Hindustan Anti - Biotics Ltd. and Ors. . Vs Kirloskar… — Cheque Dishonour

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL 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`

¶4

Hindustan Anti-Biotics Ltd.
and others

¶5

.. Petitioners
(In all the petitions)

¶6

Versus

¶7

Kirloskar Investment & Finance Ltd.
and another

¶8

.. Respondents
(In all the petitions)

¶9

: 2 :

¶10

Mr.Amit Desai with Mr.Prakash Naik for the petitioners
in all Writ Petitions.

¶11

Mr.D.R.More, A.P.P for the State in W.P.Nos.1271 of 2001
to 1275 of 2001.

¶12

Mrs.P.P.Shinde, A.P.P for the State in W.P.Nos.1276 of
2001 to 1283 of 2001.

¶13

Mr.D.P.Adsule, A.P.P for the State in W.P.Nos.1285 of
2001 to 1288 of 2001.

¶14

Mr.Y.S.Shinde, A.P.P for the State in W.P.Nos.1289 of
2001 to 1292 of 2001.

¶15

CORAM : ABHAY S.OKA, J.

¶16

DATE : 20th August 2008.

¶17

ORAL JUDGMENT:

¶18

.I have heard the submissions of the learned

¶19

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

¶20

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

¶21

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

¶22

: 3 :

¶23

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.

¶24

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

¶25

"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

¶26

: 4 :

¶27

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.

¶28

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

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: 5 :

¶30

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.

¶31

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:

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"The common question that arises for

¶33

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

¶34

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."

¶35

: 6 :

¶36

"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. ......"

¶37

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:

¶38

" ..... In a case in which the BIFR has

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submitted its report declaring a company as
‘sick’ and has also issued a direction under

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: 7 :

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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
which the cheque was drawn or before expiry of
the statutory period of 15 days after notice, a
restraint order of the BIFR under section 22A
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

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: 8 :

¶43

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 added)

¶44

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.

¶45

7.It is true that no fault can be found with the

¶46

final order passed by the learned Magistrate of
declining to drop the proceedings as he had no

¶47

: 9 :

¶48

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.

¶49

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

¶50

: 10 :

¶51

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.

¶52

9. Accordingly, petitions are disposed of by

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passing following order:

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(i)The proceeding of the complaint referred to in
prayer clause (b) is quashed and set aside.

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(ii)Rule is made absolute in above terms with no
orders as to costs.

¶56

(A.S.Oka, J)

Hindustan Anti - Biotics Ltd. and Ors. . v. Kirloskar Investment and Finance Ltd. and Anr. .

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Hindustan Anti - Biotics Ltd. and Ors. . v. Kirloskar Investment and Finance Ltd. and Anr. .

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