The declaration of insolvency under the Presidency Towns Insolvency Act does not bar the maintainability of criminal proceedings for dishonor of a cheque under Section 138 of the Negotiable Instruments Act.

Since the question involved in these two petitions for quashing is common, it is desirable to dispose of these petitions by a common order.

2. The question posed before this Court is this :-

"Whether the complaint for the offence under Section 138 of the Negotiable Instruments Act is maintainable as against the accused, when the said accused was already declared as an insolvency in the insolvency proceedings ?"

3. The facts in Crl. O.P. No. 704/99 are these :-

Bharat N. Mehta, the petitioner is an accused in a case for the offence under Section 138 of the Negotiable Instruments Act initiated by the respondent. According to the complainant, a cheque for Rs. 10,000/- was issued by the petitioner to the complainant towards discharge of a loan and it was dishonored on 25-4-98, On 30-4-98, the statutory notice was sent and the same was received by the accused. However, no payment was made. Therefore, on 27-5-98, the respondent/complainant filed a complaint in C. C. No. 4161/98 before the VII Metropolitan Magistrate, George Town, Chennai. According to the petitioner, since he incurred heavy loss in his business, on 16-4-98 he filed insolvency petition in I. P. No. 48/98 under the Presidency Towns Insolvency Act III of 1909 and on 17-4-98, he was declared as an insolvent by the High Court in insolvency jurisdiction. On 23-4-98, the petitioner sent a notice to the complainant informing about the said order and asking him not to present the cheque for clearance. The adjudication notice was also received by the counsel for the respondent on 2-7-98. Despite the above fact the complaint for the offence under Section 138 of the Negotiable Instruments Act was filed on 27-5-98.

4. The facts in Crl. O.P. No. 769/99 are as follows :-

K. Sambasiva Rao, the petitioner, is the accused in the private complaint filed by the respondent/complainant for the offence under Section 138 of the Negotiable Instruments Act. According to the complainant, the cheque issued by the the petitioner towards the payment of the amounts due was presented and the same was dishonoured. Therefore, on 5-8-97, the complainant sent a statutory notice to the accused who acknowledged the same. However, he neither sent reply to the notice nor paid the amount within the period of 15 days. Therefore, the complainant filed a complaint on 23-9-97 against the petitioner for the offence under Section 138 of the Negotiable Instruments Act in C. C. No. 5917/97. According to the petitioner/accused, since he had incurred heavy loss in his business, he filed an Insolvency Petition on 16-4-97 in I. P. No. 97/97 under the Presidency Towns Insolvency Act III of 1909 and he was declared by the High Court in the insolvency jurisdiction as an insolvent by the order dated 29-4-97. This was intimated by the petitioner to the complainant on 26-8-97. However, the complainant presented the cheque on 4-8-97 and the same was returned the petitioner also served the notice of adjudication in I. P. No. 97/97 on the complainant. Despite that, the complaint was filed on 23-9-97.

5. Mr. Ramachandran, the learned counsel for the petitioner would at length argue stating that the order adjudicating the petitioner in Crl. O.P. 796 as an insolvent was passed on 29-4-97 and that admittedly, the complaint by the complainant against the petitioner was filed on 23-9-97. Therefore, according to the counsel for the petitioner, on the date of presentation of the complaint or on the date of taking cognizance of said complaint, the petitioner was insolvent and as such, no proceedings of any nature should be initiated against the insolvent by his creditors without the leave of the Insolvency Court after the date of adjudication.

6. It is further submitted that under Section 17 of the Presidency Towns Insolvency Act III of 1909, on the making of an order of adjudication, the property of the insolvent wherever suitable shall vest in the official assignee and no creditor to whom the insolvent is indebted in resp