In the Matter of : Firth (INDIA) Steel Co. Ltd. (In Liquidation):
The expression legal proceedings or other legal proceedings for the purpose of sections 442 and 446 must be read ejusdem generis with the expression “suit” and can mean only civil proceedings which have a bearing insofar as the winding up is concerned namely realisation of the assets and discharge of liabilities of the company. The expression “other legal proceedings” in sub-section (1) and expression “legal proceedings” in sub-section (2) of section 446 conveys the same sense and the proceedings in both the sub-sections must be such as can appropriately be dealt with by the company court. If the expressions in section 446 are so construed there is no reason not to follow the same in so far as section 442 is concerned as its object also is to protect the assets of the Company and as such the proceedings must be such which can be dealt with by the company court. Criminal complaint under section 138 of the Negotiable Instruments Act is not covered by the expression “legal proceedings” or “other legal proceedings”.
The question of law which arises is whether the expression “suit or other legal proceedings” in section 446(1) and the expression “suit or proceedings” in section 442, under Chapter II of Part VII of the Companies Act, include criminal complaints filed under section 138 of the Negotiable Instruments Act.
On behalf of the Companies involved, it is contended, that the expression legal proceedings or other legal proceedings should be given its widest amplitude and must therefore also include criminal proceedings. It is pointed out that if this is not so a company in winding up would be subject to criminal prosecution. This would defeat the object of sections 442 and 446 of the Companies Act.
On the other hand it is contended on behalf of the Petitioners in these Company Petitions and others that the expression “legal proceedings” or “other legal proceedings” must be read ejusdem generis with the expression “suit”. If so read it is pointed out, it can only refer to civil proceedings which have a direct bearing on proceedings for winding up of the Company and consequently other legal proceedings must exclude criminal proceedings. Reliance has been placed on various authorities.
An illustration may be considered for the purpose of considering the contention. The Liquidator or the Provisional Liquidator on his appointment becomes the Liquidator for the Company. It is he who thereafter is empowered to represent the Company by standing in the shoes of the Board of Directors. In various Legislations apart from the Directors, Company is also liable for prosecution. This could be under Labour Legislations and/or Special Acts like Essential Commodities Act and/or Food Adulteration Act, where the Company can be convicted. In such case will it be the person who then was in charge of the Company or would it be the Liquidator who will stand accused in such criminal proceedings. If the contention is accepted the Liquidator in a case under the Essential Commodities Act will have to stand in the shoes of the Accused as representing the Company unless it is held that it is the person who was in charge of the Company at the time the offence is committed who is liable for prosecution. If a construction is given that it is the person who was in charge at the relevant time who will represent the Company, then where is the question of seeking permission to prosecute the Company. The limited question then at the highest will be paying the fine by way of sentence imposed by a Court.
