S.22 of the Sick Industrial Companies Act does not bar prosecution under S.138 of the Negotiable Instruments Act for offences completed before S.22 proceedings commenced.

1 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 ('BIFR' 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 in Criminal 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 S.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 S.16 of the SICA a declaration was made by the order passed by the BIFR as per S.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 S.22(1) of SICA.

4 When the offence under S.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 S.141 of the NI Act).

5 In Anil Hada v. Indian Acrylic Ltd. (2000 (1) SCC 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 S.141 of the NI 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 S.22(1) of SICA. In order to persuade the court to place such an interpretation on the said sub-section learned counsel invited our attention to ce