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of <h1>High Court Validates Order on Section 138 Offence, Emphasizes Case-Specific Assessments</h1> <h3>Bharat Metal Box Co. Ltd. Versus GK. Strips (P.) Ltd.</h3> The High Court upheld the validity of the Magistrate's order taking cognizance of the offence under section 138 of the Negotiable Instruments Act. It ... Dishonour of cheques for insufficiency, etc., of funds in account Issues:Quashing of proceedings invoking inherent powers due to SICA proceedings affecting payment, applicability of section 22A of SICA on criminal cases under section 138 NI Act, considerations for suspension of criminal proceedings during SICA orders, oppressive nature of complaint when BIFR issues orders, legality of magistrate's order taking cognizance of the offence under section 138.Analysis:The petitioners sought quashing of proceedings in C.C. No. 584 of 1999 due to the dishonour of a cheque by the accused company, the Managing Director, and the Director. The company, claimed to be a sick company, approached the BIFR under SICA, which issued directions preventing the company from paying the amount without consent. The 1st respondent contended that SICA proceedings should not defeat the right to prosecute for non-payment. The Public Prosecutor argued against exercising inherent powers to quash the proceedings, emphasizing the need for trial.The Supreme Court's rulings in Pankaj Mehra v. State of Maharashtra and Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. were pivotal in this case. The former clarified that a cheque's receipt presumes it was for a legally enforceable debt until proven otherwise by the drawer. The latter extensively discussed the impact of section 22A of SICA on criminal cases under section 138 NI Act, emphasizing case-specific assessments on the timing of BIFR orders and cheque dishonour.The principles derived from these Supreme Court decisions highlighted that Companies Act does not bar prosecution under section 138, and the suspension of criminal proceedings during SICA orders depends on case specifics. Factors like cheque issuance date, BIFR orders, and recoverability of claimed amounts from company assets are crucial. Directors facing trial post-BIFR restraint order issuance after notice expiry must be considered.The High Court emphasized that it could not consider documents not filed before the lower court under Section 482 of CrPC. The oppressive nature of the complaint under BIFR's section 22A orders was deemed a matter for the lower court to assess based on facts. The order passed by the BIFR under SICA needed consideration by the Magistrate to determine the validity of the proceedings and applicability of SICA provisions.Ultimately, the High Court upheld the validity of the Magistrate's order taking cognizance of the offence under section 138 NI Act. It directed the petitioners to present the BIFR order before the Magistrate for reconsideration based on the Supreme Court decisions' observations after recording evidence, emphasizing the need for case-specific assessments in light of SICA provisions.
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