Section 138 cheque dishonour liability survives sick company protection and prior intimation does not defeat prosecution.

Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 applies to winding up, execution, distress and similar steps against a sick industrial company's property, not to criminal prosecution under section 138 of the Negotiable Instruments Act, 1881. Dishonour of cheques for insufficiency of funds, excess arrangement, or stoppage of payment attracts penal liability, and a prior intimation not to present the cheque does not avoid that liability unless it gives detailed, legally tenable reasons showing inability to honour the cheque despite arrangements. A director may also be proceeded against under section 141 where the company acts through its human agency.

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Issues: Whether criminal complaints under section 138 of the Negotiable Instruments Act, 1881 could be quashed on the grounds that section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 barred continuation of the proceedings, that prior intimation not to present the cheques excluded liability, and that the director could not be proceeded against in the absence of specific allegations.

Analysis: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was held to apply to winding up, execution, distress and like steps against the property of a sick industrial company, and not to criminal prosecution. Dishonour of cheques with endorsements such as insufficiency of funds, excess arrangement, or stoppage of payment attracted the penal provisions of section 138. A mere advance intimation not to present the cheque was not sufficient unless it contained detailed, legally tenable reasons showing inability to honour the cheques despite arrangements; an intimation based only on inability to make funds available did not take the case out of section 138. The director was also held to be liable under section 141 where the company acted through its human agency.

Conclusion: The grounds for quashing were rejected and the criminal proceedings were held to be maintainable.

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