TMI Blog2000 (2) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... ve now to deal with the same question in this batch of appeals filed by special leave. 2. Though different cases now before us have differing facts we are not bothering ourselves with such differences. The common features in all the appeals, which alone are relevant for dealing with the aforesaid question, can be culled out from one of the appeals. The company involved in the said sample appeal will be referred to as the company . The cheque which the company issued bore the date 30-10-1996 and the amount covered by the cheque was Rs. 5,72,432. (There is a contention that the cheque was actually drawn much before that date.) When the cheque was presented for encashment the drawee bank dishonoured it on 26-12-1996. The payee of the cheque issued a notice to the company on 21-12-1996 calling upon it to pay the amount. As the company failed to pay the amount a complaint was filed before the magistrate on 29-1-1997 against the company and two of its directors for the offence under section 138. 3. The magistrate who took cognisance of the offence issued process to all the accused. It was then that the accused challenged the criminal proceedings by means of a writ petition filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for winding up having been presented, would also get affected as all such transactions would be void. Therefore, if this wide propositions were to be accepted then once a petition for winding up is presented, even without an order for winding up, there would be for all practical purposes closure of the company. All activities of the company would have to come to a standstill. If this were the law then unscrupulous parties could blackmail/pressurise all companies to succumb to unjustified demands by merely threatening to or presenting petitions for winding up. Conversely unscrupulous companies could avoid payment/discharge of its liabilities by having their own parties present bogus petitions for winding up. After one is dismissed another could be filed. In this manner, the company could avoid discharging its liabilities indefinitely if not permanently. If the law was that merely on the filing of a petition for winding up all disposition were void, it would lead to absurd or catastrophic results. In our view that can never be the legal position." 5. It was then argued before the Division Bench that the words in the winding up appearing in section 536(2) of the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntextually section 441(2) of the Companies Act is very relevant and hence that is also extracted here : "441. Commencement of winding up by court. (1) Where, before the presentation of a petition for the winding up of a company by the court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken. (2) In any other case, the winding up of a company by the court shall be deemed to commence at the time of the presentation of the petition for the winding up." 8. Three modes of winding up have been prescribed in Part VII of the Companies Act, ( vide section 425). First is, winding up by the court, next is voluntary winding up and the third is winding up by subjecting to the supervision of the court. 9. We need not bother ourselves with the first sub-section of section 536 of the Companies Act as it deals with a case of voluntarily winding up of the company, because none of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an consider the impact of the legislative direction in section 536(2) that any disposition of the property of the company made after the commencement of the winding up ( i.e., after the presentation of petition for winding up) shall be void. There are two important aspects here. First is that the word void need not automatically indicate that any disposition should be ab initio void. The legal implication of the word void need not necessarily be a stage of nullity in all contingencies. Black s Law Dictionary gives the meaning of the word void as having different nuances in different connotations. One of them is of course null, or having no legal force or binding effect . And the other is unable in law, to support the purpose for which it was intended . After referring to the nuances between void and voidable the Lexicographer pointed out the following : The word "void" in its strictest sense, means that which has no force and effect, is without legal efficacy, is incapable of being enforced by law, or has no legal or binding force, but frequently the word is used and construed as having the more liberal meaning of voidable . The word void is used in statutes in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Division Bench considered the scope of the sub-section and noticed that the principle had been borrowed from the English Companies Act. Hence, some of the English authorities were also referred to by Marten, CJ., who spoke for the Division Bench. The Learned judges stated thus : "Now here as regards section 227(2) the court has to steer a middle course between two extremes. On the one hand the words of the section are wide enough to include any sale or payment that a company may make after the date of the winding up petition. On that basis any business would practically have to be stopped if a petition was presented, because it would be unsafe to dispose of any of the company s assets. For instance, a mill company might not be able to buy a ton of coal for the use of its furnaces, or, on the other hand, it might not be able to sell any of its goods in the ordinary course of business. Consequently, the court has very properly laid down that, speaking generally, any bona fide transaction carried out and completed in the ordinary course of current business will be sanctioned by the court under section 227(2). On the other hand it will not allow the assets to be disposed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the English Companies Act, 1948 is almost the same as section 536(2) of the Indian Companies Act. Dispositions which could be validated are mentioned in the decision. The said decision was cited before us in order to emphasise the point that courts would be very circumspect in the matter of validating the payments and the interest of the creditors as well as the company would be kept uppermost in consideration. Be that so, the said decision is not sufficient to support the contention that disposition during the interregnum would be irretrievably void. 19. It is difficult to lay down that all dispositions of property made by a company during the interregnum between the presentation of a petition for winding up and the passing of the order for winding up would be null and void. If such a view is taken the business of the company would be paralysed, for, the company may have to deal with very many day-to-day transactions, make payments of salary to the staff and other employees and meet urgent contingencies. An interpretation which could lead to such catastrophic situation should be averted. That apart, if any such view is adopted, a fraudulent company can deceive any bona f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mb of the contention is tenuous as the debt would not cease to be legally enforceable merely because some body has filed a petition for winding up. 23. In this context, a reference to section 139 of the NI Act is indispensable. It reads thus : "139. Presumption in favour of holder It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability." Thus, when a cheque is received by a holder the court has to presume that (1) it is a cheque of the nature referred to in section 138; and (2) such cheque was received for the discharge of a legally enforceable debt or liability. It is a legislative mandate that the court should proceed with the assumption that such cheque was received for the discharge of a legally enforceable debt or other liability until the drawer proves that it is not so. The learned counsel contended that the burden of proof cast on the drawer of the cheque would stand discharged and the presumption would stand rebutted when it is shown that the company has been brought into winding up proceedings, as then no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be put forth while considering the question of sentence. 28. We, therefore, feel that the Legislature has thoughtfully used the word fails instead of other expressions as failure can be due to variety of reasons including his disability to pay. But the offence would be complete when the drawer fails to make payment within the stipulated time, whatever be the cause for such failure. 29. The drawer of the cheque can have different explanations for the failure to pay the amount covered by the cheque. But no such explanations would be sufficient to extricate him from the tentacles of the offence contemplated in the section. Perhaps some kind of explanations would be sufficient to alleviate the rigour of the offence which may be useful to mitigate the quantum of sentence to be imposed. But that is no ground for consideration at this stage. 30. For all the above reasons, we are not inclined to interfere with impugned judgment of the Bombay High Court. However, the learned counsel who argued for one of the appellants in this batch of appeals [Atash Industries (India) Ltd.] pointed out that an observation made by the Division Bench in the impugned judgment would cause pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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