2000 (2) TMI 724 - SUPREME COURT

Whether a company and its directors can be proceeded against for having committed an offence under section 138 of the Negotiable Instruments Act, 1881 after the company has been declared sick under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 before the expiry of the period of payment of the cheque amount?

Held that:- Section 22 SICA does not create any legal impediment for instituting and proceeding with a criminal case on the allegations of an offence under section 138 against a company or its directors. The section as we read it only creates an embargo against disposal of assets of the company for recovery of its debts. The purpose of such an embargo is to preserve the assets of the company from being attached or sold for realisation of dues of the creditors. The section does not bar payment of money by the company or its directors to other persons for satisfaction of their legally enforceable dues.

Non good reason for accepting the contentions raised by the learned counsel for the appellants in favour of the prayer for quashing the criminal proceedings or for keeping the proceedings in abeyance. It will be open to the appellants to place relevant materials in this regard before the learned magistrate before whom the cases are pending and the learned magistrate will examine the matter keeping in mind the discussions made in this judgment