SICA restraint order can prevent completion of cheque dishonour offence under Section 138 where dishonour process was not yet complete.

Where a company had already been declared sick and a BIFR restraint order under Section 22A of SICA was operative before the cheque was drawn or before expiry of the 15-day notice period, the offence under Section 138 of the Negotiable Instruments Act may remain incomplete because the drawer was restrained from honouring the cheque. The controlling principle is that Section 22 of SICA does not itself bar criminal proceedings, but an operative restraint under Section 22A can prevent completion of the offence on the facts pleaded. An order allowing use of current assets for day-to-day operations did not authorise payment of the alleged liability, and repeal of SICA did not revive a complaint where process had been issued before completion of the offence.

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Issues: Whether the order issuing process under Section 138 of the Negotiable Instruments Act, 1881 could stand when, before the cheque dates and expiry of the statutory notice period, the company had already been declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 and a restraint order under Section 22A had been passed.

Analysis: The controlling principle taken from the earlier Supreme Court decisions was that Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 does not itself bar criminal proceedings, but paragraph 19 of the governing authority makes it clear that where a restraint order under Section 22A is already operative before the cheque is drawn or before expiry of the 15-day period after notice, the offence under Section 138 may not be complete. On the facts, the company had been declared sick and restrained from alienating its assets by the BIFR order dated 16.07.2009. The cheques were later issued and the statutory notice period expired on 20.01.2011. The order permitting use of current assets for day-to-day operations did not authorise payment of the alleged outstanding liability in the circumstances pleaded. The repeal of SICA did not revive a complaint in which the offence was not complete when process was issued.

Conclusion: The process issued for the offence under Section 138 was unsustainable, and the challenge succeeded in favour of the petitioners.

Ratio Decidendi: If, before the cheque is drawn or before expiry of the statutory notice period, a BIFR restraint order under Section 22A of SICA is already operative and prevents honouring the cheque, the offence under Section 138 of the Negotiable Instruments Act is not complete and criminal process cannot be sustained.

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