2007 ALL MR (Cri) 3394
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
B.H. MARLAPALLE, J.
M/S. Aefloat Textiles (India) Ltd. & Anr.Vs.M/S. Boghara Polyfab Pvt. Ltd. & Anr.
Criminal Writ Petition No.1119 of 2007
13th September, 2007
Petitioner Counsel: Mr. R. D. SONI,M/s. Ram & Co.
Respondent Counsel: Ms. PRAVINA KANANI,Mr. D. P. ADSULE
Negotiable Instruments Act (1881) S.138 - Sick Industrial Companies (Special Provisions) Act (1985), Ss.22, 22A - Criminal P.C. (1973), S.482 - Dishonour of cheque - Complaint against sick company - Company declared sick on 31-2-2003 - Disputed cheque was issued on 7-2-2006 - Order of BIFR related to disposal of property and not to payments legally due - S.22 does not come in the way of proceeding with a criminal case - If accused are held guilty, they have the remedy of submitting an application immediately before the Court and pray for either being released on bail by staying the order of sentence or a blanket stay to the order of conviction and sentence as well as payment of compensation based on the BIFR order and it is for the trial Court or for the Lower Appellate Court to consider to stay the order of conviction and sentence. (Para 4)
M/s. Kusum Ingots and Alloys Ltd. Vs. M/s. Pennar Peterson Securities Ltd., 2000 ALL MR (Cri) 1223 (S.C.)=2000 Cri.L.J. 1464 [Para 2,4]
Omesh Keshav Karnik Vs. The Board for Industrial and Financial Reconstruction, Ministry of Finance, Delhi, 2006 ALL MR (Cri) 2811=2006(5) AIR Bom.R. 812 (DB) [Para 5]
JUDGMENT :- Heard Mr. Soni the learned counsel for the petitioners who are impleaded as accused in C.C. No.462/SS/2006, presently pending before the learned Metropolitan Magistrate, 28th Court, Esplanade, Mumbai under Section 138 of the Negotiable Instruments Act, 1881 (for short 'N.I. Act'). Order of process was issued by the learned Magistrate on 4/5/2006 against the present petitioners and the said order was carried in Criminal Revision Application No.959 of 2006 before the Sessions Court. The said revision application has been dismissed by the learned Additional Sessions Judge for Gr. Mumbai and hence this petition under Article 227 of the Constitution read with Section 482 of Cr.P.C..
2. The main argument advanced before this court, like before the Sessions Court, is that the accused no.1-company M/s. Aefloat Textiles (India) Ltd. is declared a sick company by the B.I.F.R. as per its order dated 4/9/2003 and in view of the scheme of Sections 22 and 22-A of the Sick Industrial Companies (Special Provisions) Act, 1986 (for short 'SICA') the complaint filed under N.I. Act is required to be quashed and set aside. Mr. Soni the learned counsel for the petitioners placed reliance in support of these contentions on the decision in the case of M/s. Kusum Ingots and Alloys Ltd. Vs. M/s. Pennar Peterson Securities Ltd. and ors. [2000 Cri.L.J. 1464 : 2000 ALL MR (Cri) 1223].
3. In the instant case, there is no dispute that the order passed under Section 22 of the SICA is dated 4/9/2003 and the dishonoured cheques in the total sum of Rs.24,00,000/- were dated 7/2/2006 i.e. after about two and half years from the date of B.I.F.R.'s order. The B.I.F.R. has appointed ICICI Bank Ltd. as the operating agency under Section 16(2) of the SICA. Mr. Soni relied upon the Direction No.vii in the said order dated 4/9/2003 and it reads as under :-
"(vii) The company/promoters are directed u/s.22A of the Act not to dispose of any fixed or current assets of the company without the consent of the secured creditor and the BIFR. In case the company is running, the current assets can be drawn to the extent required for day to day operations, proper accounts of which would be maintained."
As per Mr. Soni above condition clearly implies that the complaint filed against the petitioners under Section 138 of the N.I.Act cannot be continued any further and till the scheme is outdated. The cut off date fixed in the scheme is 31/12/2003.
"In our considered view Section 22 of SICA does not create any legal impediment for instituting and proceeding with a criminal case on the allegations of an offence under Section 138 of the NI Act 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."
Mr. Soni relied upon the observations made in para 19 of the said decision. It has been stated in the said para that in a given case, before the date on which the cheque was drawn or before expiry of the statutory period of 15 days after notice, a restraint order of the BIFR under Section 22-A was passed against the company then it cannot be said that the offence under Section 138 of the N.I. Act was completed. In the instant case, the restraint put by the BIFR, as per the condition reproduced hereinabove, is against the disposal of the property of the sick company and that too the disposal is permissible if the consent of BIFR is obtained. The dishonoured cheques have been drawn much after the order dated 4/9/2003 passed by the BIFR, whereas the contentions of the petitioners that the cheques dishonoured were blank cheques handed over to the complainant on much before the order was passed. In any case, as held by the Apex Court, Section 22 of SICA does not create any legal impediment for instituting and proceeding with a criminal case under Section 138 of N.I. Act against a company or its Directors. At the end of the trial of such a case, if the accused are held guilty and they are directed to pay compensation and also sentenced to suffer imprisonment, they have the remedy of submitting an application immediately before the learned Metropolitan Magistrate and pray for either being released on bail by staying the order of sentence or a blanket stay to the order of conviction and sentence as well as payment of compensation based on the BIFR order and it is for the trial court or for that matter for the Lower Appellate Court to consider to stay the order of conviction and sentence. The mere passing of the order by BIFR under Section 22 of the SICA cannot be a reason to quash the proceedings in the criminal case filed under Section 138 of the N.I. Act.
5. Mr. Soni has referred to a Division Bench decision of this court in the case of Omesh Keshav Karnik Vs. The Board for Industrial and Financial Reconstruction, Ministry of Finance, Delhi and ors. [2006(5) AIR Bom.R. 812 (DB) : 2006 ALL MR (Cri) 2811] and prayed for liberty to place before the learned Metropolitan Magistrate appropriate material. The Division Bench has clarified that it had not considered the question whether in the facts and circumstances of a particular case Section 138 of NI Act is attracted or not and that is question to be considered by the trial court at the appropriate stage of the trial in the light of the evidence on record. The right of placing material on record before the learned Metropolitan Magistrate has not been taken away.