Court affirms validity of complaints under Section 138 of Negotiable Instruments Act

The court upheld the validity of the complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, finding them legitimate due to the cheques being issued to discharge a pre-existing debt before the company's winding-up. It rejected claims of suppression of facts by the complainant and procedural irregularities in the issuance of process, emphasizing that liability under Section 138 persists despite the winding-up order. Impleading the Official Liquidator was deemed unnecessary, and the court dismissed the applications, directing the complaints to be decided on their merits by the Magistrate.

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Issues Involved:
1. Validity of the complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
2. Allegations of suppression of facts by the complainant.
3. Procedural irregularities in the issuance of process.
4. Impact of the winding-up order on the prosecution under Section 138 of the Negotiable Instruments Act, 1881.
5. Necessity of impleading the Official Liquidator in the complaints.

Issue-wise Detailed Analysis:

1. Validity of the complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881:
The applicants challenged the orders issuing process against them for offences under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The complaints were lodged due to the dishonour of cheques issued by M/s. Rangara Industries Private Limited (in liquidation) to M/s. Surajbhan Rajkumar Private Limited, as per the consent terms agreed upon during the winding-up proceedings. The court found that the complaints were valid as the cheques were issued in discharge of a legally enforceable debt incurred before the company was wound up.

2. Allegations of suppression of facts by the complainant:
The applicants argued that the complainant suppressed the fact that M/s. Rangara automatically stood wound up upon default in payment as per the consent terms. The court noted that the complainant did not suppress any material facts and that the winding-up order did not absolve the company or its directors from liability under Section 138 of the Negotiable Instruments Act, 1881.

3. Procedural irregularities in the issuance of process:
The applicants contended that in one of the complaints (CC No. 645/SS/2016), the process was issued before recording the verification statement of the complainant. The court examined the records and found that the verification statement was recorded on the same day the process was issued, indicating an inadvertent mistake in recording the date of the order. Thus, the alleged procedural irregularity was non-existent.

4. Impact of the winding-up order on the prosecution under Section 138 of the Negotiable Instruments Act, 1881:
The applicants argued that once the company was wound up, prosecution under Section 138 was legally untenable. However, the court referred to precedents, including the Supreme Court judgments in Kusum Ingots & Alloys Ltd. vs. Pennar Peterson Securities Ltd. and Pankaj Mehra vs. State of Maharashtra, which clarified that the liability under Section 138 persists despite the winding-up order. The court emphasized that the winding-up order does not render the debt unenforceable and that the company's failure to pay the cheque amount constitutes an offence under Section 138.

5. Necessity of impleading the Official Liquidator in the complaints:
The applicants claimed that without impleading the Official Liquidator, the complaints were not maintainable. The court referred to the Division Bench judgment in Indorama Synthetics (I) Limited vs. State of Maharashtra, which held that criminal complaints under Section 138 of the Negotiable Instruments Act, 1881, do not require the leave of the Company Court under Section 446 of the Companies Act, 1956. Thus, the impleadment of the Official Liquidator was not necessary.

Conclusion:
The court dismissed the applications, finding no merit in the applicants' contentions. It clarified that the observations were confined to the determination of the prayer to quash the complaints and that the learned Magistrate should decide the complaints on their merits, including considering the defence based on the consequences of the winding-up order. The rule was discharged with no costs.

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