Case Note & Summary
The case involved appeals by Southern Steel Ltd. and others against Jindal Vijayanagar Steel Ltd. concerning dishonoured cheques issued for HR Coils supplied under a purchase order. The appellants contended that they were declared a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and thus no legal recovery could be initiated. The High Court dismissed their petitions for quashing the criminal proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881, stating that the purchases were made with full knowledge of the company's status and that the appellants had given the impression they would clear the dues. The Supreme Court upheld the High Court's decision, agreeing that the appellants had no intention to pay for the goods purchased and had lost credibility due to their conduct. The Court directed the trial court to expedite the proceedings and conclude them within six months, dismissing the appeals as devoid of merit.
Headnote
A) Negotiable Instruments - Dishonour of Cheques - Liability of Directors - Section 138 Negotiable Instruments Act, 1881 - Directors issued cheques for goods purchased despite knowledge of company being declared sick under SICA, indicating intention not to pay. Held that the conduct of the appellants demonstrated no intention to repay the debt (Paras 9-10).
Issue of Consideration
Whether the High Court erred in dismissing the petitions for quashing the criminal proceedings under Section 138 of the Negotiable Instruments Act.
Final Decision
The Supreme Court dismissed the appeals, agreeing with the High Court that the appellants had no intention to repay the debt and directed the trial court to expedite the proceedings.
Law Points
- Negotiable Instruments Act
- 1881
- Section 138
- Sick Industrial Companies (Special Provisions) Act
- 1985
- Code of Criminal Procedure
- 1973
- Section 482
- Article 136 of the Constitution
Case Details
2008 LawText (SC) (05) 70
Appeal (crl.) 845-846 of 2008
Tarun Chatterjee, Dalveer Bhandari
Southern Steel Ltd., Others
Jindal Vijayanagar Steel Ltd.
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Nature of Litigation
Criminal appeal concerning dishonoured cheques under the Negotiable Instruments Act.
Remedy Sought
Appellants sought quashing of criminal proceedings.
Filing Reason
Dishonour of cheques issued for goods purchased.
Previous Decisions
High Court dismissed petitions for quashing the proceedings.
Issues
Whether the High Court erred in dismissing the petitions for quashing the criminal proceedings.
Whether the appellants had the intention to repay the debt.
Submissions/Arguments
Appellants argued that they were declared a sick company and thus no recovery could be initiated.
Respondent contended that the purchases were made with knowledge of the company's status and that the appellants had no intention to pay.
Ratio Decidendi
The court held that the conduct of the appellants indicated no intention to repay the debt for the goods purchased, despite being aware of their status as a sick company.
Judgment Excerpts
The appellants clearly all through gave the impression to the respondent company that the outstanding amount towards the purchase of the goods would be shortly cleared.
The intention of the appellants can be gathered by their subsequent acts, conduct and behaviour of taking a shelter under the provisions of SICA.
Procedural History
The appellants filed Criminal Petitions Nos. 3225-3226 of 2000 under Section 482 Cr.P.C. for quashing the proceedings, which were dismissed by the High Court. The appellants then approached the trial court seeking discharge under Section 258 of the Code of Criminal Procedure, which was also dismissed.
Acts & Sections
- Negotiable Instruments Act, 1881: Section 138
- Sick Industrial Companies (Special Provisions) Act, 1985:
- Code of Criminal Procedure, 1973: Section 482
- Constitution of India: Article 136
