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TMI Blog1999 (2) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. However, no payment was made. Therefore, on 27.5.1998, the respondent complainant filed a complaint in C.C. No. 4161 of 1998 before the VII Metropolitan Magistrate, George Town, Chennai. According to the petitioner, since he incurred heavy loss in his business, on 16.4.1998 he filed insolvency petition in I.P.No. 48 of 1998 under the Presidency Towns Insolvency Act III of 1909 and on 17.4.1998, he was declared as an insolvent by the High Court in insolvency jurisdiction. On 23.4.1998, 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 2.7.1998. Despite the above fact for the offence the complaint under Section 138 of the Negotiable Instruments Act was filed on 27.5.1998. 4. The facts in Crl.O.P.No.796 of 1999 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 petitioner towards the payment of the amounts due was presented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act confers power to the Insolvency Court to stay the proceedings or allow them to continue on such terms as it may think just. 8. The counsel for the petitioner would further point out that Section 25(1) of the Act gives right to the insolvent to apply to the Court for protection and the said Court may make an order for the protection of the insolvent from arrest or detention and that Section 25(3) of the Act would provide that the protection order would protect the insolvent from being arrested or detained in prison for any debt to which such order shall apply. 9. Pointing out Rule 2, Order III of the Insolvency Rules, 1958 the learned counsel for the petitioner would submit that every debtor, soon after his petition is admitted in the Insolvency court shall lodge forthwith in the Office of the Official Assignee all books, papers, etc. relating to the estate and also file a list of creditors and debtors. 10. On the strength of these provisions, the main contention of the counsel for the petitioner is that once the accused in the proceedings under Section 138 of the Negotiable Instruments Act is declared as an insolvent, by virtue of Sections 17, 18(1) and (3) and 25(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assignee as to realization. Under Section 68(d), the Official Assignee can institute, defend or continue any suit or other legal proceedings relating to the property of the insolvent. 16. The Section is based on the broad principle that when once a person is adjudicated as an insolvent, the creditors seeking any remedy against him shall come to Insolvency Court and the operation of Section 17 affects all the creditors if the petitioner is adjudicated as insolvent, the property vests with the Official Assignee and he has to dispose it of to distribute the assets to all the creditors. The filing of the suit and other proceedings against the property of the insolvent are prohibited, but not with regard to the criminal cases. The realisation of money due through the Official Assignee is entirely different from seeking penal action for the offence committed by the person by not making payment of the cheque amount after dishonour inspite of receipt of the statutory notice. 17. The offence under Section 138 of the Negotiable Instruments Act is a statutory offence and these proceedings are totally different from that of the insolvency proceedings and by any stretch of imagination, it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice demanding the cheque amount was received, the accused shall pay the cheque amount within 15 days from the date of the receipt of the said notice. Immediately, on the said 15 days expires, the cause of action arises. In other words, the offence under Section 138 of the Negotiable Instruments Act is complete. 24. When a similar issue was raised, the Bombay High Court, in Emperor v. Mullshankar Harihand Bhat, I.L.R. Vol.35 Bom. 63, held that the Magistrate's jurisdiction to try the insolvent for an offence under Section 421 I.P.C. is not taken away by anything in the Insolvency Act. 25. To put it briefly, there is no bar contained in any of the provisions of both the Acts, namely, the Negotiable Instruments Act and the Insolvency Act from approaching the criminal court to seek for penal action under Section 138 of the Negotiable Instruments Act. 26. While going through the object and scope of the Act, it is clear that there are two ways in which the legislature help the cause of the aggrieved party by facilitating the application of Section 138 of the Negotiable Instruments Act to his case: (I) Under Section 139 of the Negotiable Instruments Act, a presumption is created wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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