TMI Blog1998 (7) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... struments Act, 1881, by Indian Arcylics Ltd., against Rama Fibres Ltd., and 11 others including the present petitioner Shri Anil Hada, who was the director of the said company and the accused R.K. Sharma, who, according to the complainant was the vice-president of the said company. The present petitioner was summoned as an accused by the learned Magistrate, First Class, Chandigarh. The petitioner, Shri Anil Hada, filed an application for discharge on the plea that since the company, i.e. , Rama Fibers Ltd., has been discharged, therefore, separate proceedings against him could not proceed and they should be dropped. This plea of the petitioner was denied by the respondent and it was maintained in the reply to the application that the complaint could proceed against the authorised signatory and other directors of the company if the company has been discharged. Vide the impugned order the learned Judicial Magistrate, First Class, Chandigarh, dismissed the application of the present petitioner finding no merit in the same for the reasons given in para. No. 7 of the impugned order, which is reproduced as under : "7. The only contention of learned defence counsel is that since the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under the scheme of the provisions of the Negotiable Instruments Act as contained in Chapter XVII, notice is also served upon the company. On the contrary, learned counsel appearing on behalf of the respondent submitted that the respondent has already challenged the finding of the magistrate when he has discharged the company from the liability. Apart from that, the present petitioner along with R.K. Sharma, was the signatory of the bounced cheque and his liability is always there and he cannot escape from the liability under the garb that the company has gone into liquidation. Counsel maintained that financial liability of the company is only for a limited period, when a debtor has the right to discharge the debt covered under the cheque. But once the statutory period for discharging the obligation expires, the financial liability converts into a criminal liability. The deeming provisions under section 141 of the Negotiable Instruments Act very much make all those persons liable, who were in charge of and were responsible to the company for the conduct of the business of the company. Counsel even submitted that these persons can individually be responsible though the company ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egotiable Instruments Act. Section 391 only deals with the power to compromise or make arrangements with creditors and members of the company. So far as the liability of the present petitioner is concerned, who is admittedly the signatory of the bounced cheque, cannot be escaped by any stretch of imagination. The words "legal proceedings" appearing in section 446 of the Companies Act should be deemed to be interpreted in the manner that criminal proceeding must be in relation to the assets of the company but proceedings under section 138 of the Negotiable Instruments Act are not in relation to the assets of the company. It is on account of the fact that a cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid. To give a very wider scope to the verdict "legal proceedings" would frustrate the provisions of section 138 of the Negotiable Instruments Act itself. In Gian Chand v. Amar Nath [1970] 40 Comp. Cas. 1158 (P H) the provisions of section 446 were interpreted by this court and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 446, the proceedings must be for the enforcement of something in the nature of a right against the assets of a company and not one in vindication of public interest. Moreover, the special provisions contained in the Negotiable Instruments Act, regarding cheques would prevail over the provisions contained in the Companies Act. Counsel for the petitioner relied upon Harish C. Raskapoor v. Jaferbhai Mohmedbhai Chhatpar [1989] 65 Comp. Cas. 163 (Guj.) and submitted that the word "proceeding" occurring in section 446 of the Companies Act should include not only civil proceedings but also criminal proceedings. The proceedings under section 138 of the Negotiable Instruments Act are quasi-criminal in nature and, therefore, the present petitioner cannot be prosecuted. I have gone through this citation and to my mind this will not come to the rescue of the present petitioner. Even if it is assumed for the sake of argument that the word "proceeding" is given wide import and is taken that it would include in its sweep criminal proceedings also, still the benefit cannot go to the petitioner because the petitioner, who was the director of the company, could not get ..... X X X X Extracts X X X X X X X X Extracts X X X X
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