Shri. Omesh Keshav Karnik, erstwhile Managing Direcftor Phoenix Fine Chem Pvt. Ltd. (A company, presently under orders of Liquidation by the Board of Financial Reconstruction) age: 60 years, presently residing at: B/1/16, Hermes Heritage Phase II, Shastri Nagar, Pune 411 006 .. Petitioner.

-versus

• 1. The State of Maharashtra
• 2. M/s Bharat Jyoti, 22, S.G. Marg, Princess Street, Mumbai 400 002.
• 3. The Board of Financial Reconstruction (BIFR), Jawahar Vyapar Bhavan, Tolstoy Marg, New Delhi 110 001. .. Respondents.

WITH

CRIMINAL WRIT PETITION NO.2737 OF 2008

Shri. Omesh Keshav Karnik, erstwhile Managing Direcftor Phoenix Fine Chem Pvt. Ltd. (A company, presently under orders of Liquidation by the Board of Financial Reconstruction) age: 60 years, presently residing at: B/1/16, Hermes Heritage Phase II, Shastri Nagar, Pune 411 006 .. Petitioner.

• 1. The State of Maharashtra
• 2. M/s Bharat Jyoti, 22, S.G. Marg, Princess Street, Mumbai 400 002.
• 3. The Board of Financial Reconstruction (BIFR), Jawahar Vyapar Bhavan, Tolstoy Marg, New Delhi 110 001. .. Respondents.

WITH

CRIMINAL WRIT PETITION NO.2738 OF 2008.

Shri. Omesh Keshav Karnik, erstwhile Managing Direcftor Phoenix Fine Chem Pvt. Ltd. (A company, presently under orders of Liquidation by the Board of Financial Reconstruction) age: 60 years, presently residing at: B/1/16, Hermes Heritage Phase II, Shastri Nagar, Pune 411 006 .. Petitioner.

-versus

• 1. The State of Maharashtra
• 2. M/s Bharat Jyoti, 22, S.G. Marg, Princess Street, Mumbai 400 002.
• 3. The Board of Financial Reconstruction (BIFR), Jawahar Vyapar Bhavan, Tolstoy Marg, New Delhi 110 001. .. Respondents.

ALONGWITH

WRIT PETITION NO.505 OF 2009.

Omesh Keshav Karnik, aged about 60 years, occn. Consultant 24, Industrial Area, Roz Ka Meo,

Sohna District: Gurgaon State: Haryana. .. Petitioner

Ori. Accused No.1.

versus

1. The State of Maharashtra

2. Siddharth Organic Industries, Flat No.4, Vasudha Bldg. 7th cross Road, Chembur, Mumbai 400 071. .. Respondents.

respondent No.2. Ori. Complainant.

ALONGWITH WRIT PETITION NO. 2223 OF 2008.

Shri. Omesh Keshav Karnik, erstwhile Managing Direcftor Phoenix Fine Chem Pvt. Ltd. (A company, presently under orders of Liquidation by the Board of Financial Reconstruction) age: 60 years, presently residing at: B/1/16, Hermes Heritage Phase II, Shastri Nagar, Pune 411 006 .. Petitioner.

-versus

• 1. The Board of Financial Reconstruction (BIFR), Jawahar Vyapar Bhavan, Tolstoy Marg, New Delhi 110 001.
• 2. The State of Maharashtra
• 3. M/s Bhagirath Chemicals, having its office at 110, damji Shamji Trade Centre, Vidyavihar, (West), Mumbai 400 086 through its authorized person and Manager, Datta Keshav Shet .. Respondents.

ALONGWITH

WRIT PETITION NO.2224 OF 2008

Shri. Omesh Keshav Karnik, erstwhile Managing Direcftor Phoenix Fine Chem Pvt. Ltd. (A company, presently under orders of Liquidation by the Board of Financial Reconstruction) age: 60 years, presently residing at: B/1/16, Hermes Heritage Phase II, Shastri Nagar, Pune 411 006 .. Petitioner.

-versus

• 1. The Board of Financial Reconstruction (BIFR), Jawahar Vyapar Bhavan, Tolstoy Marg, New Delhi 110 001.
• 2. The State of Maharashtra
• 3. M/s Bhagirath Chemicals, having its office at 110, damji Shamji Trade Centre, Vidyavihar, (West), Mumbai 400 086 through its authorized person and Manager, Datta Keshav Shet .. Respondents.

Smt. Usha Purohit, for the petitioner in all petitions.

Mr. G. Krishna Mohan Nair, for Respondent No.2 in WP Nos 2736/2008, 2737 of 2008 and 2738 of 2008.

Ms. R. V. Newton, APP for the Respondent State in all petitions.

None for respondent No.2 in WP Nos 505 of 2009.

None for respondent No.3 in WP 2223 of 2008 and 2224 of 2008

CORAM: R.C. CHAVAN, J. DATED: 30th January, 2012

Oral Judgment

1. These petitions question the orders dated 12.12.2008, passed by the Additional Sessions Judge, Mumbai dismissing petitioners' Revision Petition Nos. 428 of 2008, 429 of 2008 and 430 of 2008, questioning rejection of the petitioners applications for dismissal, by the learned Metropolitan Magistrate, of the complaints for offences punishable under Section 138 of the Negotiable Instruments Act.

2. Facts which are material for deciding these petitions and about which there is not much of dispute are as under:

3. The petitioner was the Managing Director of Phoenix Fine Chem. Pvt. Ltd. On 13th October, 1997, the petitioner company was declared as "sick" under the Sick Industrial Companies (Special Provisions) Act,1985, (for short called as 'SICA 1985'). By order of the same date, petitioner company was asked to submit a proposal for revival-cum-rehabilitation under Section 17 (2) of the SICA 1985. On 8th May, 1998, the Board for Industrial and Financial Reconstruction, (for short called as, "BIFR"), confirmed the order dated 13th October, 1997 and directed the company not to alienate any of its assets under Section 22A of the SICA 1985. Though the scheme for revival of the company was sanctioned on 9th February, 2000, on 12th September, 2001, BIFR declared the proposal as un-viable and having failed since the promoters did not finance the company to the expected extent and fell much short of the proposed value. On 9th October, 2002, BIFR issued a winding up notice to the company. On 4th January, 2005, BIFR confirmed winding up of the company after hearing various objections. The challenge by the petitioner company to this winding up was rejected by the Delhi High Court and winding up was confirmed.

4. The details of cheques in respect of which complaints were filed and which are the subject matter of these petitions, as could be gathered from petitions, are as under.

Cheque	Date	Amount	Date of return
808809	25.11.2004	`.3,90,000/-	03/02/2005
808806	25.12.2004	`.3,90,000/-	08/02/2005
808807	25.01.2005	`.3,90,000/-	08/02/2005
808808	25.02.2005	`.3,90,000/-	31/01/2005
745291	25.01.2005	`.1,50,000/-	15/04/2005
745292	25.02.2005	`.1,50,000/-	15/04/2005
745293	25.03.2005	`.1,50,000/-	15/04/2005
728005	25.09.2004	`.2,44,358.40	15.01.2005/Memo<br>22.01.22005advice

5. The petitioner questioned the orders issuing process by filing Writ Petition No.1434 of 2006. This petition came to be decided by High Court on 18th July, 2006. A Division Bench of this Court, held that the option available to the petitioner was to go before the learned Magistrate. Accordingly, the petitioner filed applications for dismissal of Criminal Complaints. The learned Magistrate, rejected those applications. Aggrieved thereby the petitioner preferred revision applications before the Court of Sessions at Mumbai and Kalyan. The learned Additional Sessions Judges, by their judgments and orders dated 19.09.2008, 12th December, 2008 and 22.0l.2009, dismissed those Criminal Revision Applications, which led to filing of the present petitions.

6. The original complainant seems to have taken the matter to Hon'ble Supreme Court since the petitions were not coming up for hearing. Supreme Court refused to entertain the Special Leave Petition, but directed this Court to expedite hearing and decide the Writ Petitions within three months. This is how these petitions have come up for hearing.

7. Learned counsel for the petitioner submits that the company was declared "sick" by BIFR on 13th October, 1997. Therefore, from that date onwards there could be no transfer

of any assets of the company or any payment to be made by the company to any individual creditors or others since this would defeat the interest of other creditors which had to be protected. On 8th May, 1998, BIFR passed order under Section 22A of the SICA 1985, restraining the company from alienating any of its assets. Learned counsel for the petitioner submits that in view of this order there could be no question of any cheques being issued in favour of any individual, by the company or its Managing Director, since that would defeat the interest of the other creditors, as also be violative of the order passed under Section 22A of the SICA 1985. Therefore, according to her, all the claims of the creditors would have to be dealt with as per the BIFR order or by the operating agency appointed by the Delhi High Court in the winding up proceedings. The learned counsel submitted that since the company could not have been made liable towards the cheques issued, there would be no question of the petitioner Managing Director of the company being made liable upon dishonour of those cheques.

8. She submitted that the judgment of Supreme Court, in M/s Kusum Ingots & Alloys Ltd and ors -vs- M/s Pennar Peterson, reported in 2005 (5) Bom C.R. 428 is clear and would categorically show that the prosecution for dishonour of cheques issued after order under Section 22A of SICA 1985, was passed, was not at all be maintainable and such proceedings should not be continued. This judgment had been cited before the Division Bench as well as before Revisional Courts. After considering this judgment, the Courts have passed orders which are impugned in these petitions.

9. Learned counsel for respondent in some of the petitions M/s Bharat Jyoti, the original complainant submitted that the cheques were issued between 2004 to 2006 but all of them were presented to bankers and were returned dishonoured after BIFR had confirmed winding up proceedings. Learned counsel pointed out that the petitioner was Managing Director of Phoenix Fine Chem Pvt. Ltd. He had issued those cheques in his capacity as the Managing Director. The learned counsel for the petitioner, however, clarified that the petitioners had issued those cheques by way of security. This question as to whether the cheques issued were by way of security would be a matter of taking evidence and could be dealt with while disposing of the complaints in the trial. The question to be decided is whether the company or its Directors can be proceeded against for committing an offence under Section 138 of the Negotiable Instruments Act, for cheques issued/dishonoured after the company has been declared "sick" under the provisions of SICA 1985, and before the orders passed under Section 22A cease to operate.

10. In Kusum Ingots & Alloys Ltd & ors (supra) on considering the provisions of Sections 138 to 141 of the Negotiable Instruments Act and Section 22 and 22A of the SICA 1985, the Court had noted that Chapter XVII of the Negotiable Instrument Act, was inserted in order to bring on statute book a provision which would inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. The Court considered whether the provisions of SICA 1985 create any legal impediment for payment of the amount for which the cheques were drawn, and, upon dishonour, whether the persons concerned could be said to have committed offence under Section 138 of the Negotiable Instruments Act.

11. In para 14 of the judgment, Supreme Court found that bare reading the section 22 of the SICA 1985 makes the position clear that during pendency of an inquiry under section 16 or during the preparation of a scheme referred to under Section 17 or during implementation of a sanctioned scheme or during pendency of an appeal under Section 25, no proceeding for winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof could be taken out, except with the consent of the Board or the Appellate Authority, as the case may be. The Court noted that section 22 does not refer to any criminal proceeding.

12. Relying on earlier judgment of Supreme Court in M/s B.S.I. Ltd and another -vs- Gift Holdings Pvt. Ltd. reported in 2000 (5) Bom C.R. (S.C.) 397, the court held that the pendency of proceeding under Section 22 of the SICA 1985 alone is not sufficient to get absolved from the liability under Section 138 of the Negotiable Instruments Act. In para 15 of the judgment, the Supreme Court, rejected the contention that if Criminal case is proceeded with and the appellants are convicted and sentenced to fine then it will be necessary to realize the amount of fine from the assets of the company which would be impermissible in view of the provisions of section 22 of the SICA. The Court found the contention to be premature and far fetched. The Court held that it could not be a ground to hold that the criminal proceeding should be foreclosed at the threshold. In para 16 of the judgment the Supreme Court rejected the contention raised on behalf of appellant before it that if he, being Director of the company, on being convicted, is arrested and kept in jail the efforts of the BIFR for reconstruction/revival of the company will not be possible and in that event the purpose of inquiry by the BIFR will be rendered futile as too remote and the apprehension far fetched. In para 17, Supreme Court observed that Section 22 of SICA does not create any legal impediment for instituting and proceeding with a criminal case on the allegations of an offence under Section 138 of the N.I. Act against the company or its Directors. The Court added that the section, as Their Lordships read it, only creates an embargo against disposal of assets of the company for recovery of its debts. This question would arise only if company is convicted and sentenced to pay fine and if recovery of fine is sought to be made by process prescribed under the Code of Criminal Procedure. The Supreme Court had also observed that the purpose of embargo was to preserve the assets of the company from being attached or sold for realisation of dues of the creditors and that section does not bar payment of money by the company or its directors to other persons for satisfaction of their legally enforceable dues. In para 18 of the judgment, the Court considered the question whether section 22A of the SICA affects a criminal case for an offence under Section 138 of the Negotiable Instruments Act. Referring to the provisions of Section 22A the Supreme Court held that the section enables the Board to make an order in writing to direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets (a) during the period of preparation or consideration of the scheme under Section 18 and (b) during the period beginning with the recording of opinion by the Board for winding up of the company under sub section (1) of section 20 upto commencement of the proceedings relating to the winding up before the concerned High Court. The Court added that in a case in which BIFR submitted its report declaring company as "sick" and has also issued a direction under Section 22-A restraining the company or its directors not to dispose of any of its assets except with the consent of the Board, then the contention raised on behalf of the appellants that a criminal case for the alleged offence under Section 138 N. I. Act cannot be instituted during the period in which the restraint order passed by the BIFR remains operative cannot be rejected outright.

13. Thus, the crux of the matter is whether at the time when cheques were presented, provisions of either clause (a) or (b) of section 22A of the SICA 1985, was applicable. There is no dispute that even before the cheques were presented, BIFR had already concluded that the proposal for revival of the company had failed and winding up notice had been issued by BIFR. So as far as clause (a) is concerned, that stage was already over. As far as clause (b) is concerned, it provides protection to assets during the period beginning with the recording of opinion of the Board for winding up of the company, upto the commencement of proceedings relating to the winding up before concerned High Court. Now winding up was confirmed by B.I.F.R. on 4.1.2005. According to petitioner the cheques in question were presented after 4.1.2005 i.e. after BIFR confirmed winding up of the company. Learned counsel for the petitioner submits that in fact the winding up order was challenged by the petitioner before Delhi High Court. Delhi High Court, remanded the matter back to BIFR and eventually the petitioner's petition was dismissed on 26th August, 2006 and final order of BIFR was passed on 26th August, 2006. All these averments are not found in the application for dismissal of the complaints made before the learned Magistrate, and the revision application before the Revisional Court and even in the petition before Division Bench of this Court. In view of the pleas unfolded before me, there appears to be no error in the orders passed, requiring any correction in exercise of jurisdiction under Article 226 and 227 of the Constitution and therefore all the petitions are disposed of. If any facts, which would go to the root of the matter, and which would legally make complaints untenable, such legal pleas could always be raised before the trial Court by laying foundation on facts for raising such pleas. Writ Petitions are disposed of accordingly.

(R. C. CHAVAN, J.)