No relief for sick companies in cheque-bouncing cases

MUMBAI: The Bombay high court has refused to quash criminal proceedings against plywood company Kitply and its directors in a cheque-bouncing case. Justice Revati Dere ruled that no exemption has been granted to sick companies from being prosecuted under the Negotiable Instruments Act for dishonouring cheques.

The plywood firm was dragged to court by an Ulhasnagar firm after two cheques issued to it for Rs 5.40 crore and Rs 2.40 lakh in 2012 were dishonoured. The company had claimed that it had approached the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies Act in 2011. BIFR had ordered it not to make payment to unsecured creditors without its nod, the company claimed.

The HC pointed out that the company had made the agreement with the firm after it had approached the BIFR. Also, it had not made any application to BIFR seeking its nod to release payments to the Ulhasnagar firm.

"Criminal prosecution is neither for recovery of money nor for enforcement of any security. Section 138 of the NIA is a penal provision and entails a conviction and sentence, at the end of the criminal proceedings," said the judge.

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