IMPORTANT POINTS
1. If commission of the offence under Section 138 of the N.I. Act was completed before the commencement of proceedings under Section 22(1) of SICA there is no hurdle in any of the provisions of SICA against the maintainability and prosecution of a criminal complaint duly instituted under Section 142 of the N.I. Act.
2. The word "suit" envisaged in Section 22(1) of SICA cannot be stretched to criminal prosecutions.

Headnote:(i) Negotiable Instruments Act, 1881-Section 138 r/w Section 22 of Sick Industrial Companies (Special Provisions) Act, 1985-Dishonour of cheque-Offence by companies-Complaint filed against Directors and Company and process issued-Company thereafter filing application under SICA before BIFR to declare company as sick company-BIFR declaring company as sick company-Company s plea that prosecution not maintainable in view of Section 22 of SICA-Plea untenable-Offence under Section 138 completed prior to commencement of proceedings under SICA-No hurdle in any of provisions of SICA against maintainability and prosecution of criminal prosecution duly initiated u/s 142 of N.I. Act-Plea that Court could not effectively impose sentence on company after conviction and therefore proseuction not maintainable is fallacious.
       Held : BIFR did not pass any order against any company involved herein until the expiry of the period of 15 days from the receipt of notice contemplated in clause (c) of the proviso to Section 138 of the NI Act. So none of the companies was interdicted by any such order envisaged in Section 22-A during the above period of 15 days. (Para 12)
       It was contended that recovery of the fine covered by such sentence would be impractical on account of the ban envisaged in Section 22(1) of SICA against proceedings for execution, distress or the likes as against any of the properties of the company. As a corollary, it was submitted that prosecution against 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 NI Act. 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. (Paras 14 & 15)
       If comission of the offence under Section 138 of the NI Act was completed before the commencement of proceedings under Section 22(1) of SICA there is no hurdle in any of the provisions of SICA against the maintainability and prosecution of a criminal complaint duly instituted under Section 142 of the N.I. Act. (Para 22)
       (ii) Sick Industrial Companies (Special Provisions) Act, 1985-Section 22-Negotiable Instruments Act, 1881-Section 22-Bar of suit against sick Industrial Company-Suit envisaged in Section 22(1) cannot be stretched to criminal proceedings-Criminal proceedings u/s 138 of N.I. Act is not barred by Section 22 of SICA.
       The word "suit" envisaged in Section 22(1) of SICA cannot be stretched to criminal prosecutions. The suit mentioned therein is restricted to "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. As the suit is clearly delineated in the provision itself, the context would not admit of any other stretching process. A criminal prosecution is neither for recovery of money nor for enforcement of any security etc. Section 138 of the N.I. Act is a penal provision the commission of which offence entails a conviction and sentence on proof of the guilt in a dulty conducted criminal proceedings. Once the offence under Section 138 is completed the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to the penal liability. (Paras 19 & 20)
       Further, Section 138 of 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 proceedings, 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 not 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 specifically include prosecution proceedings within the ambit of the said ban. (Para 21)

JUDGMENT

Thomas, J.-Some companies and their Directors are now frantically struggling to get themselves extricated from the catch of prosecution proceedings pitted 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 ( BIER for short) and sought for declaration that those companies became sick as envisaged in the Sick Industrial Companies (Special Provisions) Act, 1985, ( SICA for short). 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 inCriminal Appeal No. 847 of 1999 are the following : Cheques issued by the appellant therein were dishonoured by the drawee bank on 27.12.1996 on the ground of insufficiency of amount in the account concerned, and the payee thereof issued a notice on 2.1.1997, demanding payment of the amount covered by such cheques. As the drawer of the cheques failed to make the payment as per demand, within 15 days of receipt of the notice, a complaint was filed on 29.1.1997 against the company and its Directors for the offence under Section 138 of the Negotiable Instruments Act ( NI Act for short). The magistrate before whom the complaint was filed issued process against the accused who were arrayed therein.

3. Two petitions for winding up of the company were filed in June 1997, one at the instance of a creditor of the company and the other by the company itself. Thereafter the company moved the BIFR to declare it a sick industrial company. When proceedings were pending before the BIFR under Section 16 of the SICA a declaration was made by the order passed by the BIFR as per Section 22(3) of SICA. The above is the background in which the appellants contend that they are not liable to be prosecuted in view of the embargo contained in Section 22(1) of SICA.

4. When the offence under Section 138 of the NI Act has been committed by 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." (vide Section 141 of the NI Act).

5. In Anil Hada v. Indian Acrylio Ltd.1 it has been pointed out that three categories of persons can be discerned as brought within the purview of the penal liability, through the legal fiction envisaged in Section 141 of the N.I. Act. They are : (1) The company which committed the offence. (2) Every person who was in charge of and responsible to the company for the conduct of the business of the company. (3) Any other person who is a director or a manager or a secretary or an officer of the company with whose connivance or with whose neglect the company has committed the offence.

6. Learned counsel for the appellant submitted that when reconstruction efforts of a sick industrial company are pending under the 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 su

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2000 Supreme(SC) 358

Cases Referred (1)