IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL CRIMINAL CRIMINAL APPELLATE JURISDICTION APPELLATE JURISDICTION APPELLATE JURISDICTION CRIMINAL WRIT PETITION NO.1271 OF 2001 WITH CRIMINAL WRIT PETITION NO.1272 OF 2001 WITH CRIMINAL WRIT PETITION NO.1273 OF 2001 WITH CRIMINAL WRIT PETITION NO.1274 OF 2001 WITH CRIMINAL WRIT PETITION NO.1275 OF 2001 WITH CRIMINAL WRIT PETITION NO.1276 OF 2001 WITH CRIMINAL WRIT PETITION NO.1277 OF 2001 WITH CRIMINAL WRIT PETITION NO.1278 OF 2001 WITH CRIMINAL WRIT PETITION NO.1279 OF 2001 WITH CRIMINAL WRIT PETITION NO.1283 OF 2001 WITH CRIMINAL WRIT PETITION NO.1285 OF 2001 WITH CRIMINAL WRIT PETITION NO.1286 OF 2001 WITH CRIMINAL WRIT PETITION NO.1287 OF 2001 WITH CRIMINAL WRIT PETITION NO.1288 OF 2001 WITH CRIMINAL WRIT PETITION NO.1289 OF 2001 WITH CRIMINAL WRIT PETITION NO.1290 OF 2001 WITH CRIMINAL WRIT PETITION NO.1291 OF 2001 WITH CRIMINAL WRIT PETITION NO.1292 OF 2001 Hindustan Anti-Biotics Ltd. and others .. Petitioners (In all the petitions) Versus Kirloskar Investment & Finance Ltd. and another .. Respondents (In all the petitions) : 2 : 2 : 2 : Mr.Amit Desai with Mr.Prakash Naik for the petitioners in all Writ Petitions. Mr.D.R.More, A.P.P for the State in W.P.Nos.1271 of 2001 to 1275 of 2001. Mrs.P.P.Shinde, A.P.P for the State in W.P.Nos.1276 of 2001 to 1283 of 2001. Mr.D.P.Adsule, A.P.P for the State in W.P.Nos.1285 of 2001 to 1288 of 2001. Mr.Y.S.Shinde, A.P.P for the State in W.P.Nos.1289 of 2001 to 1292 of 2001. CORAM CORAM CORAM : ABHAY S.OKA, J. : ABHAY S.OKA, J. : ABHAY S.OKA, J. DATE DATE DATE : : : 20th August 2008. ORAL ORAL ORAL JUDGMENT: JUDGMENT: JUDGMENT: . I have heard the submissions of the learned counsel appearing for the petitioners. None appeared for the 1st respondent. As the learned counsel for the petitioner has stated that the facts involved in all these Writ Petitions are more or less identical, a reference is made to the facts of the case in Writ Petition No.1271 of 2007. The 1st respondent filed a complaint alleging commission of offence under section 138 read with section 141 of the Negotiable Instruments Act, 1881 against the petitioners. In the complaint it is alleged that after negotiations with the parties, the 1st respondent complainant had agreed to advance and : 3 : 3 : 3 : disburse the amount by way of lease finance on terms and conditions agreed between the parties. According to the case of the 1st respondent, a cheque dated 20th December 1997 was issued by the 1st petitioner towards lease rentals. The said cheque was dishonoured. The cheque was returned on 23rd December 1997 with the remark "Exceeds arrangements". A notice of demand was issued by the 1st respondent which was received by the petitioners on or about 23rd December 2007. The complaint was lodged on 06th February 1998. 2. According to the case of the petitioners, on 31st March 1997, an order was passed by the Board For Industrial and Financial Reconstruction (for short "BIFR") declaring the 1st petitioner as a Sick Industrial Company within the meaning of section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1986 (for short "SICA"). A direction was issued under the same order directing the petitioner not to alienate any of its assets in terms of section 22A of SICA. According to the case of the petitioners, the order of BIFR was confirmed by this Court. The petitioner informed the 1st respondent of the said order and requested the first respondent not to deposit the cheque. The case of the petitioners is that despite the : 4 : 4 : 4 : request, the 1st respondent Company deposited the cheque and the same was dishonoured. On the basis of the judgment of the Apex Court in the case of Kusum Ignots and Alloys Ltd. Vs. Pennar Patterson Securities Ltd dated 23rd February 2000 in Criminal Appeal No.212 216 of 2000, an application was made before the learned Magistrate for dropping the proceedings of the complaint. The said application was rejected by the learned Magistrate. The prayer in this petition under Article 227 of the Constitution of India and section 482 of the Code of Criminal Procedure, 1973 is for quashing the order of the learned Magistrate and also for quashing the proceedings of the complaint. 3. The learned counsel appearing for the petitioner pointed out that cheques which are subject matter of the complaints in this group of petitions were issued after the order dated 31st March 1997 under section 22A of SICA was passed. He submitted that the cheques were dishonoured, demand notices were issued and the complaints were filed when the order under section 22A of the SICA was in force. He submitted that in view of clear directions issued under section 22A of SICA, the proceeding under section 138 read with section 141 of the said Act of 1881 were not maintainable. He placed : 5 : 5 : 5 : reliance on the decision of the Apex Court in the case of Kusum Ignots (supra). He, therefore, submitted that though the learned Magistrate could not have recalled the order issuing process, a case is made out for quashing the complaints in exercise of powers under section 482 of the said Code of 1973. 4. I have carefully considered the submissions. I have perused the decision of the Apex Court in the case of Kusum Ignots (supra). The questions which arose for consideration of the Apex Court in the said case were as under: "The common question that arises for consideration in these appeals is whether a company and its directors can be proceeded against for having committed an offence under section 138 of the Negotiable Instruments Act, 1881 (for short ‘the NI Act’) after the company has been declared sick under the provisions of The Sick Industrial Companies (Special Provisions) Act, 1985 (for short ‘SICA’) before the expiry of the period for payment of the cheque amount." : 6 : 6 : 6 : "The next question for consideration is whether under the provisions of the SICA there was any legal impediment for payment of the amount for which the cheques were drawn and for that reason the appellants cannot be taken to have committed an offence under section 138 NI Act. ......" 5. The Apex Court after considering its earlier decision in the case of M/s.B.S.L. Ltd and another Vs. Gift Holdings Pvt Ltd. (Criminal Appeal No.847 of 1999), re-affirmed the view taken earlier that mere pendency of the proceedings under section 22(1) of SICA is not sufficient to get absolved of liability under section 138 of the said Act of 1881. The Apex Court also specifically considered the question whether section 22A of SICA affects a criminal case for an offence under section 138 of the said Act of 1881. While dealing with the said question the Apex Court observed thus: " ..... In a case in which the BIFR has submitted its report declaring a company as ‘sick’ and has also issued a direction under : 7 : 7 : 7 : section 22A restraining the company or its directors not to dispose of any of its assets except with consent of the Board then the contention raised on behalf of the appellants that a criminal case for the alleged offence under section 138 of the NI Act cannot be instituted during the period in which the restraint order passed by the BIFR remains operative cannot be rejected outright. Whether the contention can be accepted or not will depend on the facts and circumstances of the case. Take for instance, before the date on Take for instance, before the date on Take for instance, before the date on which which which the cheque was drawn or before expiry of the cheque was drawn or before expiry of the cheque was drawn or before expiry of the the the statutory period of 15 days after notice, a statutory period of 15 days after notice, a statutory period of 15 days after notice, a restraint restraint restraint order of the BIFR under section 22A order of the BIFR under section 22A order of the BIFR under section 22A was was was passed against the company then it cannot be passed against the company then it cannot be passed against the company then it cannot be said said said that the offence under section 138 NI Act that the offence under section 138 NI Act that the offence under section 138 NI Act was was was completed. In such a case it may reasonably completed. In such a case it may reasonably completed. In such a case it may reasonably be be be said that the dishonouring of the cheque by said that the dishonouring of the cheque by said that the dishonouring of the cheque by the the the bank and failure to make payment of the bank and failure to make payment of the bank and failure to make payment of the amount amount amount by the company and/or its Directors is by the company and/or its Directors is by the company and/or its Directors is for for for reasons beyond the control of the accused. reasons beyond the control of the accused. reasons beyond the control of the accused. It It It may also be contended that the amount claimed may also be contended that the amount claimed may also be contended that the amount claimed by by by the complainant is not recoverable from the the complainant is not recoverable from the the complainant is not recoverable from the assets assets assets of the company in view of the ban order of the company in view of the ban order of the company in view of the ban order : 8 : 8 : 8 : passed passed passed by the BIFR. In such circumstances it by the BIFR. In such circumstances it by the BIFR. In such circumstances it would would would be unjust and unfair and against the be unjust and unfair and against the be unjust and unfair and against the intent intent intent and purpose of the statute to hold that and purpose of the statute to hold that and purpose of the statute to hold that the the the Directors should be compelled to face trial Directors should be compelled to face trial Directors should be compelled to face trial in in in a criminal case. a criminal case. a criminal case." (Emphasis added) 6. Thus, the Apex Court considered a case where before the date on which the cheque was drawn and before expiry of statutory period of 15 days of notice, a restraint order under section 22A was already passed against the company. In such contingency, the Apex Court observed that it cannot be said that offence under section 138 of the said Act of 1881 was completed. The Apex Court observed that in such a case it may reasonably be said that dishonour of the cheque by bank and failure to make payment by the company and or its directors is for the reasons beyond the control of the accused and therefore it would be unjust and unfair to hold that directors should be compelled to face a trial in the criminal case. 7. It is true that no fault can be found with the final order passed by the learned Magistrate of declining to drop the proceedings as he had no : 9 : 9 : 9 : jurisdiction to recall the order of issue of process. However, the case for quashing under section 482 of the said Code will have to be considered. There is a clear direction issued by the BIFR on 31st March 1997 under section 22A of SICA directing the 1st petitioner not to alienate any of its assets. A detailed reply was filed by the 1st respondent to the application made by the petitioners before the Magistrate. In the said reply, the 1st respondent has not disputed the existence of order dated 31st March 1997 passed by the BIFR before date on which cheques were issued. The contention raised by the 1st respondent is that after order dated 31st March 1998 was passed, a sum of Rs.40,00,000/- was paid by the accused in discharge of their liability. 8. A chart is placed on record showing the respective dates of the cheques, dates of demand notice and date of filing of the complaints. The said chart is taken on record and marked "X" for identification. From the said chart it is apparent that the cheques have been dishonoured after 31st March 1997. There is nothing on record to dispute the contention of the petitioner that when the notice of demand was issued and when the statutory notice period expired, the direction under section 22A of SICA was very much in force. Considering : 10 : 10 : 10 : this undisputed factual aspect, as observed by the Apex Court in the case of Kusum (supra), the petitioners cannot be compelled to face the trial. In such a case, it is observed by the Apex Court that it cannot be said that an offence under section 138 of the said Act of 1881 was completed. It must be stated here that though rule was issued on 21st September 2000, till today there is no reply filed by the 1st respondent. None has appeared for the 1st respondent. In the circumstances, a case is made out for exercising power under section 482 of the Code of Criminal Procedure, 1973 for quashing the complaints. 9. Accordingly, petitions are disposed of by passing following order: (i) The proceeding of the complaint referred to in prayer clause (b) is quashed and set aside. (ii) Rule is made absolute in above terms with no orders as to costs. (A.S.Oka, J)