PANKAJ MEHRA AND ANR. versus STATE OF MAHARASHTRA AND ORS.

Citation: [2000] 1 S.C.R. 825 · Decided: 15-02-2000 · Supreme Court of India · Bench: K.T. THOMAS, AJAY PRAKASH MISRA · Disposal: Dismissed
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Judgment (excerpt)

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PANKAJ MEHRA AND ANR. E"l'C. 
v. 
STATE OF MAHARASHTRA AND ORS. 
FEBRUARY 15, 2000 
[KT. THOMAS AND A.P. MISRA, JJ.] 
Negotiable Instruments Act, 1881-Section 138-Di~·honour of cheque 
issued by a company-Criminal prosecution under Section 138-Sus-
tainability--Held : company cannot escape from penal liability u/s. 138 on 
ground that a petition for winding up of company was pending during the 
relevant tim~-Companies Act, 1956-Sections 441(2), 536(2). 
A 
B 
c 
Companies Act, 1956-Sections 441(2), 536(2)-Winding up of a com-
pany-Commencement of-Evidence of trans/ ers etc. after commencement of 
winding up-Disposing of any property by the company would not become D 
'void' immediately on presentation of petition---<:ompany can not also avert 
its penal liability under Section 138 of the Negotiable Instruments Act on the 
ground that winding up petition was pending during the relevant time-Nego-
tiable instruments Act, 1881-Section 138. 
A cheque issued by a company when presented for encashment was 
dishonoured by the drawee bank on 26.12.1996. The payee of the cheque 
issued a notice to the company calling upon it to pay the amount and as 
the failed to pay the amount, a criminal complaint was filed on 29.1.1997 
against the Company and its directors for the offence under Section 138 
of the Negotiable Instruments Act. The Company challenged the criminal 
proceedings by filing a writ petition stating that a petition for winding up 
of the company had been filed on 27.5.1996, therefore, any disposition of 
the property of the company shall be void if it was made after the com-
mencement of winding up proceedings by the court. Dismissing the writ 
petition, the Division Bench of the High Court held that merely because a 
petition for winding up has been presented all transactious or disp.ositions 
undertaking during the period cannot become ab initio void as what 
Section 536 (2) read with Section 441 (2) of the Companies Act provides 
E 
F 
G 
for is to convert what was otherwise valid into void by virtue of the legal 
fiction, thus tile voidness to take effect on the passing of the order of 
winding up or appointment of provisional liquidator and by virtue of the H 
825 
826 
SL'PREMF COURT Rt.PORTS 
(2000] 1 S.C.R 
A legal faction, in Section 441(2), it then relates back to the date of presen· 
tation of the petition for winding up. Therefore it was held that the 
company could not avert its liability on the mere ground that such a 
petition was presented prior to the company being called upun by a notice 
to pay the amount uf the cheque. 
B 
c 
These appeals had been filed against the judgment of the High 
Court. The question raised for consideration was can a company escape 
from penal liability under Section 138 of the Negotiable Instruments Act 
on the premise that a petition has been presented and was pending during 
the relevant time. 
The appellants submitted that the very issuance of a cheque would 
amount to disposition of property and that under Section 536(2) of the 
Companies Act any disposition of the property of the Company shall be 
void if it was made after the commencement uf winding up proceedings by 
the court as per provision of Section 441 (2) of the Companies Act, winding 
D up of a company by the court shall be deemed tu commence at the time of 
presentation of the petition for winding up; that since one of the conditions 
to constitute the offence under Section 138 of the !\regotiable Instruments 
Act is that a cheq11e should have been drawn for the discharge of a legally 
enforceable 'debt or other liability' no such cheque can possible be con· 
E ceived in a situation such as this because the creditor would be disabled 
from legally enforcing the debt with the commencement of winding up 
proceedings. 
Dismissing the appeals, the Court 
F 
HELD : l.l. The word "void" in Section 536(2) of the Companies Act 
need not automatically indicate that any disposition should be ab initio void. 
The legal implication of the word "void" need not necessarily be a stage of 
nullity in all contingencies. The word void is not employ"d peremptorily 
since court has power to order otherwise. The words "unless the court other· 
G wise orders" are capable of diluting the rigor of the word "void" and to choose 
the alternative meaning attached to that word. (834-B; G] 
1.2. It is difficult to lay down that all dispositions of the property made 
by a company during the interregnum between the presentation of
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