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Issues: (i) whether the criminal proceedings could continue without leave of the court under section 171 of the Companies Act; (ii) whether the materials disclosed a sufficient case of cheating to justify continuation of the proceedings.
Issue (i): Whether the criminal proceedings could continue without leave of the court under section 171 of the Companies Act.
Analysis: The provision applies only to a suit or other legal proceeding against the company. The prosecution was directed against the petitioner in his personal capacity as manager of the bank and not against the bank itself. A bank, being a juridical person, could not in the circumstances be treated as the accused in a charge of cheating, and the pendency of liquidation did not make the criminal case one against the company.
Conclusion: Section 171 did not apply and the criminal proceedings were not liable to be stopped on that ground.
Issue (ii): Whether the materials disclosed a sufficient case of cheating to justify continuation of the proceedings.
Analysis: There was evidence that the petitioner represented that the cheque would be honoured if the complainant deposited a further sum, and there was also evidence that the bank was already in liquidation when the representation was made. These materials were enough to warrant framing of a charge at that stage, although they did not amount to proof of the offence.
Conclusion: A prima facie case of cheating was disclosed and the proceedings could continue.
Final Conclusion: The attempt to quash the criminal case failed, and the proceedings were allowed to go on.
Ratio Decidendi: Section 171 of the Companies Act bars continuation only of proceedings against the company itself, and a criminal prosecution against an individual officer for cheating is not such a proceeding.
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