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TMI Blog2019 (7) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 138 of the Act (emphasis supplied). The offence under Section 138 of the Act was not complete and the order of issuance of process is unsustainable. The offence not complete, not because there was a statutory bar, but as explained by the Apex Court, because the directors of the company were prevented by reasons beyond their control from honouring the cheques. The repeal of SICA, cannot breathe life in the complaint which was still born since the offence was not complete as on the date of the issuance of process by the learned Magistrate. The order for issuance of process is quashed - petition allowed. - CRIMINAL WRIT PETITION NO.740 OF 2018 - - - Dated:- 9-7-2019 - ROHIT B. DEO, J. Shri Anil Mardikar, Senior Counsel with Shri S.L. Kotwal, Advocate for Petitioners. Smt. Shilpa Tapdiya, Advocate for Respondents. ORAL JUDGMENT: Heard Shri Anil Mardikar, the learned Senior Counsel with Shri S.L. Kotwal, for the petitioners and Smt. Shilpa Tapdiya, the learned Counsel for the respondents. With consent the petition is finally heard at the admission stage. 2] The petitioners are assailing the order dated 20.04.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g letter dated 12.06.2010, 24.06.2010 and 24.06.2010 are annexed to the petitions as Annexures B, B1 and B2 to substantiate the said assertions. 8] The accused company contends that due to financial problem a reference under Section 15 of the SICA was made to BIFR which was received by the BIFR on 03.12.2008 and registered as Case 55 of 2008 and the BIFR passed an order dated 16.07.2009 (Anneuxre C) which inter alia declared the accused company as sick unit. 9] The accused contends that the complainant company intervened in the proceedings vide Miscellaneous Application under reference 125 of 2012 inter alia seeking impleadment and a direction to the accused company to release payment of ₹ 605.50 lakhs and in the alternative to permit the complainant company to take recourse to recovery proceedings. The accused company asserts that the said application was disposed of by the BIFR vide order dated 22.01.2014 which reads thus: Having considered the submissions of the parties during the hearing and material on record the Bench allowed the MA No. 125 of 2012 to the extent of implement and directed the parties to reconcile the account and Coal quantity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons not residing within the territorial jurisdiction of the Court without conducting the preliminary inquiry under Section 202(1) of the Criminal Procedure Code, 1973 ('Code'). 18] The fourth ground is that in view of the provisions of Section 46 of the Act, and the written stipulations as evidenced in the three communications referred to supra, the cheques could not have been presented for encashment. 19] The fifth ground, and which is the thrust of the submissions of the learned Senior Counsel Shri Anil Mardikar, is that in view of the decision of the Apex Court in M/s. Kusum Ingots Alloys Ltd., vs. M/s. Pennar Peterson Securities Ltd and others reported in AIR 2000 SC 954, the ingredients of offence punishable under Section 138 of the Act are not established. This submission is on the premise that in view of the proceedings under the SICA and the orders passed by the BIFR therein, the accused were precluded from honouring the cheques, even if it is assumed that the cheques were issued towards satisfaction of existing and legally enforceable debt. 20] The sixth ground is that in view of the specific bar under Section 22 of the SICA no prosec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the SICA before the expiry of the period for payment of the cheque amount. The Apex Court has held that Section 22 only deals with the proceedings for recovery of money or for enforcement of any security or guarantee in respect of any loans or advance granted to the company and a proceedings for winding up of the company and there is no reference to any criminal proceedings. The Apex Court then referred to its earlier decision in M /s. BSI Ltd. v. Gift Holdings Pvt. Ltd. 2000 AIR SCW 521 which holds that pendency of proceedings under Section 22(1) of the SICA alone is not sufficient to get absolved from the liability under Section 138 of the Act (emphasis supplied). In paragraph 18 the Apex Court enunciates thus: 18. In our considered view S 22 SICA does not create any legal impediment for instituting and proceeding with a criminal case on the allegations of an offence under S 138 of the NI Act against a company or its Directors. The section as we read it only creates an embargo against disposal of assets of the company for recovery of its debts. The purpose of such an embargo is to preserve the assets of the company from being attached or sold for reali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the complainant is not recoverable from the assets of the company in view of the ban order passed by the BIFR. In such circumstances it would be unjust and unfair and against the intent and purpose of the statute to hold that the Directors should be compelled to face trial in a criminal case. (emphasis supplied) 25] The illustrations given by the Apex Court are illuminating. The Apex Court articulates that if before the date on which the cheque was drawn or expiry of the statutory period of 15 days after notice, a restraint order of BIFR under Section 22A was passed against the company, then it cannot be said that the offence under Section 138 of the Act was completed. The reasoning of the Apex Court is that the failure to make the payment would be for reasons beyond the control of the accused and it may also be contended that the amount claimed is not recoverable from the assets of the company in view of the ban order passed by the BIFR. 26] The facts of the present case may now be considered on the anvil of the decision in Kusum Ingots. 13 cheques were dishonoured. One cheque is dated 12.06.2010 and the other 12 cheques are dated 24.06.2010. The avement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guidelines and Checklist while carrying out this exercise. Meanwhile, it is necessary in public interest to protect the interest of the company, its creditors, employees, Government departments to whom dues are to be paid share holders etc. and ensure that the assets of the company are used under the direction of BIFR. Accordingly, the company was directed not to dispose of, lease, sell or alienate except with the consent of the Board, any of its assets as per Section 22A of the SICA. However, if the unit is working, the current assets could be utilized for running day to day operations, subject to keeping proper records thereof and routing all transactions through the account with the company's financing bank(s) only. It is specifically directed that investments of the company shall also not be disposed of, sold or alienated without the prior permission of BIFR although the company may have classified investments under current assets. The cut off date (COD) for the scheme shall be taken as 30.07.2007 as indicated in the CDR scheme. 28] The order dated 16.07.2009 is unambiguous. It is clear that the accused company was declared sick and restrained from disposing of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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