TMI Blog2000 (2) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... against them, consequent to non-payment of amounts covered by cheques issued by such companies. All the companies involved in this batch of appeals have a common cause now in that those companies have, subsequent to the filing of complaints against them, approached the Board for Industrial Finance and Reconstruction ( BIFR ) and sought for declaration that those companies became sick as envisaged in the Sick Industrial Companies (Special Provisions) Act, 1985, ( SICA ). They maintained the stand that when proceedings are pending before the BIFR no prosecution can be maintained under law against those companies. But the plea so made by such companies was not found favour with the trial courts nor with the revisional courts nor even with the High Courts before which the companies approached. All these appeals have been filed by special leave against the orders passed by the High Courts by which the aforesaid plea was discountenanced. 2. It is sufficient to set out the facts from one of these appeals in this batch. Answers given to the questions raised in that appeal would apply to all the connected appeals now being heard along with that appeal. Facts in Criminal Appeal No. 847 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of SICA all other legal proceedings including any prosecution proceedings would stand suspended by the operation of the embargo contained in section 22(1) of SICA. In order to persuade the court to place such an interpretation on the said sub-section the learned counsel invited our attention to certain other provisions of SICA also. 7. In the Statement of Objects and Reasons for introducing the Bill in the Parliament which later became Act No. 1 of 1986, it is stated, inter alia , that the ill effects of sickness in industrial companies such as loss of production, loss of employment, loss of revenue to the Governments and locking up of investible funds of banks and financial institutions are of serious concern to the Government and the society at large. A need has, therefore, been felt to enact in public interest a legislation to provide for timely detection of sickness in industrial companies and for expeditious determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch. A s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. Sub-section (3) confers power on the BIFR to declare that the operation of all or any of the contracts,assurances of property, agreements, settlements, awards, standing orders or other instruments in force shall be suspended and that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date shall remain suspended. Sub-section (4) says that when any such declaration is made under sub-section (3) it shall have overriding effect and any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any court. . . shall remain stayed. 11. As the arguments based on section 22(1) of SICA were endeavoured to be fortified with the help of section 22A of SICA the said provision is extracted below : "22A. Direction not to dispose of assets. The Board may, if it is of opinion that any direction is necessary in the interest of the sick industrial company or creditors or shareholders or in the public interest, by order in writing, direct the sick industrial company not to dispose of, except with the consent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the company cannot be maintained since a court would not be able to effectively impose a sentence on a company after convicting it of the offence under section 138 of the NI Act. 15. The fallacy of the above contention is two-fold. First is that maintainability of a prosecution proceeding is not to be tested on the touchstone of any practical hurdle in enforcing the sentence which might be imposed on a company after conviction. Second is, there is no insurmountable hurdle for recovery of the fine covered by the sentence even from a sick industrial company because the ban contained in section 22(1) is only conditional as could be discerned from the last limb thereof which reads thus: Except with the consent of the Board or, as the case may be, the Appellate Authority. It means that with such consent the court would be in a position to resort to proceedings for distress against the properties of the sick industrial company. Hence the aforesaid contention has no merit at all. 16. It was next contended that the ban against maintainability of a suit for the recovery of money would encompass prosecution proceedings, also. To support the said contention reliance was sought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l liability. What was considered in Maharashtra Tubes Ltd. s case ( supra ) is whether the remedy provided in section 29 or 31 of the State Finance Corporation Act, 1951 could be pursued notwithstanding the ban contained in section 22 of the SICA. Hence the legal principle adumbrated in the said decision is of no avail to the appellants. 21. In the above context it is pertinent to point out that section 138 of the NI Act was introduced in 1988 when SICA was already in vogue. Even when the amplitude of the word company mentioned in section 141 of the NI Act was widened through the Explanation added to the section, Parliament did not think it necessary to exclude companies falling under section 22 of SICA from the operation thereof. If Parliament intended to exempt sick companies from prosecution proceeding, necessary provision would have been included in section 141 of the NI Act. More significantly, when section 22(1) of SICA was amended in 1994 by inserting the words [ and no suit for the recovery of money or for enforcement of any security against industrial company or of any guarantee in respect of any loans or advance granted to industrial company ] Parliament did not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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