Case Note & Summary
The petitioner, Omesh Keshav Karnik, Managing Director of Phoenix Fine Chem Pvt. Ltd., a sick company, filed a Criminal Writ Petition before the Bombay High Court seeking quashing of process issued against him under Section 138 of the Negotiable Instruments Act, 1881 in Case No.1387/SS/2005 pending before the 30th Metropolitan Magistrate's Court at Kurla and other connected cases. The respondents (Nos. 2 to 4) had filed complaints under Section 138 NI Act against the petitioner for dishonour of cheques issued by the company. The petitioner contended that the complainants were aware at the time of transaction that the company was declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and that the proceedings before the Board for Industrial and Financial Reconstruction (BIFR) were pending. The petitioner argued that the criminal proceedings should be quashed in light of the company's sickness. The court, after hearing the learned advocate for the petitioner and the APP for the State, dismissed the petition. The court held that the declaration of a company as sick under SICA does not absolve the directors from criminal liability under Section 138 NI Act. The court observed that the two proceedings are independent and operate in different spheres; criminal liability for dishonour of cheques is separate from the civil aspects of sickness. The court found no merit in the petition and dismissed it, thereby refusing to quash the process.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Sick Company - Criminal Liability - Declaration of a company as sick under SICA does not absolve the directors from criminal liability under Section 138 of the Negotiable Instruments Act, 1881 - The court held that the pendency of proceedings before BIFR or declaration of sickness does not bar criminal proceedings for dishonour of cheques, as the two are independent and operate in different spheres (Paras 1-2).
Issue of Consideration
Whether the process issued against the petitioner under Section 138 of the Negotiable Instruments Act can be quashed on the ground that the company was declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the complainants were aware of the sickness at the time of transaction.
Final Decision
The petition is dismissed. The process issued against the petitioner under Section 138 of the Negotiable Instruments Act is not quashed.
Law Points
- Criminal liability under Section 138 NI Act is independent of civil liability
- SICA declaration does not bar criminal proceedings
- Mens rea not essential for Section 138 NI Act
- Dishonour of cheque by sick company attracts liability of directors
