A.K. Sikri, J.
1. In CP No. 323/99 filed by Dr. V.P. Mainra (petitioner) against M/s Dawson Leasing Limited, Provisional Liquidator was appointed on 9th November, 2000 and the petition was admitted to hearing. The Provisional Liquidator was also asked to take in his possession the assets, records and books of accounts of the respondent company (hereinafter referred to as `the company') He has taken charge of the liquidation affairs of the company since then, although final winding up orders have not been passed in this case. It may be mentioned that statement of ex-Directors is recorded under Rule 130 of the Companies (Court) Rules, 1959. They have also filed the statement of affairs. Since there are certain deficiencies therein, ex-Directors are called upon to remove those deficiencies.
2. While that is the present status of the winding up proceedings, these Case are filed which primarily relate to transfer of certain cases and execution proceedings pending before the Consumer Disputes Redressal Forum, Ghaziabad and New Delhi under the Consumer Protection Act, 1986 to this court. All these applications are filed by ex-Directors of the company (in provisional liquidation). Details of these proceedings may be noted at this stage.
CA Nos. 72 and 73/2003
3. Two persons, namely, Smt. Saroj Jain and Mr. Raj Kumar Jain had filed Case No. 3164/2000 titled Saroj Jain and Anr. v. Dawsons Leasing and Finance Co. Ltd. before the District Consumer Disputes Redressal Forum-II, New Delhi. Claim of these two persons was that they were poor investors who had invested in the fixed deposit scheme of the company and were not paid even a single penny on maturity of said deposits. The claim was, thereforee, for refund of these deposits with interest. This claim was allowed by the District Consumer Disputes Redressal Forum vide ex-parte order dated 10th July, 2001. Thereafter these complainants filed execution of the order dated 10th July, 2001 being Execution application No. 2737/2001 which is pending before the District Forum-II. As the amount is not paid, the District Consumer Disputes Forum has issued non-bailable warrants for the arrest of Managing Director Mr. Mukesh Hans.
4. In CA No. 72/2003 it is stated that in view of the provisions of Section 446 of the Companies Act, 1956 (for short `the Act') these proceedings are now to be transferred to this court. It is also pointed out that in another suit being Suit No. 840/99 filed on the Original Side of this court, this court had passed restraint order dated 20th April, 1999 against the company and its servants, employees, agents etc. from operating the Bank Accounts of the company. In another Suit No. 843/99 titled Uma Bhasin and Ors v. Dawsons Leasing Ltd. and Ors. this court vide order dated 6th May, 1999 attached the movable and immovable properties of the applicants and because of these reasons it became impossible for the applicants to service their clients and pay the complainants as all the accounts of the company were frozen. Further with the appointment of the Provisional Liquidator vide order dated 9th November, 2000 and assets, records and books of accounts of the company have been taken over by the Official Liquidator.
In CA No. 73/2003 stay of execution proceedings before District Consumer Disputes Redressal Forum-II, Delhi is prayed for.
CA Nos. 75 and 76/2003
5. In CA No. 75/2003 similar prayer is made. It relates to complaint No. 472/1999 titled as B.K. Mandal and ors. v. Dawsons Leasing Ltd. This complaint was of identical nature as in CA No. 72/2003. Here the District Consumer Forum, Ghaziabad passed ex-parte order dated 4th July, 2000. The company had filed application for setting aside the said order which was dismissed. Thereafter, execution proceedings are filed and in these execution proceedings, warrants of arrest have been issued against ex-Directors vide order dated 20th December, 2002. On identical submissions, prayer is made in this application also that in view of provisions of Sections 442 and 446 of the Act, these proceedings be also transferred to this court.
In CA No. 76/2003 also stay of execution proceedings is prayed for.
CA Nos. 1251 and 1252/2003
6. Here also same prayer is made for transfer of the proceedings before the District Consumer Forum, Ghaziabad. First case relates to complaint No. 431/1999 titled as L.N. Singhal v. M/s Dawsons Leasing Ltd. Here the District Consumer Forum, Ghaziabad passed ex-parte order dated 11th October, 2000. The company had filed application for setting aside the said order which was dismissed. Thereafter, execution proceedings are filed which are pending before the said Forum.
Second case relates to complaint No. 633/1999 titled as B.K. Mandal v. M/s Dawsons Leasing Ltd. Here the District Consumer Forum, Ghaziabad passed ex-parte order dated 4th April, 2001. The company had filed application for setting aside the said order which was dismissed. Thereafter, execution proceedings are filed and in these execution proceedings, warrants of arrest have been issued against ex-Directors. On identical submissions, prayer is made in this application also that in view of provisions of Sections 442 and 446 of the Act, these proceedings be also transferred to this court.
Third case relates to complaint No. 245/2000 titled as B.K. Mandal v. M/s Dawsons Leasing Ltd. Here the District Consumer Forum, Ghaziabad passed ex-parte order dated 12th October, 2000. The company had filed application for setting aside the said order which was dismissed. Thereafter, execution proceedings are filed and in these execution proceedings, warrants of arrest have been issued against ex-Directors. On identical submissions, prayer is made in this application also that in view of provisions of Sections 442 and 446 of the Act, these proceedings be also transferred to this court.
In CA No. 1252/2003 also stay of execution proceedings is prayed for.
7. In reply filed by the opposite parties (who are the complainants in the complaints before the District Consumer Forum), the ground of opposition is common. It is stated that the complainants who are poor and innocent investors and who invested their hard earned money in the fixed deposit scheme of the company are duped and not a single penny is paid to them on maturity of said deposits. When inspire of the orders passed by the District Consumer Forum the amount was not paid, these complainants filed applications under Section 27 of the Consumer Protection Act, 1986 (hereinafter referred to as `the CP Act') and execution/contempt proceedings are initiated by the District Consumer Forum under the said provisions against the company as well as the ex-Directors. In these proceedings arrest warrants are issued against Mr. Mukesh Hans, ex-Managing Director of the company. According to them these proceedings now before the District Consumer Forum are in the nature of criminal proceedings which cannot be stayed under Sections 446 of the Act as held by the Supreme Court in a catena of cases.
8. I have considered the submissions of learned counsel for the parties. It may be stated at the outset that various complaints which are decided by the District Consumer Forum were filed before the winding up orders were passed in the present proceedings. All the complaints except complaint/Case No. 3164/2000 titled Saroj Jain and Anr. v. Dawsons Leasing and Finance Co. Ltd. were also decided before the winding up orders were passed. As those proceedings are not pending, question of transfer of those proceedings, in any case, does not arise. thereforee, we are concerned with the applications/execution petitions filed under Section 27 of the CP Act.
9. It may be stated that the legal position about the pending cases against the company in respect of which winding up orders are passed is clear beyond shadow of doubt. This legal position is contained in few Sections of the Act which may be taken note of:
'' 445 Copy of winding up order to be filed with Registrar - (1) xxx
(2) xxx.
(3) Such order shall be deemed to be notice of discharge to the officers and employees of the company, except when the business of the company is continued.
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 the winding up order, shall be proceeded with, against the company, except by leave of [Tribunal] and subject to such terms as the [Tribunal] may impose.''
10. The aforesaid provisions are interpreted in various judgments, notable among them would be the judgment of the Supreme Court in the case of National Transports and General Co.(P) Ltd. (in liquidation) Re, (1990) 69 CompCas 791. The principle laid down in the aforesaid judgment is that when a winding up order is passed, it puts an end to the powers of the Directors of making calls and it operates as a discharge of all officers of the company including Directors and the employees under Section 45(3). In law, a company which is ordered by the court to be wound up is represented by the Official Liquidator for all purposes except where the order of winding up or appointment of Official Liquidator is itself under challenge. The Company Court take charge of all the legal proceedings against such a company in respect of which winding up orders are passed. It is for this reason that all the proceedings pending in different courts stand stayed and can be transferred to the Company Court. With the appointment of the Official Liquidator since he takes charge the assets of the company, he represents the company (in liquidation) and not the erstwhile management/ex-Director. While this is the position in law, power to stay the proceedings is discretionary as held by the Supreme court in the case of The Official Liquidator v. Dharti Dhan (P) Ltd. : [1977]2SCR964 .
11. However, the argument of learned counsel for the respondents is that the provisions of Section 446(1) would not extend to criminal proceedings. In support of this submission, reliance is placed on Rakoor Industries Pvt.Ltd. and Anr. v. R.L. Bali, Income Tax Officer and Anr. : 94(2001)DLT478 , wherein this Court held:
''Para 4: Section 446(1) of Companies Act says that when a winding up order has been made or Official Liquidator appointed as Provisional Liquidator, no suit or other legal proceedings shall be commenced or if pending at the time 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. Expression ''legal proceedings'' in Section 446(1) is wide enough to include criminal prosecution also but such proceedings must be in relation to the assets of company. As the proceedings arising out of criminal complaint for alleged violation of said two sections of the Act are not in respect of assets of petitioner No. 1 company, said Sub-Section (1) of Section 446 has no applicability. Further, aforesaid section cannot be invoked as regards criminal proceedings against the Managing Director/Director of company for the offences under the Act. I am fortified in this view of mine by the decision in Jose Antony v. Official Liquidator, I (2000) BC 19-2000 (3) Crimes 191, wherein scope of Section 446(1) vis--vis Section 138 of Negotiable Instruments Act was considered by a Division Bench of Kerala High Court. As was rightly pointed out, M/s BSI Ltd. and another's case (supra), has no applicability in the matter as it was not decided with reference to Section 446 of the Companies Act.''
12. In order to examine this contention, we will have to first peruse Section 27 of the CP Act to understand the nature of proceedings therein. Section 27 is couched in the following language:
''27 Penalties.-Where a trader or a person against whom a complaint is made [or the complainant] fails or omits to comply with any order made by the District Forum, the State Commission or the National Commission, as the case may be, such trader or person[or complainant] shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years, or with fine which shall not be less than two thousands rupees but which may extend to ten thousand rupees, or with both: Provided that the District Forum, the State Commission or the National Commission, as the case may be, may, if it is satisfied that the circumstances of any case so require, impose a sentence of imprisonment or fine, or both, for a term lesser than the minimum term and the amount lesser than the minimum amount, specified in this section.''
13. It is clear from the language of Section 27 that, for failure to comply with the orders of the District Forums, the person who was to comply with such an order, is punishable with imprisonment or with fine or with both. Obviously a company incorporated under the Act, which is juristic or artificial entity, cannot be imprisoned. It is for this reason that when an order is made against a company, its Directors would be liable for such a punishment/penalties prescribed under Section 27 of the CP Act.
As held by this court in Rakoor Industries Pvt.Ltd.(supra), expression ''''legal proceedings'' in Section 446(1) is wide enough to include criminal prosecution also but such proceedings must be in relation to assets of the company. The court in that case, which was under the Income Tax Act, 1961, found that the complaint by the Income Tax Officer against the Directors of the company was made for the offences punishable under Section 276-C and Section 277 of the Income Tax Act and the allegation was that the accused willfully attempted to evade tax, penalty or interest chargeable or imposable under the provisions of the Income Tax Act. Section 276C provides for penalty when a person willfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under the Income Tax Act. Section 277 makes a person liable for imprisonment when he makes a statement in any verification under the Income Tax Act or under any rule made there under or delivers an account or statement which is false. These Sections do not attribute to the assets of the company but the actions are attributable to the person who has committed such willful acts. Such proceedings were held to be not in respect of assets of the company in liquidation and rightly so. However, as far as proceedings/complaints under the CP Act are concerned, these were filed against the company. Order was passed against the company. It is the company which was to comply with the said order. Because of non-compliance, applications under Section 27 of the CP Act have been filed by the complainants. There is no personal liability of the Directors. If the company pays the amount, there would not be any proceedings. However, when the company fails to make the payment and since it is an artificial person and cannot be imprisoned, the Directors are held responsible and it is in this context that the orders can be passed against the Directors under Section 27 of the CP Act. thereforee, it cannot be said that the ex-Directors of the company committed any such act in relation to the proceedings under the CP Act which is personally attributable to them. To put it differently, proceedings under Section 27 of the CP Act would be in relation to the assets of the company.
14. It may be added here that in the present case that the applicants have also stated that payment could not be made to the respondent as the Original Side of this Court in Suit No. 840/99 passed restraint order dated 20th April, 1999 freezing the accounts of the company.
15. The result of the aforesaid discussion would be that the proceedings under Section 27 of the CP Act in the instant case shall be covered by Section 446 of the Act and, thereforee, such proceedings cannot continue except with leave of this court. It would be appropriate to transfer execution proceedings filed under Section 27 of the CP Act, to this court. These execution proceedings, particulars whereof have already been noted above, shall stand transferred to this Court. The registry may send request to the District Forum-II, New Delhi as well Ghaziabad for transmitting the records of those proceedings to this court.
16. These applications stand disposed of.