Vesting of Assets in Official Liquidator Post‑Winding‑Up No Basis to Quash Criminal Case against Petitioner: Calcutta HC [Read Order]

The Calcutta High Court, in a recent case, dismissed a criminal revisional application seeking the quashing of proceedings under Section 482 of the Code of Criminal Procedure. It was also held that vesting of assets in the officialliquidator post winding up of the company is not a ground for quashing criminal proceedings against the petitioner.

The petitioners, Sri Biswanath Chakraborty and others, had been arraigned in Regent Park Police Station for cases involving charges under Sections 420, 406, and 120B of the IPC. The genesis of this dispute lies in an outstanding commercial debt of Rs.6,36,526/- owed by the Petitioners' company for goods supplied between October 2012 and July 2013.

Their central defence was rooted in company law: the winding-up order passed on January 10, 2014, had vested control of all corporate assets in the Official Liquidator, thereby extinguishing their authority over the company’s financial instruments.

They argued that dishonour of cheques in 2015 was a civil consequence of liquidation, not a criminal act, and continuation of prosecution amounted to abuse of process.

Notwithstanding the declared status of liquidation, the Charge Sheet was filed in May 2016, also incorporating allegations of criminal conspiracy and subsequent overt acts, including the use of abusive language and threats on October 1, 2015, which compelled the Petitioners to seek intervention under the inherent powers of the High Court.

Counsel for the Petitioners forcefully contended that the case clearly falls within the extraordinary category warranting quashing, as the entire criminal proceeding lacks the necessary criminal mens rea.

It was also contended that once the winding‑up order was passed, the Official Liquidator assumed exclusive control over the company’s affairs. The dishonour of seven cheques presented between July and September 2015 occurred during a period when the petitioners had no legal dominion over the company’s assets. Thus, they could not be held personally liable.

The petitioners further alleged that the complainant had suppressed the winding‑up order, thereby maliciously converting a corporate insolvency into a criminal case.

The State opposed the plea, emphasising that the charge sheet alleged fraudulent intent at the inception of the transaction in 2012–2013, well before liquidation. It was also submitted that the question of mens rea and the Petitioners' actual control post-liquidation are complex questions of fact resolvable only through a full trial and production of evidence.

The State also pointed to allegations of conspiracy under Section 120B and overt acts of threats and abusive language in October 2015, which were independent of the liquidation defense. It argued that questions of mens rea and the petitioners’ actual control post‑liquidation were disputed facts requiring trial, not summary quashing.

Justice Uday Kumar underscored the narrow scope of inherent powers under Section 482 CrPC. The Court reiterated that quashing is permissible only when allegations, even if taken at face value, fail to disclose any cognizable offence.

It was observed that, “The power under Section 482 Cr.P.C. must be exercised sparingly, cautiously, and with circumspection, and cannot be invoked to stifle a genuine prosecution where the allegations,prima facie, disclose a cognizable offence.”

Applying the Bhajanlal principles, the Court held that it could not conduct a “mini‑trial” or evaluate the merits of the petitioners’ defence at this stage.

On the company law aspect, the Court acknowledged that the winding‑up order and vesting of assets in the Official Liquidator constituted a strong defence. However, it clarified that such a defence does not automatically negate a prima facie case when the charge sheet concurrently alleges fraudulent intent at inception or subsequent independent criminal acts.

Consequently, the Revisional Application does not meet the exceptional threshold required for the invocation of Section 482 Cr.P.C. The inherent power of this Court is not warranted, and the ends of justice require that the trial be permitted to run its full course.

Also the court directed the Additional Chief Judicial Magistrate, Alipore, to proceed with the trial arising from Regent Park Police Station expeditiously, without being influenced by any observations made herein regarding the merits of the evidence.