1998 (11) TMI 688 - HC - Indian Laws

Impact of Sick Industrial Companies Act on Section 138 of Negotiable Instruments Act clarified by court

Raghunath Cotton And Oil Products Ltd. Versus Ramarao Cotton Company And Anr.

The court held that Section 22(1) of the Sick Industrial Companies Act does not impact proceedings under Section 138 of the Negotiable Instruments Act. It ... - Issues Involved:1. Interference with police investigation.2. Revisional jurisdiction under Section 482 of the Code of Criminal Procedure.3. Effect of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 on proceedings under Section 138 of the Negotiable Instruments Act.Issue-wise Detailed Analysis:1. Interference with police investigation:The court reiterated the well-settled law that interference with police investigations is limited. As per the Privy Council decision in *Emperor v. Nazir Ahmed*, 'no doubt, if no cognizable offence is disclosed and still more if no offence of any kind is disclosed the police would have no authority to undertake an investigation.' This principle was supported by the Supreme Court in several cases, including *State of West Bengal v. Swapin Kumar Gniha* and *State of Haryana v. Bhajan Lal*. The court emphasized that an investigation cannot be quashed if some cognizable offence is disclosed by the first information report.2. Revisional jurisdiction under Section 482 of the Code of Criminal Procedure:The court discussed the scope of revisional jurisdiction under Section 482, which allows the High Court to give effect to an order under the Code, prevent abuse of process, and secure the ends of justice. This jurisdiction is inherently restrictive and cannot be invoked in every matter. The court noted that judicial decisions provide guiding principles, emphasizing that complaints without disclosure of an offence can be quashed, but the judiciary should not interfere with police investigations within their domain.3. Effect of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 on proceedings under Section 138 of the Negotiable Instruments Act:The principal issue was the impact of Section 22(1) of the Sick Industrial Companies Act on proceedings under Section 138 of the Negotiable Instruments Act. Section 138 deals with penalties for dishonoured cheques issued for discharging debts or liabilities. The court noted that the offence under Section 138 is complete upon dishonour of the cheque and non-payment after notice, irrespective of the company's status under the Sick Industrial Companies Act. The court rejected the argument that Section 22(1) suspends criminal proceedings, stating that it applies to civil liabilities and does not extend to criminal prosecutions. The court emphasized that Section 138 is a penal provision with strict liability, and the Sick Industrial Companies Act does not negate this liability. The court cited previous judgments, including *B. Mohan Krishna v. Union of India* and *Sri Srinivasa Trading Co. v. State of A.P.*, which supported the view that Section 22(1) does not bar criminal proceedings under Section 138.Conclusion:The court concluded that Section 22(1) of the Sick Industrial Companies Act does not affect the prosecution under Section 138 of the Negotiable Instruments Act. The petition was dismissed, affirming that criminal liability under Section 138 is absolute and independent of the provisions of the Sick Industrial Companies Act. The court emphasized the legislative intent to maintain the penal consequences for dishonoured cheques to ensure the credibility of financial transactions.