2000 (2) TMI 719 - SC - Companies Law

Court affirms Section 138 NI Act prosecutions despite SICA; clarifies civil-criminal distinction.

The court dismissed the appeals, affirming that prosecution under Section 138 of the NI Act is maintainable despite SICA proceedings. It clarified that ... Whether the remedy provided in section 29 or 31 of the State Finance Corporation Act, 1951 could be pursued notwithstanding the ban contained in section 22 of the SICA? Held that:- Appeal dismissed. The conclusion which we have to draw is that if commission of the offence under section 138 of the NI Act was completed before the commencement of proceedings under section 22(1) of SICA there is no hurdle in any of the provisions of SICA against the maintainability and prosecution of a criminal complaint duly instituted under section 142 of the NI Act. The decisions rendered by the High Courts, which are assailed before us in this batch of appeals, are therefore not liable to be interfered with Issues Involved:1. Applicability of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) to criminal prosecution under Section 138 of the Negotiable Instruments Act (NI Act).2. Interpretation of the term 'suit' within Section 22(1) of SICA.3. Impact of SICA proceedings on the maintainability of criminal prosecution for cheque dishonor.Issue-wise Detailed Analysis:1. Applicability of Section 22(1) of SICA to Criminal Prosecution under Section 138 of the NI Act:The appellants contended that the prosecution under Section 138 of the NI Act should be suspended due to the pendency of proceedings before the Board for Industrial Finance and Reconstruction (BIFR) under SICA. They argued that Section 22(1) of SICA, which suspends legal proceedings against a sick company, should include criminal prosecutions. However, the court clarified that Section 22(1) of SICA is primarily aimed at suspending civil proceedings such as winding up, execution, distress, or suits for recovery of money. The court emphasized that criminal prosecution under Section 138 of the NI Act is for penal liability and not for recovery of money. Therefore, the prosecution for cheque dishonor does not fall within the ambit of Section 22(1) of SICA.2. Interpretation of the term 'suit' within Section 22(1) of SICA:The appellants argued that the term 'suit' in Section 22(1) of SICA should be interpreted broadly to include criminal prosecutions. They relied on the definition of 'suit' from Bouvier's Law Dictionary and the maxim 'contemporanea expositio est optima et fortissima in lege' to support their argument. However, the court rejected this contention, stating that the term 'suit' in Section 22(1) is specifically delineated to refer to civil suits for recovery of money or enforcement of security. The court held that the context of Section 22(1) does not admit an interpretation that includes criminal prosecutions.3. Impact of SICA Proceedings on the Maintainability of Criminal Prosecution for Cheque Dishonor:The court examined whether the initiation of proceedings under SICA could impact the maintainability of criminal prosecution for cheque dishonor under Section 138 of the NI Act. It was noted that Section 138 of the NI Act is a penal provision aimed at penalizing the dishonor of cheques. The court highlighted that the offence under Section 138 is complete once the cheque is dishonored and the drawer fails to make the payment within the stipulated period. The court further observed that Parliament did not exclude companies under SICA from the purview of Section 138 of the NI Act, even when amending Section 22(1) of SICA in 1994. Therefore, the court concluded that the commission of the offence under Section 138, if completed before the commencement of SICA proceedings, does not face any legal hurdle from SICA provisions.Conclusion:The court dismissed the appeals, holding that the prosecution under Section 138 of the NI Act is maintainable despite the pendency of proceedings under SICA. The court affirmed that Section 22(1) of SICA does not apply to criminal prosecutions for cheque dishonor, and the term 'suit' in Section 22(1) does not encompass criminal proceedings. The decisions of the High Courts, which rejected the appellants' plea for suspension of prosecution, were upheld.