the conviction or acquittal of the accused and not the recovery of any amount covered by the dishonored cheques.2. Jurisdiction of the Magistrate Court in Light of the Supreme Court Decision in Dashrath Rupsingh Rathod v. State of Maharashtra:The court acknowledged that the jurisdiction issue must be examined in light of the Supreme Court's decision in Dashrath Rupsingh Rathod v. State of Maharashtra. According to this decision, the complaint is maintainable only at the place where the cheque stands dishonored. The Supreme Court directed that cases where the recording of evidence has commenced would continue at the existing court, while others should be filed in the proper court with territorial jurisdiction.The court instructed the lower court to determine whether the drawee bank is within its jurisdiction and if the evidence has been started, as per the Supreme Court's guidelines.3. Consideration of the Health Condition of the Accused Regarding Court Appearances:The petitioners submitted that the second accused is bedridden and in a coma, making it impossible for him to appear in court. The court directed that if the petitioner can demonstrate the second accused's inability to move or understand due to illness, the lower court should consider this application. The lower court should permit the second accused to be represented through counsel and decide the jurisdiction issue in his absence.For the third accused, the court directed that if she surrenders and moves for bail, the lower court should recall the warrant, grant bail, and allow her to be represented through counsel. The lower court should then consider the maintainability of the case in light of the Dashrath Rupsingh Rathod decision.Conclusion:The petitions were dismissed with directions to the lower court to consider the jurisdiction issue based on the Supreme Court's guidelines and the health condition of the second accused. The proceedings under Section 138 of the Negotiable Instruments Act cannot be stayed by invoking Section 446 of the Companies Act.