2003 (12) TMI 330 - HC - Companies Law

Summary

Issues:
1. Interpretation of sections 22 and 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 in relation to criminal proceedings under section 138 of the Negotiable Instruments Act.

Analysis:
The case involved five revision petitions challenging the order of the Additional Chief Judicial Magistrate regarding the accusation under section 138 of the Negotiable Instruments Act. The complainant, a marketing company, accused the company and its directors of not honoring an agreement and issuing cheques that bounced. The accused company was declared a sick company by the BIFR before the issuance of the cheques. The defense argued that criminal proceedings cannot proceed due to the provisions of SICA. The court examined relevant judgments, including Kusum Ingots and Alloys Ltd. v. Pennar Peterson Securities Ltd., and highlighted the provisions of section 22A of SICA, emphasizing that a sick company is restricted from disposing of assets without BIFR's consent.

The court noted that the sick company could only dispose of fixed assets with BIFR's approval, as per the provisions of section 22-A of SICA. It concluded that the proceedings under section 138 of the Negotiable Instruments Act could proceed during the period of restraint imposed by BIFR. The court agreed with the complainant's counsel that the issue raised by the accused company was premature and should be addressed at the trial court stage. Consequently, the court dismissed all five petitions, stating that no interference was warranted at that stage, and ordered the records to be returned.

This judgment provides a detailed analysis of the interplay between the provisions of SICA and the proceedings under the Negotiable Instruments Act. It clarifies that a sick company's ability to dispose of assets is restricted and that criminal proceedings can continue during the period of restraint imposed by BIFR. The court emphasized the importance of presenting relevant material before the trial court and highlighted the need to consider the facts and circumstances of the case in making decisions.