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2000 DIGILAW 761 (RAJ)

Peacock Industries Ltd. v. State of Rajasthan

2000-07-04

BHAGWATI PRASAD

body2000
JUDGMENT 1. - The point raised by the learned counsel for the petitioners in this case is that the criminal prosecution launched against the Company under Section 138 of the Negotiable Instruments Act, 1881 (referred to hereinafter as the Act) cannot be continued after an order is made under Section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 (referred to hereinafter as the SICA). 2. This proposition of the learned counsel for the petitioners can be viewed from the angle of the law laid down by the Honble Supreme Court in the case of Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., and others reported in (2000) 2 SCC 745 wherein the Honble Supreme Court has observed as under:- "In our considered view Section 22 SICA does not create any legal impediment for instituting and proceeding with a criminal case on the allegations of an offence under Section 138 of the NI Act against a company or its directors. The Section as we read it only creates and 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 realisation of dues of the creditors. The Section does not bar payment of money by the company or its directors to other persons for satisfaction of their legally enforceable dues." 3. Learned counsel for the petitioners urges that the law laid down by the Honble Supreme Court in the aforesaid case deserves to be viewed in view of a subsequent decision rendered by the Honble Supreme Court in the case of BSI Ltd. and another v. Gift Holdings Pvt. Ltd. and another, reported in (2000) 2 SCC 737 wherein the Honble Supreme Court has observed as under : "A criminal prosecution is neither for recovery of money nor for enforcement of any security etc. Section 138 of the NI Act is a penal provision the commission of which offence entails a conviction and sentence on proof of the guilt in duly conducted criminal proceedings. Once the offence under Section 138 is completed the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to penal liability. Once the offence under Section 138 is completed the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to penal liability. What was considered in Maharashtra Tubes Ltd. is whether the remedy provided in Section 29 or Section 31 of the State Finance Corporation Act, 1951 could be pursued notwithstanding the ban contained in Section 22 of SICA. Hence the legal principle adumbrated in the said decision is of no avail to the appellants." 4. Learned counsel for the petitioners urges that the Honble Supreme Court has observed that once the offence under Section 138 is completed the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to penal liability. The intention of the Court while expressing this view is that unless the offence under Section 138 of the Act is completed, the prosecution cannot be continued. That being the intention of the Honble Supreme Court it can further be extended in the light of the intention of the legislature that the provisions of Section 22 of the SICA make a comprehensive provision and with the non-obstante clause occurring in the Section all recoveries of money are barred. 5. Learned counsel for the petitioners submits that the law deserves to be expanded in the light of the legislative intent contained in Section 22 of the SICA. 6. In the instant case, the proceedings were initiated by filing a complaint against the petitioners on 26.6.1998 whereby it is alleged that the accused issued cheques to complainant which were dishonoured by the bank on presentation. The complainant served notice dated 16.5.1998 through advocate which they have not responded and hence the offence as envisaged under Section 138 of the Act is complete. The Court took cognizance against the petitioners on 11.11.1998. An order was made by the Board under SICA on 7.12.1998. On such order being made under Section 22-A of the SICA the accused petitioners filed an application before the Trial Court for cancelling the complaint. The Trial Court after considering the application and the provisions of law came to the conclusion that the proceedings in the nature of Section 138 of the Act are criminal in character and they are not recovery proceedings and, therefore, the Trial Court rejected the application. The Trial Court after considering the application and the provisions of law came to the conclusion that the proceedings in the nature of Section 138 of the Act are criminal in character and they are not recovery proceedings and, therefore, the Trial Court rejected the application. A revision was preferred against that order and the revision Court also dismissed the revision petition. Hence this petition under Section 482 Cr.P.C. has been filed before this Court. 7. The case of the learned counsel for the petitioners is that Section 22 of the SICA already been made. During the period a restraint order under Section 22-A of the SICA is in force. It would be unjust, unfair and against the intent and purpose of the statute to hold that the persons responsible should be compelled to face trial in a criminal case. Learned counsel for the petitioners relies on certain observations made in the case of BSI Ltd. (supra) and Pankaj Mehra and another v. State of Maharashtra and others, reported in (2000) 2 SCC 756 . 8. Learned counsel for the respondents per contra has urged that the perception of law as laid down by the Honble Supreme Court has wrongly been put forward by the learned counsel for the petitioners in all the three cases referred to above by the learned counsel for the petitioners. The Honble Supreme Court has held that as and when an offence under Section 138 of the Act is completed the prosecution proceedings cannot be stopped. In the instant case, before the order under Section 22 of the SICA was made the proceedings were initiated and cognizance was taken. 9. I have considered the rival submissions and have also perused the case law referred to by the learned counsel. 10. The Honble Supreme Court in the case of Kusum Ingots and Alloys Ltd. (supra) has held as narrated hereinabove. In view of the law laid down by the Honble Supreme Court it cannot be said that the present prosecution cannot be continued. The observations of the Honble Supreme Court in the case of BSI Ltd. (supra) also does not help the petitioners. For ready reference the observations of the Honble Supreme Court in the case of BSI Ltd. (supra) are quoted hereinunder : "19. The observations of the Honble Supreme Court in the case of BSI Ltd. (supra) also does not help the petitioners. For ready reference the observations of the Honble Supreme Court in the case of BSI Ltd. (supra) are quoted hereinunder : "19. The question that remains to be considered is whether Section 22-A of SICA affects a criminal case for an offence under Section 138 NI Act. In the said Section provision is made enabling the Board to make an order in writing to direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets - (a) during the period of preparation or consideration of the scheme under Section 18; and (b) during the period beginning with the recording of opinion by the Board for winding up of the company under sub-section (1) of Section 20 and up to commencement of the proceedings relating to the winding up before the High Court concerned. This exercise of the power by the Board is conditioned by the prescription that the Board is of the opinion that such a direction is necessary in the interest of the sick industrial company or its creditors or shareholders or in the public interest. In a case in which BIFR has submitted its report declaring a company as sick and has also issued a direction under Section 22-A 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 NI Act cannot be instituted during the period in which the restraint order passed by 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 which the cheque was drawn or before expiry of the statutory period of 15 days after notice, a restraint order of BIFR under Section 22-A was passed against the company then it cannot be said that the offence under Section 138 NI Act was completed. Take for instance, before the date on which the cheque was drawn or before expiry of the statutory period of 15 days after notice, a restraint order of BIFR under Section 22-A was passed against the company then it cannot be said that the offence under Section 138 NI Act was completed. In such a case it may reasonably be said that the dishonouring of the cheque by the bank and failure to make payment of the amount by the Company and/or its Directors is for reasons beyond the control of the accused. It may also be contended that the amount claimed by the complainant is not recoverable from the assets of the company in view of the ban order passed by 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. 20. Except in the circumstances noted above we do not find any good reason for accepting the contentions raised by the learned counsel for the appellants in favour of the prayer for quashing the criminal proceedings or for keeping the proceedings in abeyance. It will be open to the appellants to place relevant materials in this regard before the learned Magistrate before whom the cases are pending and the learned Magistrate will examine the matter keeping in mind the discussions made in this judgment. We make it clear that we have not considered the question whether in the facts and circumstances of a particular case Section 138 Nl Act is attracted or not, for that is a question to be considered by the Court at the appropriate stage of the case in the light of the evidence on record. The appeals are disposed of on the terms aforesaid." 11. Reference can also be made to the following observations of the Honble Supreme Court made in Pankaj Mehras case (supra): "29. The words "the drawer of such cheque fails to made the payment" are ostensibly different from saying "the drawer refuses to make payment". Failure to make payment can be due to the reasons beyond the control of the drawer. Reference can also be made to the following observations of the Honble Supreme Court made in Pankaj Mehras case (supra): "29. The words "the drawer of such cheque fails to made the payment" are ostensibly different from saying "the drawer refuses to make payment". Failure to make payment can be due to the reasons beyond the control of the drawer. An illustrative case is, if the drawer is not a company but an individual who has become so pauperised or so sick as he cannot raise the money to pay the demanded sum, can he contend that since failure to make payment was on account of such conditions he is entitled to be acquitted ? The answer cannot be in the affirmative though the aforesaid conditions can be put forth while considering the question of sentence. 31. The drawer of the cheque can have different explanations for the failure to pay the amount covered by the cheque. But no such explanations would be sufficient to extricate him from the tentacles of the offence contemplated in the Section. Perhaps some kind of explanations would be sufficient to alleviate the rigour of the offence which may be useful to mitigate the quantum of sentence to be imposed. But that is no ground for consideration at this stage." 12. Thus, it can be seen that the Honble Supreme Court has clearly held that the proceedings initiated before the order under Section 22-A of the SICA was made, can be continued. The cognizance in the present case was taken before the order under Section 22-A of the SICA was made. The offence under Section 138 of the Act having been completed before an order under Section 22-A of the SICA was made, it cannot be said that the Trial Court in taking cognizance has erred. Once this is held that the Court in taking cognizance has not erred because the offence was complete before an order under Section 22-A of the SICA was made, the Trial Court cannot be said to have erred in dismissing the application of the petitioners for quashing the proceedings. The order of the revisional Court also cannot be said to be wrong. In these proceedings under Section 482 Cr.P.C. no interference is called for as the impugned orders are inconsonance with the law laid down by the Honble Supreme Court.In the aforesaid circumstances, this misc. The order of the revisional Court also cannot be said to be wrong. In these proceedings under Section 482 Cr.P.C. no interference is called for as the impugned orders are inconsonance with the law laid down by the Honble Supreme Court.In the aforesaid circumstances, this misc. petition having no force is hereby dismissed.Petition dismissed. *******