TMI Blog2000 (2) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - CRIMINAL APPEAL NOS. 212-216 OF 2000 - - - Dated:- 23-2-2000 - K.T. THOMAS AND D.P. MOHAPATRA, JJ. JUDGMENT Mohapatra, J. - Leave granted. 2. The common question that arises for consideration in these appeals is whether a company and its directors can be proceeded against for having committed an offence under section 138 of the Negotiable Instruments Act, 1881 ( the Act ) after the company has been declared sick under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 ( SICA ) before the expiry of the period of payment of the cheque amount. The answer to the question depends on interpretation of section 138 of the NI Act and its interaction with the relevant provisions of SICA. Since the relevant fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings in the criminal case should be stayed or suspended till the accused company becomes a functional and viable unit. On behalf of the appellants reliance is placed on sections 22 and 22A of the SICA. 5. The learned counsel appearing for the respondents on the other hand contended that on the undisputed fact situation of the case a prima facie case under section 138 is made out against the accused and on being satisfied about this position the learned magistrate took cognizance of the offence and ordered issue of summons to the appellants. It is their submission that section 22 has no application to criminal proceedings and that the said section does not bar payment of dues by the accused company or its Directors; an embargo is placed only on the creditors from realising their dues from the company by a proceeding for winding up or execution or distress. It is also the submission of the learned counsel for the respondents that the criminal case cannot be said to be a proceeding for realisation of money due from the company. 6. Before dealing with the rival contentions raised on behalf of the parties it will be convenient to note relevant provisions of the NI Act and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons stated in that section. 141. Offences by companies. (1) If the person committing an offence under section 138 is a company, every person, who at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholders of such company or any other person to nominate or appoint any person to be a director of the company; ( b )no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) [Where an inquiry under section 16 is pending on any scheme referred to in section 17 is under preparation or during the period] or consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board: Provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear that the ingredients which are to be satisfied for making out a case under the provisions are : ( i )a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability; ( ii )that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier; ( iii )that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank; ( iv )the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; ( v )the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the SICA there was any legal impediment for payment of the amount for which the cheques were drawn and for that reason the appellants cannot be taken to have committed an offence under section 138. A bare reading of the section 22 makes the position clear that during pendency of an inquiry under section 16 or during the preparation of a scheme referred to under section 17 or during implementation of a sanctioned scheme or pendency of an appeal under section 25, no proceedings for winding up of the industrial company or for execution, distress, or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company, shall lie or be proceeded with further, except with the consent of the Board or, the appellate authority, as the case may be. The section only deals with proceedings for recovery of money or for enforcement of any security or a guarantee in respect of any loans or advance granted to the company and proceedings for winding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order in writing to direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets - ( a ) during the period of preparation or consideration of the scheme under section 18; and ( b ) during the period beginning with the recording of opinion by the Board for winding up of the company under sub-section (1) of section 20 and up to commencement of the proceedings relating to the winding up before the concerned High Court. This exercise of the power by the Board is conditioned by the prescription that the Board is of the opinion at such a direction is necessary in the interest of the sick industrial company or its creditors or shareholders or in the public interest. In a case in which the BIFR has submitted its report declaring a company as sick and has also issued a direction under section 22A restraining the company or its directors not to dispose of any of its assets except with consent of the Board then the contention raised on behalf of the appellants that a criminal case for the alleged offence under section 138 cannot be instituted during the period in which the restraint order passed by the BIFR remains operative cannot be rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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