Cheque Dishonour under Section 138 of Negotiable Instruments Act, 1881 and principles of discharge of accused

Cheque Dishonour under Section 138 of Negotiable Instruments Act, 1881 and principles of discharge of accused - BIFR proceedings and effect on complaint under S.138 of NI Act, 1881 - Validity of orders of Magistrate discharging the accused - Interference by High Court in the Order of Magistrate - Interface of Sick Industrial Companies (Special Provisions) Act, 1985 and prosecution for offences under Negotiable Instruments Act, 1881 - Offences by Companies under S.141 of N.I. Act, 1881

In case of Harshad Jayprakash Bakshi v. State of Maharashtra [2013] GCtR 6469 (Bombay), when the accused was discharged by Magistrate in respect of offences under S.138 of Negotiable Instruments Act, 1881, then the complainant had challenged the Order of Magistrate. The issue involved applicability of Sick Industrial Companies (Special Provisions) Act, 1985 ("SIC (SP) Act, 1985") on N.I. Act, 1881. 

High Court noted that the learned Magistrate has not held that there was any order under section 22­A of Sick Industrial Companies (Special Provisions) Act, 1985. Upon repeated questioning what was produced before HC is a copy of summary of the proceedings stated to have taken place before BIFR. It was argued that the proceedings that are referred to in discharge application, include a copy of the order in Appeal No.77 of 2007 passed by the appellate authority for Industrial and Financial Reconstruction (AAIFR), New Delhi. It was held that it is extremely doubtful whether all this could be considered as an order in terms of section 22­A of the Sick Industrial Companies (Special Provisions) Act, 1985. A bare perusal of section 22­A of Sick Industrial Companies (Special Provisions) Act, 1985 shows that the Board (BIFR) has to make a specific order and in terms of the section.  Section 22(1) has been clarified by the Supreme Court as not constituting a bar to institute a complaint under section 138 of NI Act, even against a company.  Section 22­A, is the provision referred to in the previous Judgment of Supreme Court.   However,   that speaks of direction not to dispose of assets.  That is a direction after BIFR forms an opinion that it is necessary in the interest of sick industrial company or creditors or shareholders or in public interest that the sick company should not dispose of its assets, except with the consent of the Board.  However, there ought to be an order in writing which is required so as to constitute a direction not to dispose of the assets.  In this case, there was no such order in writing which is referred to in the application for discharge or the order passed by the learned Magistrate in the instant case. A clause in the guidelines which has been reproduced above in this case definitely   falls   short  of such   a   direction  and   which   is required to be made or issued by an order in writing by the Board. It is not a case where Bar under section 22(1) of Sick Industrial Companies (Special Provisions) Act, 1985 can be pleaded for institution of the complaint. If there is no bar under Sick Industrial Companies (Special Provisions) Act, 1985 to institute a complaint alleging offence punishable under section 138 of the N.I. Act and proceed with it and only one of the contingencies that is taken care of is of an order under section 22­A being made and when no such order is made in this case, then, the Magistrate could not have relied upon the judgement of Supreme Court to discharge the accused from the criminal complaint under section 138 of NI Act read with section 141 thereof.

After explaining these aspects the Order of Magistrate discharging the accused for the offences under S.138 of NI Act, 1881 was set aside and the petition filed by the complainant was allowed by High Court.