R. Rajendra Babu, J.
1. This appeal is at the instance of the applicant in C. A. No. 257 of 1998 in C. P. No. 20 of 1994 on the file of this court (company court). The applicant, the managing director of Belhouse Associates (P.) Ltd., who was an accused in C. C. No. 456 of 1996 pending before the Additional Chief Judicial Magistrate's Court, Ernakulam, filed C. A. No. 257 of 1998 before the company court to stay the above proceedings invoking Section 446 of the Companies Act, 1956. The company court dismissed the above application and the above order is under challenge in this appeal.
2. The second respondent herein (complainant) filed C. C. No. 456 of 1996 before the Additional Chief Judicial Magistrate's Court, Ernakulam, against the applicant and Belhouse Associates Pvt. Ltd., a company under liquidation, for the commission of an offence under section 138 of the Negotiable Instruments Act. It was alleged that a cheque for Rs. 1,12,000 issued by the accused on January 19, 1996, towards discharge of a liability to the complainant for the electrical works done by them, was dishonoured when presented for encashment, due to the insufficiency of funds in the accounts in the name of the accused and they had not cared to pay the amount in spite of demand through registered notice. Accordingly, the complainant filed the complaint after complying with all the legal formalities.
3. The first accused in the complaint Belhouse Associates Pvt. Ltd. is a company under liquidation as per the order passed by the company court in C. P. No. 20 of 1994 and the official liquidator had been appointed as liquidator of the company. According to the appellant he issued the cheque as the managing director of the company and as there was no allegation made personally against him, the liability under C. C. No. 456 of 1996 was entirely upon the company and as such the entire proceedings of the case are to be stayed under Section 446 of the Companies Act. The official liquidator filed an objection contending that the proceedings cannot be stayed under Section 446 of the Companies Act, and similar applications in M. C. A. Nos. 106 and 109 of 1990 and 155 of1994 in C. P. Nos. 54 and 57 of 1989 were dismissed by this court by its order dated June 12, 1997. The company court after hearing the appellant and the official liquidator held that Section 446 of the Companies Act cannot be attracted in criminal proceedings where the assets of the company are not involved and the proceedings pending against the accused were only in respect of the commission of the offence and the punishment thereon. Accordingly, the petition was dismissed and the above order is now under challenge.
4. Heard, learned counsel for the appellant and the learned official liquidator.
5. Admittedly the company, Belhouse Associates Pvt. Ltd., was under liquidation and the official liquidator was appointed as the liquidator of the company. The second respondent filed C. C. No. 456 of 1996 before the Additional Chief Judicial Magistrate's Court, Ernakulam, alleging the commission of an offence under section 138 of the Negotiable Instruments Act against the company and the appellant as accused Nos. 1 and 2 respectively. A cheque issued by the company and signed by the appellant as the managing director of the company was dishonoured for want of sufficient funds in the accounts of the company. Learned counsel for the appellant argued that the company was under liquidation and no personal allegations were made in the complaint against the appellant and the liability in the proceedings pending before the Chief Judicial Magistrate's court was only against the company under liquidation and hence the proceedings were liable to be stayed under Section 446 of the Companies Act. The official liquidator contended that the allegations in the complaint were only in respect of the criminal liability punishable under section 138 of the Negotiable Instruments Act and as no claim or allegation was made against the assets of the company under liquidation, the provisions under Section 446 of the Companies Act cannot be attracted. It would be beneficial to extract Section 446 of the Companies Act. Section 446 reads :
'446. Suits stayed on winding up order.--(1) When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of winding up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose.
(2) The court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of-
(a) any suit or proceedings by or against the company ;
(b) any claim made by or against the company (including claims by or against any of its branches in India) ;
(c) any application made under section 391 by or in respect of the company ;
(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company ;
whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.
(3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court.
(4) Nothing in Sub-section (1) or Sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.'
6. Learned counsel for the appellant argued that the expression 'other legal proceedings' in Section 446 of the Companies Act is wide enough to include all legal proceedings including criminal proceedings within the ambit of Section 446 and hence the proceedings initiated against the appellant under section 138 of the Negotiable Instruments Act have to be stayed. In support of the above argument he placed reliance on a decision of this court in Prof. Narayanan Kutty (P.) v. Official Liquidator [1998] 1 KLJ 656 ; [1999] 96 Comp Cas 418. There a Division Bench of this court held (page 420) :
'Section 446 of the Act deals with suits stayed on winding up order. When a winding up order has been made or an official liquidator is appointed as provisional official liquidator, no suit or other legal proceedings shall be commenced or if pending on the date of the winding up order, shall be proceeded with against the above, except by a leave of the court and subject to such terms as the court impose. The court which is winding up the company, shall have the jurisdiction to entertain or dispose of any suit or proceeding by or against the company, or any claim made by or against the company, or any application made under section 391 by or in respect of the company and also decide any question of priorities or any other question.'
7. That was a case where an arrest warrant issued by the Consumer Disputes Redressal Forum, Kozhikode, against Professor P. Narayanan Kutty (the appellant) who was the managing director of a company under liquidation. A complaint had been filed before the Consumer Disputes Redressal Forum against Professor P. Narayanan Kutty under the provisions of the Consumer Protection Act. There this court permitted Professor Narayanankutty to make an application under Section 446 of the Companies Act and to prosecute thesame by placing all the materials before the company court, and till the above petition was disposed of, the arrest of Professor P. Narayanan Kutty was stayed. In the above decision the question whether the criminal proceedings pending before criminal courts can be stayed under Section 446 of the Companies Act was not considered. A complaint filed under the Consumer Protection Act cannot be equated to a complaint as defined under section 2(d) of the Criminal Procedure Code. A complaint filed before the Consumer Disputes Redressal Forum is not for imposing any punishment, but it is intended only to claim compensation. Hence the above decision is not of any avail to resolve the controversy in the present case.
8. The learned official liquidator argued that the proceedings envisaged under Section 446 of the Companies Act did not include 'all proceedings', but it included proceedings only against the assets of the company and it did not take in all criminal proceedings. It was further argued that the penal proceedings envisaged under section companies a of the Negotiable Instruments Act regarding the dishonour of the cheque would prevail over the provisions contained in the Companies Act. In support of the above argument learned counsel placed reliance on decisions of this court as well as the Supreme Court. The Supreme Court had considered the scope of Section 446 of the Companies Act vis-a-vis Section 41 of the Life Insurance Act in Damji Valji Shah v. Life Insurance Corporation of India [1965] 35 Comp Cas 755 ; AIR 1966 SC 135, and held that the provisions of the special Act, viz., the Life Insurance Corporation Act will override the provisions of the general Act, viz., the Companies Act which was an Act relating to companies in general. The question whether an assessment on a wound up company under the Income-tax Act can be interfered with under Section 446 of the Companies Act was considered by the Supreme Court in S. V. Kondaskar, Official Liquidator and Liquidator of the Colabo Land and Mills Co. Ltd. v. V. M. Deshpande, ITO [1972] 42 Comp Cas 168 ; AIR 1972 SC 878. There it was held (page 180) :
'The expression 'other legal proceeding' in sub-section (1) and the expression 'legal proceeding' in sub-section (2) of Section 446 of the Companies Act convey the same sense and the proceedings in both the subsections must be such as can appropriately be dealt with by the winding up court. The Income-tax Act is a complete code and it is particularly so with respect to the assessment and reassessment of income-tax. The fact that after the amount of tax payable by an assessee has been determined or quantified its realisation from a company in liquidation is governed by the Act because the income-tax payable also being a debt has to rank pari passu with other debts due from the company does not mean that the assessment proceeding for computing the amount of tax must be held to be such other legal proceedings as can only be started or continued with the leave of the liquidation court under Section 446 of theAct. The liquidation court cannot perform the functions of Income-tax Officers while assessing the amount of tax payable by the assessees even if the assessee be the company which is being wound up by the court.'
9. In B. V. John v. Coir Yarn and Textiles Ltd. [1960] 30 Comp Cas 162 ; AIR 1960 Ker 247, this court held that Section 446 of the Companies Act can have no application to proceedings pursuant to a reference under section 10 of the Industrial Disputes Act. In Joshi Trading Co, P. Ltd. v. Essa Ismail Sait [1980] 50 Comp Cas 801 (Ker) a single judge of this court held that the winding up court has no jurisdiction to decide matters which are to be decided under the Kerala Building (Lease and Rent Control) Act. There it was further held that a proceeding for eviction not being a proceeding which can be appropriately dealt with by the winding up court, does not come under the category of 'other legal proceeding' in Section 446 and, therefore, leave of the winding up court was not necessary for proceeding with a petition filed against a company in liquidation under the Kerala Buildings (Lease and Rent Control) Act. In State of Keralu v. Official Liquidator, Palai Central Bank [1987] 62 Comp Cas 742 ; [1988] 1 Comp LJ 60 (Ker) a Division Bench of the court had considered the validity of an order passed by the company court declaring an assessment made by the agricultural income-tax authorities as null and void. There it was held (headnote) :
'... company court in dealing with an application under Section 446 of the Companies Act, 1956, has no jurisdiction to embark upon an investigation into the correctness or legality of an order of assessment. That is the matter which has to be considered by the appropriate authorities or by the High Court on a reference or by the Supreme Court in an appeal from the decision of the High Court. The jurisdiction of the company court in such matters is confined only to the question whether the debt arising from the orders of assessment being an unsecured debt, is one which is payable in terms of the relevant statutory provisions. The debt in question being an unsecured debt ranked pari passu with other debts in the order of preference to be applied in regard to the payment of debts. It is to that end that jurisdiction is conferred upon the liquidation court in matters arising under Section 446. On the facts, the company court was held to have exceeded its jurisdiction in the matter of declaration as to the validity of assessment order.'
10. The question whether the criminal proceedings against an employee of the company for cheating and for other offences can be proceeded in a criminal court was considered by the Punjab and Haryana High Court in Gian Chand v. Amar Nath [1970] 40 Comp Cas 1158. There it was held (headnote) :
'Section 446 of the Companies Act, 1956, only bars proceedings against the company where a winding up order has been passed or theofficial liquidator has been appointed as provisional liquidator except by leave of the court. This provision does not bar criminal proceedings against employees of the company for cheating or other offences. Where criminal proceedings for cheating are not against the company but against the manager or directors of the company, leave of the court is not necessary as the proceedings cannot be said to be against the company.'
11. The question whether the proceedings pending before a criminal court under Section 138 of the Negotiable Instruments Act are liable to be stayed under Section 446 of the Companies Act was considered by a learned single judge of this court in K. P. Devassy v. Official Liquidator [1997] 90 Comp Cas'438 ; [1997] 2 KLJ 243. There C. S. Rajan J. held that though the expression 'legal proceedings' in Section 446 of the Companies Act is wide enough to include criminal prosecution also, such criminal proceedings must be in relation to the assets of the company, and, as the proceedings under Section 138 of the Negotiable Instruments Act are not in respect of the assets of the company, Section 446 has no application and the proceedings cannot be stayed invoking' Section 446 of the Companies Act. A consideration of the above decision would make it clear that the expression 'other legal proceedings' in Section 446 of the Companies Act does not take in all proceedings and the proceedings under the special Act have an overriding effect over the general provisions under the Companies Act. The object of winding up of a company by the court was to facilitate the protection and realisation of its assets with a view to ensure an equitable distribution thereof among those entitled. Once the court has taken the assets of a company under its control or has passed an order for its being wound up, in the ordinary course, it will not be proper to allow proceedings to be started or continued against the company. Section 446 is intended to avoid multiplicity of proceedings and to safeguard the assets of a company against wasteful or expensive litigation in regard to matters capable of being determined expeditiously and effectively by the winding up court itself. Though the words 'legal proceedings' in Section 446 of the Companies Act is wide enough to take in criminal proceedings also, such criminal proceedings must be in relation to the assets of the company. Criminal proceedings which are not in respect of the assets of the company but end in the conviction or acquittal of the accused, cannot be stayed under Section 446 of the Companies Act. The proceedings under Section 138 of the Negotiable Instruments Act can end only in the conviction or acquittal of the accused in the case and no recovery of any amount covered by the dishonoured cheques can be made in the criminal proceedings. As the criminal proceedings under Section 138 of the Negotiable Instruments Act are not in respect of the assets of the company, the proceedings pending in the criminal courts cannot be stayed under Section 446 of the Companies Act. Hence the proceedings initiated against the appellant under Section 138 ofthe Negotiable Instruments Act before the criminal court cannot be stayed invoking Section 446 of the Companies Act.
12. The official liquidator further argued that Section 141 of the Negotiable Instruments Act in respect of the offence committed by a company or by its directors or employees were incorporated in Chapter XVII of the Negotiable Instruments Act fully knowing about Section 446 of the Companies Act and as such the above provisions in the Negotiable Instruments Act will have an overriding effect on Section 446 of the Companies Act. Section 141 of the Negotiable Instruments Act reads ;
'141. Offences by companies.--(1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in Sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.'
13. Section 138 to Section 142 in Chapter XVII was introduced in the Negotiable Instruments Act by the Central Act 66 of 1988 with effect from April 1, 1989. The above provisions were incorporated in the Negotiable Instruments Act with the intention of safeguarding and sustaining the credibility of commercial transactions and those provisions were introduced while Section 446 of the Companies Act was in force. When specific provision has been made with respect to the commission of an offence under Section 138 by a company or its directors or its employees, it has to be presumed that Parliament introduced the above provisions in the Negotiable Instruments Act fully knowing that Section 446 was there in the Companies Act. In the above circumstances we find force in the above argument also. We find no merit in the appeal and it has only to be dismissed.