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Issues: (i) Whether proceedings for an offence under section 138 of the Negotiable Instruments Act, 1881 can continue against a company and its directors notwithstanding a declaration of sickness under the Sick Industrial Companies (Special Provisions) Act, 1985 and the operation of section 22 thereof; (ii) whether a restraint order under section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 can bar institution or continuation of such criminal proceedings.
Issue (i): Whether proceedings for an offence under section 138 of the Negotiable Instruments Act, 1881 can continue against a company and its directors notwithstanding a declaration of sickness under the Sick Industrial Companies (Special Provisions) Act, 1985 and the operation of section 22 thereof.
Analysis: The offence under section 138 is complete when the cheque is drawn for discharge of a legally enforceable debt, presented within time, dishonoured, statutory notice is issued, and payment is not made within the prescribed period. Section 141 extends liability to persons in charge of the company. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 creates a bar against winding up, execution, distress, or suits for recovery of money and enforcement of security, but it does not refer to criminal proceedings. The statutory embargo is directed to recovery of dues from the assets of the sick company and does not prevent the company or its directors from paying a legally enforceable debt or from being prosecuted for dishonour of cheques. The pendency of sickness proceedings, by itself, does not absolve liability under section 138.
Conclusion: The bar under section 22 does not prevent prosecution under section 138, and the criminal proceedings were maintainable.
Issue (ii): Whether a restraint order under section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 can bar institution or continuation of such criminal proceedings.
Analysis: Section 22A empowers the Board to restrain disposal of assets in specified circumstances. A restraint order may, in a suitable factual situation, affect the conclusion whether the offence under section 138 had been completed when the cheque was dishonoured and the statutory period expired. However, such effect depends on the facts and circumstances of the particular case. Outside such exceptional situations, section 22A does not create a general prohibition against prosecution under section 138, nor does it justify quashing or keeping the criminal case in abeyance at the threshold.
Conclusion: Section 22A does not create a general legal bar against prosecution under section 138, though its effect may be examined on the facts of a particular case.
Final Conclusion: The appeals failed because the sickness regime under SICA did not, in the ordinary course, bar prosecution for dishonour of cheques, and the accused were left to raise any factual defence before the trial court.
Ratio Decidendi: Section 22 of SICA bars recovery and winding-up proceedings against a sick industrial company, but it does not bar criminal prosecution for dishonour of cheques under section 138 of the Negotiable Instruments Act, 1881; a section 22A restraint order may have only fact-specific relevance.
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