Gujarat High Court
Rajesh Tarachand Sheth vs M/S High Tech Litho Private Limited ... on 2 February, 2022
Author: Nikhil S. Kariel
Bench: Nikhil S. Kariel
R/SCR.A/4310/2018 ORDER DATED: 02/02/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION NO. 4310 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4306 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4305 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4303 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4289 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4288 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4287 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4285 of 2018
With
R/SPECIAL CRIMINAL APPLICATION NO. 4283 of 2018
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RAJESH TARACHAND SHETH & 4 other(s)
Versus
M/S HIGH TECH LITHO PRIVATE LIMITED THROUGH RAMAKANT R.
SHUKLA, MANAGER ADMINISTRATION) & 3 other(s)
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Appearance:
MR MAULIK NANAVATI for NANAVATI & CO.(7105) for the Applicant(s) No. 1,2,3,4,5
MR PATHIK M ACHARYA(3520) for the Respondent(s) No. 4
MR SUDHIR NANAVATI, SR. ADVOCATE for NANAVATI & NANAVATI(1933) for the
Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2
MS M D MEHTA, APP for the Respondent(s) No. 3
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CORAM:HONOURABLE MR. JUSTICE NIKHIL S. KARIEL
Date : 02/02/2022
COMMON ORAL ORDER
1. Heard learned Advocate Mr. Maulik Nanavati for Nanavati and Co. for the petitioners, learned APP Ms. M.D. Mehta for the respondent No.3- State, learned Senior Advocate Mr. Sudhir Nanavati for Nanavati and Nanavati Advocates for the respondent No.1 - original complainant and learned Advocate Mr. Pathik Acharya for Official Liquidator i.e. respondent No.4 attached with the Bombay High Court.
2. Since the issue involved in all these petitions is common, with Page 1 of 7 Downloaded on : Sun Apr 24 11:39:04 IST 2022 R/SCR.A/4310/2018 ORDER DATED: 02/02/2022 consent of learned Advocates for the parties, all these petitions are taken up for hearing together.
3. By way of these petitions the petitioners challenge the orders dated 02.5.2018 under Exh Nos. 44, 44, 40, 39, 44, 53, 38, 44 and 44 in Criminal Complaint Nos. 425 of 2016, 420 of 2016, 419 of 2016, 421 of 2016, 426 of 2016, 422 of 2016, 418 of 2016, 427 of 2016 and 423 of 2016, respectively passed by the Court of Additional Chief Judicial Magistrate at Vapi.
4. As stated hereinabove, since the issue involved in all these petitions is common, this Court will relate the facts of one case i.e. Special Criminal Application No. 4310 of 2018 for the sake of convenience.
5. It appears that a complaint under Section 138 of the Negotiable Instruments Act, 1881 came to be filed by M/s. High Tech Litho Private Limited (Respondent No.1) against M/s. Sharp Industries Limited (Respondent No.2) and its Directors, who are petitioners before this Court. It further appears that subsequent to filing of the complaint but prior to framing of charge, the accused company M/s. Sharp Industries Limited, was ordered to be wound up by the High Court of judicature at Bombay in Company Petition Nos. 171 of 2013 and 224 of 2013.
6. Pursuant to such order of winding up and appointment of Provisional Liquidator, the petitioners as Directors of the company in liquidation i.e. M/s. Sharp Industries Limited had submitted an application under Exh. 44 praying for stay of the criminal case inter alia relying upon bar contained in Section 279 of the Companies Act, 2013 to continuation of the legal proceeding and also to implead Official Liquidator to represent the accused No.1 company in the criminal case for the purpose of recording plea on behalf of the company. Vide the impugned order the learned Magistrate had been pleased to reject the said application.
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7. At this stage, it would be pertinent to mention that while a contention had been raised before the learned Magistrate that there would be a bar for further continuation of proceedings under Section 138 of the Negotiable Instruments Act, but it appears that in view of the settled proposition of law in this regard, the petitioners have not raised such challenge before this Court. On the contrary, it appears upon perusal of the Para 2.6 of the petition that the petitioners have very specifically stated that there is no bar or restriction to continuation of criminal proceedings against the company or its Directors upon an order of winding up of the company being passed and Official Liquidator being appointed.
8. The only issue that is contended on behalf of the petitioners being that since Section 313 of the Companies Act, 2013 envisaging that upon appointment of a liquidator pursuant to an order of admission of winding up passed by the competent Company Court, all the powers of the Board of Directors and of the managing or full-time Directors and Managers, if any, shall cease, except for the purpose of giving notice of such appointment of the liquidator of the company. It is contended in this regard that the petitioners who were Directors of the company in liquidation would cease to be in management of the company immediately on passing order of winding up by the High Court of Bombay. Thus, the petitioners as Directors would be precluded from appearing for and on behalf of the company in liquidation. It is further urged that the Official Liquidator appointed by the Company Court would only be legally competent to appear for and on behalf of the company in liquidation. In context of the present scenario, it is submitted that the Directors of the company (prior to liquidation) could not be directed to record plea for and on behalf of the company, since they would be precluded under the law from doing so.
9. As against the same, learned Senior Advocate Mr. Sudhir Nanavati Page 3 of 7 Downloaded on : Sun Apr 24 11:39:04 IST 2022 R/SCR.A/4310/2018 ORDER DATED: 02/02/2022 assisted by learned Advocate Mr. Vaibhav Shukla for the respondent No.1 - M/s. High Tech Litho Private Limited, has fairly submitted that looking to the provisions of Section 313 of the Companies Act, 2013, once the order of liquidation is passed and the Official Liquidator is appointed as a Provisional Liquidator, in no proceedings the erstwhile Directors can represent the company in their capacity as the Directors of that company. Learned Senior Advocate has further submitted that as far as the company in liquidation i.e. M/s. Sharp Industries Limited is concerned, he has no objection so far as learned Magistrate issues summons to the Provisional Liquidator to represent the accused No.1 company for recording plea on behalf of the company or any other measure as deemed necessary and expedient by the Court.
10. Learned Advocate Mr. Pathik Acharya appearing for the Official Liquidator appointed by the Bombay High Court has submitted that his client is now in charge of the affairs of the company in liquidation, and that his client will abide by any directions that may be issued by this Court. Learned Advocate Mr. Acharya has relied upon the judgment of Cosmopolitan Hotels Ltd. passed in Official Liquidator Report No. 618 of 2015 by the Bombay High Court (2016 SCC Online Bom 7743), more particularly observations in the said case in Para 5 which is reproduced hereunder :
"5. As for personal presence of the Official Liquidator in a criminal prosecution, it is important to consider first the position of an Official Liquidator vis-a-vis the company in liquidation. When a company is ordered to be wound up, a liquidator is appointed, whose job it is to conduct the proceedings in winding up of the company and perform such duties in reference thereto as the Company Court may impose (Section 451 of the Companies Act, 1956). So far as the Companies Act relates to the winding up of a company, there has to be an Official Liquidator who is appointed under Section 448. On a winding up order being made in respect of the company, the Official Liquidator becomes, by virtue of his office, the liquidator of the company (Section 449). The Companies Act provides for various functions to be performed by the Official Page 4 of 7 Downloaded on : Sun Apr 24 11:39:04 IST 2022 R/SCR.A/4310/2018 ORDER DATED: 02/02/2022 Liquidator in the course of winding up. For example, based on a statement of affairs to be made under Section 454, he presents a report to the Court under Section 455, takes into his custody the property, affects and actionable claims of the company. He has powers to institute or defend any suit or prosecution, whether civil or criminal, in the name and and on behalf of the company, carry on its business for beneficial winding up, sell property, raise money on the security of any property of the company and do all other things as may be necessary for winding up the affairs of the company and distributing its assets amongst creditors and beneficiaries (Section 457). Subject to the provisions of the Act, the Official Liquidator ascertains the wishes of the creditors and contributories and uses his discretion in the administration of the assets of the company in liquidation and the distribution thereof amongst the latter (Section 460). All these powers to be exercised by the Official Liquidator are, however, subject to the control of the Company Court, though the court may, by order, provide that the liquidator may exercise any of the powers without the sanction or intervention of the court (Section 458). In short, the Official Liquidator is an officer appointed for conducting the winding up of the company under directions and supervision of the Company Court. His position cannot be likened to directors or principal officers of the company insofar as any civil or criminal liability of the company arising prior to the winding up is concerned. Merely because he has the power to defend or prosecute any civil or criminal proceedings for and on behalf of the company in liquidation in respect of any such liability (which has arisen prior to winding up), that too subject to the directions and control of the company court, no court can seek to either prosecute him as a representative of the company or insist on his personal appearance as such representative. In any event, in a case where personal presence of the Official Liquidator may be necessary, either for defending or prosecuting such proceedings, the court, which requires such presence, ought to seek appropriate leave or directions from the Company Court, since all acts of the Official Liquidator in defending or prosecuting proceedings are subject to the control of the Company Court and are with leave of that court.
Even in the case of Firth (India), this Court held that in a rare case "if the Liquidator himself is to be held liable for acts of the Company there is always power in him to seek permission of the Company Court to prosecute or defend such prosecution." There have been cases where criminal prosecutions have been permitted by this Court against companies in liquidation, but without the official Liquidator being required to remain present personally in the proceedings (See for example, Southern Engineers v. Official Liquidator of Vibha Mechano Electric India Pvt. Ltd.)"
11. Learned APP Ms. M.D. Mehta for the respondent-State has submitted that the dispute is essentially private in nature and does not really Page 5 of 7 Downloaded on : Sun Apr 24 11:39:04 IST 2022 R/SCR.A/4310/2018 ORDER DATED: 02/02/2022 concern the Government, nevertheless, the prosecuting arm of the Government will render all legal assistance as is directed by the Court.
12. Learned Advocate Mr. Maulik Nanavati for the petitioners has submitted that he has no objection to passing an order by this Court directing the Official Liquidator to represent the accused No.1 company in the criminal proceedings, subject to the Official Liquidator taking appropriate permission envisaged in law. Learned Advocate Mr. Maulik Nanavati has also expressed no objection to issuance of a direction for expeditious completion of trial.
13. Having regard to the discussion and observations as hereinabove, the present petitions are disposed of with the following directions :
(1) The orders of the learned Magistrate dated 02.5.2018 passed under Exh Nos. 44, 44, 40, 39, 44, 53, 38, 44 and 44 in Criminal Complaint Nos. 425 of 2016, 420 of 2016, 419 of 2016, 421 of 2016, 426 of 2016, 422 of 2016, 418 of 2016, 427 of 2016 and 423 of 2016, respectively, are not interfered with.
(2) The learned Trial Court shall join the Official Liquidator attached with the Bombay High Court as representing the accused No.1 - M/s. Sharp Industries Limited in the criminal complaints.
(3) The Official Liquidator shall record his plea for and on behalf of the company in liquidation - accused No.1 M/s. Sharp Industries Limited and for such purpose and for any other purpose in relation to prosecuting the complaints as representing accused No.1, the Official Liquidator shall approach the Bombay High Court with appropriate application for seeking leave of the Bombay High Court.Page 6 of 7 Downloaded on : Sun Apr 24 11:39:04 IST 2022
R/SCR.A/4310/2018 ORDER DATED: 02/02/2022 (4) Since the complaints were registered in the year 2013, the learned Trial Court shall make appropriate endeavour to conduct and complete the trial with regard to the criminal complaints as expeditiously as possible, but not later than one year from the date of receipt of this order.
14. It is clarified that the learned Trial Court shall proceed against the erstwhile Directors of the accused No.1 company in liquidation - M/s. Sharp Industries Limited in their capacity as Directors of the company as well as in their individual capacity if so alleged in the complaints. The erstwhile Directors shall also record their plea in their capacity as Directors of the company at the relevant point of time or in their individual capacity if so alleged in the complaints, if the plea is not recorded so far.
15. It is further clarified that this Court has not entered into the merits of the matters and whereas all the observations and directions hereinabove, are with regard to the issue in question and whereas this Court has not entered into the merits of liability of any of the parties with regard to the cheque amount.
16. With the above observations and directions, the present petitions are disposed of.
(NIKHIL S. KARIEL,J) BDSONGARA Page 7 of 7 Downloaded on : Sun Apr 24 11:39:04 IST 2022