1. Dishonour of cheques issued by a company declared sick under SICA — Complaint under Section 138, NI Act — Challenge to summoning based on BIFR restraint order. (Para 3 , 4 , 6 , 7 )
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2025 Supreme(SC) 1290
SUPREME COURT OF INDIA
MANOJ MISRA, UJJAL BHUYAN, JJ.
Shree Nagani Silk Mills Pvt. Ltd. – Appellant
VERSUS
L.D. Industries Ltd. & Ors. – Respondents
Criminal Appeal No. 3821 of 2025 (Arising out of SLP (Crl.) No.1550 of 2024)
With Criminal Appeal No. 3822 of 2025 (@ SLP (Crl.) No.1551 of 2024) Criminal Appeal No. 3823 of 2025 (@ SLP (Crl.) No.1552 of 2024) Criminal Appeal No. 3824 of 2025 (@ SLP (Crl.) No. 1553 of 2024) Criminal Appeal No. 3825 of 2025 (@ SLP (Crl.) No.530 of 2024) Criminal Appeal No. 3826 of 2025 (@ SLP (Crl.) No.1554 of 2024) Criminal Appeal No. 3827 of 2025 (@ SLP (Crl.) No.1555 of 2024)
Decided On : 02-09-2025
Important Points
IMPORTANT POINT
Dishonour of cheque – There is no embargo on filing complaint under Section 138 of N.I. Act against a ‘SICK’ company.
Dishonour of cheque – There is no embargo on filing complaint under Section 138 of N.I. Act against a ‘SICK’ company.
Subject
Criminal Law - Negotiable Instruments Act
Act Referred
Headnote
Negotiable Instruments Act, 1881 – Section 138 read with Section 141 – Sick Industrial Companies (Special Provisions) Act, 1985 – Sections 22 and 22A – Dishonour of cheque – There is no embargo on filing complaint under Section 138 of N.I. Act against a ‘SICK’ company – Even if there is a restraint order under Section 22A of SICA, nature of restraint order and facts of that case would have to be considered before taking a decision whether proceeding under Section 138 could continue or not – Appropriate stage for taking such a decision would, ordinarily, be after parties have led their evidence – In instant case, restraint order under Section 22A of SICA did not restrain accused company to draw on its assets to meet its day-to-day operations and, according to complaint allegations, cheques in question were issued to discharge liability of accused-company against supplies made by complainant company – In such circumstances, revisional court fell in error by recalling processes and discharging accused at threshold of proceeding and High Court erred in not correcting error so committed – Impugned judgment(s) and order(s) of High Court as well as of Revisional Court set aside. (Paras 22, 23 and 25)
Facts of the case:
These seven appeals arise from identical judgment(s) and order(s) of High Court of Judicature at Bombay, dated 5.10.2023, passed on separate petitions, under Article 227 of Constitution of India, impugning revisional court order(s) emanating from separate complaint(s) filed by appellant against the respondent(s) under Section 138 of Negotiable Instruments Act, 1881.
Findings of Court:
Proceeding(s) on complaints of appellant, under Section 138 read with Section 141 of N.I. Act, shall stand restored on file of Magistrate. Magistrate shall now proceed in accordance with law and bring the proceedings to its logical end.
Result : Appeals allowed.
Legal Category Hierarchy
- crime and sentencing
- practice and procedure
- administrative law
Advocates appeared:
For the Petitioner(s): Mr. Ninad Laud, Adv. 1 Mr. Sahil Tagotra, AOR Mr. Maulk Chokshi, Adv. Ms. Shankari Mishra, Adv. Mr. Zubin Dash, Adv. Ms. Ishani Shekhar, Adv. Ms. Shreya Kasera, Adv.
For the Respondent(s): Mr. Rishi Bhuta, Adv. Mr. Manish Meghraj Bohra, Adv. Mr. Saurabh Soni, Adv. Mr. Sanjeet Kumar Thakur, Adv. Ms. Mannat Singh Kahai, Adv. Ms. Lakshmi, Adv. Mrs. Smerity Rani, Adv. Mrs. Sabika Ahmad, Adv. Mr. Shalen Bhardwaj, Adv. Mr. Nischal Kumar Neeraj, AOR
For the Petitioner(s): Mr. Ninad Laud, Adv. 1 Mr. Sahil Tagotra, AOR Mr. Maulk Chokshi, Adv. Ms. Shankari Mishra, Adv. Mr. Zubin Dash, Adv. Ms. Ishani Shekhar, Adv. Ms. Shreya Kasera, Adv.
For the Respondent(s): Mr. Rishi Bhuta, Adv. Mr. Manish Meghraj Bohra, Adv. Mr. Saurabh Soni, Adv. Mr. Sanjeet Kumar Thakur, Adv. Ms. Mannat Singh Kahai, Adv. Ms. Lakshmi, Adv. Mrs. Smerity Rani, Adv. Mrs. Sabika Ahmad, Adv. Mr. Shalen Bhardwaj, Adv. Mr. Nischal Kumar Neeraj, AOR
Table of Contents
2. Whether BIFR restraint orders bar Section 138 proceedings — Maintainability of applications to recall summoning orders — Effect of post-dated cheques on liability. (Para 10 , 11 , 12 )
3. Presumption of date under Section 118(b), NI Act — SICA Section 22 does not bar criminal proceedings — Section 22A restraint orders require factual determination during trial. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 )
4. No absolute bar on Section 138 proceedings against sick companies — Section 22A restraint effects are mixed questions of law and fact — Summoning orders cannot be recalled. (Para 22 , 24 )
5. Appeals allowed — Impugned orders set aside — Criminal proceedings under Section 138, NI Act restored before the Magistrate. (Para 25 )
6. Does a company being declared 'SICK' under SICA bar proceedings under Section 138 of the NI Act?
No. Section 22 of SICA does not create a legal impediment for instituting and proceeding with a criminal case under Section 138 of the NI Act against a sick company or its directors. (Para 19 , 20 , 22 )
7. How does a BIFR restraint order under Section 22A of SICA affect Section 138 proceedings?
It is not an absolute bar. Whether such an order prevents prosecution depends on the facts, including the nature of the restraint order, the date the cheque was issued, and the reason for issuance. (Para 19 , 20 , 22 )
8. Can a Trial Court recall a summoning order in a Section 138 NI Act case?
No. Trial Courts do not have the inherent power to review or recall the issue of summons, except where the court lacks jurisdiction to try the complaint. (Para 24 )
9. What is the legal presumption regarding the date of a cheque under the NI Act?
Under Section 118(b) of the NI Act, there is a rebuttable presumption that every negotiable instrument bearing a date was made or drawn on such date. (Para 14 )
JUDGMENT
MANOJ MISRA, J.
1. Leave granted.
2. These seven appeals arise from identical judgment(s) and order(s) of the High Court of Judicature at Bombay (for short the High Court), dated 5.10.2023, passed on separate petitions, under Article 227 of the Constitution of India, impugning revisional court order(s) emanating from separate complaint(s) filed by the appellant against the respondent(s) under Section 138 of the Negotiable Instruments Act, 1881 [N.I.Act]. As common questions of law and fact arise for our consideration, between same set of parties, these appeals were heard together and are being decided by a common order.
Factual matrix
3. Appellant is the original complainant who had lodged separate complaints, under Section 138 read with Section 141 of N.I. Act, against L.D. Textile Industries (for short the accused company – first respondent) and four others (other respondents) in respect of dishonour of cheques issued by the accused company. Details of those cheques with reference to corresponding SLP (Crl.) No. and complaint number(s) are given in the table below:
| Special Leave Petition No | Complaint No. | Cheque Date | Cheque No. | Cheque Amount (In Rs.) |
| SLP (CRL) No. 1550 of 2024 | 1164/5/2001 | 25.04.2001 | Cheque No. 948365 | Rs. 20,00,000/- |
| SLP (CRL) No. 1551 of 2024 | 1162/5/2001 | 25.04.2001 25.04.2001 20.04.2001 | Cheque No. 948367 Cheque No. 948368 Cheque No. 948369 | Rs. 20,00,000/- Rs. 20,00,000/- Rs. 20,00,000/- |
| SLP (CRL) No. 1552 of 2024 | 1167/5/2001 | 25.04.2001 | Cheque No. 948363 | Rs. 20,00,000/- |
| SLP (CRL) No. 1553 of 2024 | 1168/5/2001 | 25.04.2001 | Cheque No. 948362 | Rs. 20,00,000/- |
| SLP (CRL) No. 530 of 2024 | 1163/5/2001 | 25.04.2001 | Cheque No. 948364 | Rs. 20,00,000/- |
| SLP (CRL) No. 1554 of 2024 | 1166/5/2001 | 25.04.2001 | Cheque No. 948361 | Rs. 20,00,000/- |
| SLP (CRL) No. 1555 of 2024 | 1165/2001 | 25.04.2001 25.04.2001 | Cheque No. 948366 Cheque No. 948388 | Rs. 20,00,000/- Rs. 1,61,646/- |
4. Allegations in each complaint, inter alia, are: (a) that the accused company, towards part payment for supplies made by the complainant, issued cheque(s) in favour of the complainant; (b) those cheque(s) were deposited for collection but they returned for “insufficient funds” in the drawer’s account; (c) complainant thereafter served notice on all the accused calling upon them to pay to the complainant the cheque amount; (d) despite service of notice, the amount was not paid; and (e) therefore, the accused company including respondents 2 to 5, who were in-charge of and responsible for day-to-day business affairs of the accused company, are liable to be punished for offence punishable under Section 138 read with Section 141 of N.I. Act.
5. Based on the complaint and the affidavit filed in support thereof, the accused were summoned by Magistrate concerned.
6. On being summoned, the accused applied to the learned Magistrate to recall the processes issued against them and prayed that proceedings against them be dropped and they be discharged. In their application, it was claimed that the accused company was not only declared ‘SICK’ by the Board of Industrial and Financial Reconstruction [BIFR] under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 [SICA] but it was restrained from disposing of any of its assets without the consent of BIFR. In such circumstances, when a legal embargo was imposed on disposal of its assets, it could not have responded to the demand notice. Therefore, proceedings qua them, under Section 138 of N.I. Act, were not sustainable. In support of its plea, the accused relied on a decision of this Court in M/s. Kusum Ingots & Alloys Ltd. vs. M/s. Pennar Peterson Securities Ltd. and others, (2000) 2 SCC 745
