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Issues: (i) Whether the pendency of a reference and inquiry under sections 15 and 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars prosecution under section 138 of the Negotiable Instruments Act, 1881 by virtue of section 22(1) of the 1985 Act. (ii) Whether the complaints disclosed sufficient averments to proceed against the directors and managing director under section 141 of the Negotiable Instruments Act, 1881.
Issue (i): Whether the pendency of a reference and inquiry under sections 15 and 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 bars prosecution under section 138 of the Negotiable Instruments Act, 1881 by virtue of section 22(1) of the 1985 Act.
Analysis: Section 22(1) stays proceedings of the nature specified therein, but criminal prosecution under section 138 of the Negotiable Instruments Act is not a suit for recovery of money or enforcement of security. The controlling interpretation, as applied, is that the embargo under section 22(1) does not extend to prosecution for dishonour of cheque, and the pendency of BIFR proceedings does not suspend or prevent such prosecution.
Conclusion: The bar under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 does not apply to prosecution under section 138 of the Negotiable Instruments Act, 1881.
Issue (ii): Whether the complaints disclosed sufficient averments to proceed against the directors and managing director under section 141 of the Negotiable Instruments Act, 1881.
Analysis: Liability under section 141 arises where the complaint contains allegations showing that the persons sought to be prosecuted were in charge of, and responsible for, the conduct of the business of the company, or that the offence was committed with their consent, connivance, or neglect. The complaints stated that the managing director and directors were responsible for the conduct of the business of the company, which was treated as sufficient at the stage of quashing and as a matter to be examined in trial if necessary.
Conclusion: The complaints contained sufficient averments to proceed against the directors and managing director under section 141 of the Negotiable Instruments Act, 1881.
Final Conclusion: No ground was made out to quash the criminal proceedings, and the petitions were dismissed.
Ratio Decidendi: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 does not bar prosecution under section 138 of the Negotiable Instruments Act, 1881, and complaints containing allegations that directors were responsible for the conduct of the company's business are sufficient to withstand quashing at the threshold.
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