2002 (8) TMI 784 - HC - Companies Law

Petition seeking quashment of order under IPC dismissed; petitioner directed to raise objections before trial court.

Kirti Prem Raj Jain Versus Ved Prakash Gupta

The High Court dismissed the petition seeking quashment of an order under section 406 of the Indian Penal Code. It directed the petitioner to raise ... Directions not to dispose of assets Issues:1. Quashment of order under section 406 of the Indian Penal Code.2. Impact of direction under section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 on criminal proceedings.3. Requirement of raising objections before the trial court.Analysis:Issue 1: Quashment of order under section 406 IPCThe petitioner sought quashment of an order under section 406 of the Indian Penal Code (IPC) by the Judicial Magistrate First Class, Gwalior. The order was based on the complaint filed by the respondent, which alleged an offense under section 406 IPC. The petitioner argued that the Board for Industrial and Financial Reconstruction (BIFR) had issued a direction under section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985, prohibiting the disposal of assets by the petitioner-company. The petitioner contended that the respondent should have informed the Magistrate about these circumstances. However, the court held that objections regarding such matters should have been raised before the trial court for consideration based on the material presented. The High Court, exercising inherent powers under section 482 of the Code of Criminal Procedure, dismissed the petition, directing the petitioner to raise the issue before the trial court for a decision based on the evidence presented.Issue 2: Impact of direction under section 22A of SICA on criminal proceedingsThe court referred to precedents such as Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. and B.S.I. Ltd. v. Gift Holidays (P.) Ltd., where it was established that the declaration of a company as a sick unit does not bar prosecution under various sections of the law. The court cited a case where the A.P. High Court held that no permission from BIFR is required for prosecution. It emphasized that the decision to bar a prosecution depends on the specific circumstances of each case. The court highlighted the conditions under section 22A of the Sick Industrial Companies (Special Provisions) Act, stating that the BIFR's direction not to dispose of assets is subject to certain criteria and is based on the interests of the company, creditors, or shareholders. The court reiterated that the trial court should assess the situation after considering all relevant materials presented before it.Issue 3: Requirement of raising objections before the trial courtThe court emphasized that objections related to the impact of BIFR's direction under section 22A should have been raised before the trial court, which is better positioned to decide on such matters based on the evidence provided. The court clarified that it cannot adjudicate on factual issues that arise during the trial without the material being presented before the trial court. Therefore, the petitioner was directed to raise the objections before the trial court, which would then decide on the matter following the guidance provided by the High Court and the Supreme Court. The parties were instructed to appear before the trial court for further proceedings on the specified date.In conclusion, the High Court dismissed the petition, emphasizing the importance of raising objections before the trial court and allowing the trial court to decide on the matter based on the evidence presented, in line with legal precedents and statutory provisions.