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Friday, September 19, 2025

Criminal liability under Section 138 NI Act survives even against sick companies, subject to trial proof.

  • Case Title: Shree Nagani Silk Mills Pvt. Ltd. v. L.D. Industries Ltd. & Ors.

  • Citation: 2025 INSC 1064

  • Court: Supreme Court of India, Criminal Appellate Jurisdiction

  • Appeal No.: Criminal Appeal No. 3821 of 2025 & connected appeals

  • Date of Judgment: 02 September 2025

  • Bench: Manoj Misra, J. and Ujjal Bhuyan, J.

Facts

  1. The appellant (Shree Nagani Silk Mills Pvt. Ltd.) filed multiple complaints under Section 138 read with Section 141 NI Act, 1881 against L.D. Textile Industries (accused company) and its directors.

  2. The cheques (all dated 25.04.2001) totaling over ₹1.61 crores were dishonoured for “insufficient funds.”

  3. Notices were issued; payment was not made.

  4. The Magistrate took cognizance and issued process.

  5. The accused argued:

    • The company had already been declared “SICK” under SICA, 1985.

    • A BIFR restraint order (21.08.2000) prohibited disposal of assets without consent.

    • Hence, prosecution under Section 138 NI Act was not maintainable.

  6. Magistrate dismissed recall applications.

    • Revisional Court allowed discharge.

    • High Court (Bombay) affirmed discharge (05.10.2023).

    • Hence, appeal to Supreme Court.

Issues

  1. Whether recall of process by the Magistrate was permissible?

  2. Whether proceedings under Section 138 NI Act are barred when a company has been declared SICK and is under a BIFR restraint order u/s 22A SICA?

  3. At what stage can the impact of a BIFR restraint order be examined – threshold or after trial?

Arguments

Appellant:

  • Recall of process is impermissible (Adalat Prasad; In re: Expeditious Trial of 138 cases).

  • Kusum Ingots does not bar all prosecutions; only requires examining facts if a restraint order exists.

  • Presumption u/s 118(b) NI Act that cheque date is genuine.

  • Cheques may have been issued for day-to-day operations, which the restraint order itself allowed.

Respondent:

  • Once company declared “SICK,” and BIFR issued restraint, complaint proceedings were not maintainable.

  • Cheques were post-dated; hence liability could not arise.

Held (Supreme Court Findings)

  1. On Recall of Process:

    • No power of recall lies with Magistrate (Adalat Prasad; Constitution Bench, 2021).

    • Revisional Court erred in interfering.

  2. On BIFR Restraint Orders & NI Act:

    • Section 22 SICA: No bar on instituting criminal cases under Section 138 NI Act.

    • Section 22A SICA: Restrains disposal of assets, but does not automatically bar prosecution.

    • Whether cheques were issued for day-to-day operations is a factual issue, to be decided at trial after evidence.

    • Kusum Ingots clarifies: only in exceptional circumstances can restraint orders defeat prosecution, and that too fact-dependent.

  3. On High Court & Revisional Court:

    • Both misapplied Kusum Ingots.

    • They wrongly discharged accused at threshold.

    • Proper stage to consider impact of restraint order is after evidence, not at process stage.

Decision

  • Appeals allowed.

  • Orders of High Court & Revisional Court set aside.

  • Complaints under Section 138 NI Act restored before Magistrate.

  • Magistrate directed to proceed with trial and bring matters to logical end.

2025 INSC 1064
 SLP (Crl.) No.1550/2024 & connected matters Page 1 of 19
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 3821 OF 2025
(Arising out of SLP (Crl.) No.1550/2024)
SHREE NAGANI SILK MILLS PVT. LTD.…APPELLANT(S)
VERSUS
L.D. INDUSTRIES LTD. & ORS. …RESPONDENT(S)
WITH
CRIMINAL APPEAL NO. 3822 OF 2025
(@ SLP (Crl.) No.1551/2024)
CRIMINAL APPEAL NO. 3823 OF 2025
(@ SLP (Crl.) No.1552/2024)
CRIMINAL APPEAL NO. 3824 OF 2025
(@ SLP (Crl.) No.1553/2024)
CRIMINAL APPEAL NO. 3825 OF 2025
(@ SLP (Crl.) No.530/2024)
CRIMINAL APPEAL NO. 3826 OF 2025
(@ SLP (Crl.) No.1554/2024)
SLP (Crl.) No.1550/2024 & connected matters Page 2 of 19
CRIMINAL APPEAL NO. 3827 OF 2025
(@ SLP (Crl.) No.1555/2024)
J U D G M E N T
MANOJ MISRA, J.
1. Leave granted.
2. These seven appeals arise from identical
judgment(s) and order(s) of the High Court of
Judicature at Bombay (for short the High Court),
dated 5.10.2023, passed on separate petitions, under
Article 227 of the Constitution of India, impugning
revisional court order(s) emanating from separate
complaint(s) filed by the appellant against the
respondent(s) under Section 138 of the Negotiable
Instruments Act, 18811. As common questions of law
and fact arise for our consideration, between same
set of parties, these appeals were heard together and
are being decided by a common order.
Factual matrix
3. Appellant is the original complainant who had
lodged separate complaints, under Section 138 read
with Section 141 of N.I. Act, against L.D. Textile
Industries (for short the accused company – first
respondent) and four others (other respondents) in
1 N.I.Act
SLP (Crl.) No.1550/2024 & connected matters Page 3 of 19
respect of dishonour of cheques issued by the
accused company. Details of those cheques with
reference to corresponding SLP (Crl.) No. and
complaint number(s) are given in the table below:
Special
Leave
Petition
No.
Complaint
No.
Cheque
Date
Cheque No. Cheque
Amount (In
Rs.)
SLP
(CRL)
No. 1550
of 2024
1164/5/2001 25.04.2001 Cheque No.
948365
Rs.
20,00,000/-
SLP
(CRL)
No. 1551
of 2024
1162/5/2001 25.04.2001
25.04.2001
20.04.2001
Cheque No.
948367
Cheque No.
948368
Cheque No.
948369
Rs.
20,00,000/-
Rs.
20,00,000/-
Rs.
20,00,000/-
SLP
(CRL)
No. 1552
of 2024
1167/5/2001 25.04.2001 Cheque No.
948363
Rs.
20,00,000/-
SLP
(CRL)
No. 1553
of 2024
1168/5/2001 25.04.2001 Cheque No.
948362
Rs.
20,00,000/-
SLP
(CRL)
No. 530
of 2024
1163/5/2001 25.04.2001 Cheque No.
948364
Rs.
20,00,000/-
SLP
(CRL)
No. 1554
of 2024
1166/5/2001 25.04.2001 Cheque No.
948361
Rs.
20,00,000/-
SLP
(CRL)
No. 1555
of 2024
1165/2001 25.04.2001
25.04.2001
Cheque No.
948366
Cheque No.
948388
Rs.
20,00,000/-
Rs.
1,61,646/-
SLP (Crl.) No.1550/2024 & connected matters Page 4 of 19
4. Allegations in each complaint, inter alia, are:
(a) that the accused company, towards part payment
for supplies made by the complainant, issued
cheque(s) in favour of the complainant; (b) those
cheque(s) were deposited for collection but they
returned for “insufficient funds” in the drawer’s
account; (c) complainant thereafter served notice on
all the accused calling upon them to pay to the
complainant the cheque amount; (d) despite service
of notice, the amount was not paid; and (e) therefore,
the accused company including respondents 2 to 5,
who were in-charge of and responsible for day-to-day
business affairs of the accused company, are liable to
be punished for offence punishable under Section
138 read with Section 141 of N.I. Act.
5. Based on the complaint and the affidavit filed in
support thereof, the accused were summoned by
Magistrate concerned.
6. On being summoned, the accused applied to
the learned Magistrate to recall the processes issued
against them and prayed that proceedings against
them be dropped and they be discharged. In their
application, it was claimed that the accused company
was not only declared ‘SICK’ by the Board of
Industrial and Financial Reconstruction2 under the
2 BIFR
SLP (Crl.) No.1550/2024 & connected matters Page 5 of 19
provisions of Sick Industrial Companies (Special
Provisions) Act, 19853 but it was restrained from
disposing of any of its assets without the consent of
BIFR. In such circumstances, when a legal embargo
was imposed on disposal of its assets, it could not
have responded to the demand notice. Therefore,
proceedings qua them, under Section 138 of N.I. Act,
were not sustainable. In support of its plea, the
accused relied on a decision of this Court in M/s.
Kusum Ingots & Alloys Ltd. vs. M/s. Pennar
Peterson Securities Ltd. and others4.
7. The learned Magistrate dismissed the
application seeking recall of the processes. Against
which, the accused filed a revision before the Court of
Session. The revisional court allowed the revision and
set aside the order of the learned Magistrate thereby
discharging the accused of offences punishable under
Section 138 read with Sections 141 and 142 of N.I.
Act. Aggrieved by orders of the revisional court,
appellant filed Criminal Writ Petition Nos.767, 768,
769, 770, 776, 777 and 779 of 2005 before the High
Court of Judicature at Bombay, which came to be
dismissed by impugned order(s) dated 5.10.2023.
3
SICA
4
(2000) 2 SCC 745
SLP (Crl.) No.1550/2024 & connected matters Page 6 of 19
8. Aggrieved therewith, these appeals have been
filed.
9. We have heard Sri Ninad Laud for the
appellants and Sri Rishi Bhuta for the respondents.
Submissions on behalf of the appellant
10. Learned counsel for the appellant submitted:
(i) Recall of processes is not permissible
in view of law laid down by this Court in
Adalat Prasad vs. Rooplal Jindal5
and Constitution Bench decision In Re:
Expeditious Trial of Cases under
Section 138 of NI Act, 18816.
Therefore, the learned Magistrate was
justified in rejecting the recall
application. In such circumstances, the
revisional court ought not to have
interfered with the order of learned
Magistrate. Thus, the High Court erred
in not correcting the mistake committed
by the revisional court.
(ii) High Court misconstrued the law
laid down by this Court in Kusum
Ingots (supra) where, in paragraph 18,
5
(2004) 7 SCC 338
6
(2021) 16 SCC 116
SLP (Crl.) No.1550/2024 & connected matters Page 7 of 19
it was held 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 a company or its Directors.
Further, in paragraph 19 of the said
judgment, it was clarified that where
BIFR has issued a restraint order under
Section 22A the Court would have to
examine whether proceedings under
Section 138 of N.I. Act can be instituted
during the period in which the restraint
order remains operative. Therefore, such
issue would have to be decided on the
facts of each case, that is, by taking into
account the nature of the restraint
order, the date when the cheque is
issued and the reason for which it is
issued. It was also urged that the
restraint order issued by BIFR clearly
provided that if the company was
running, the current assets could be
drawn to the extent required for day-today operations which meant that the
embargo was not absolute and if 
SLP (Crl.) No.1550/2024 & connected matters Page 8 of 19
cheques were issued for running day to
day operations, the restraint order
would not hit the proceedings under
Section 138 of N.I. Act.
(iii) Restraint order of BIFR is dated
21.08.2000 whereas the cheques in
question were issued in 2001 as is clear
from the date on the face of the cheque.
Further, the date on the cheque raises a
rebuttable presumption, under Section
118(b) of N.I. Act, that it was issued on
the date which the cheque bears. In
such circumstances, if the cheque was
issued in 2001 to meet day-to-day
expenses of the accused-company, the
restraint order of BIFR cannot stifle the
proceedings under Section 138 of N.I.
Act.
11. In a nutshell, the submission of learned
counsel for the appellant is that whether the
proceedings under Section 138 of N.I. Act are barred
on account of restraint order of BIFR, is a mixed
question of law and fact which has to be decided on
the facts of each case based on the evidence led by
the parties. Therefore, restraint order cannot be used
to stifle a legitimate prosecution without giving 
SLP (Crl.) No.1550/2024 & connected matters Page 9 of 19
opportunity to the complainant to lead evidence.
Further, the power to recall the summoning order
does not exist. Hence, the learned Magistrate’s order
rejecting the recall application required no
interference by the revisional court. In such
circumstances, the High Court ought to have
corrected the error committed by the revisional court.
Submissions on behalf of accused-respondent(s)
12. Per contra, learned counsel for the accusedrespondent(s) supported the judgment of the High
Court and submitted that the cheques sought to be
encashed by the complainant were all post-dated and
once the accused company was declared ‘SICK’ and a
restraint order was passed, the complaint
proceedings were liable to be quashed and, therefore,
order of the revisional court as well as the High Court
calls for no interference.
Analysis/ Discussion
13. We have considered the submissions and
have perused the materials on record.
14. Before we address the rival submissions, it
would be apposite to notice the allegations which are
common in all the complaints. In all complaints, it is
alleged that cheques were issued in 2001 against
supplies made to the accused company. No doubt, a
plea has been raised on behalf of accused that those 
SLP (Crl.) No.1550/2024 & connected matters Page 10 of 19
were post-dated cheques. However, the law raises a
presumption that every negotiable instrument
bearing a date was made or drawn on such date7. In
such circumstances, to rebut the said presumption,
evidence would have to be led. Therefore, at this
stage, while dealing with validity of the processes
issued, based on complaint allegations and affidavit
filed in support thereof, in absence of any evidence
led by the accused, it would not be permissible to
pre-judge the issue and record a finding that cheque
was post-dated.
15. Section 228 of SICA, inter-alia, deals with
suspension of legal proceedings etc against a ‘SICK’
7 118. Presumptions as to negotiable instruments.—
Until the contrary is proved, the following presumptions shall be made:—
(a) of consideration — that every negotiable instrument was made or drawn for consideration, and that
every such instrument, when it has been accepted, endorsed, negotiated or transferred, was accepted,
endorsed, negotiated or transferred for consideration;
(b) as to date —that every negotiable instrument bearing a date was made or drawn on such date;
8 22. Suspension of legal proceedings, contracts etc - (1) Where in respect of an industrial company, an
inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or
consideration or a sanctioned scheme is under implementation or where an appeal under section
25 relating to an industrial company is pending, then, notwithstanding anything contained in
the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of
the industrial company or any other instrument having effect under the said Act or other law, no
proceedings for the 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
(and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company) shall lie
or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate
Authority.
(2) Where the management of the sick industrial company is taken over or changed (in pursuance of any
scheme sanctioned under section 18), notwithstanding anything contained in the Companies Act,
1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or
any instrument having effect under the said Act or other law -
(a) it shall not be lawful for the shareholders of such company or any other person to nominate or
appoint any person to be a director of the company;
SLP (Crl.) No.1550/2024 & connected matters Page 11 of 19
company. Section 22A9 empowers BIFR to direct the
Sick Industrial Company not to dispose of, except
with the consent of the Board, any of its assets:
(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to
unless approved by the Board.
(3) Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under
preparation or during the period) or consideration of any scheme under section 18 or where any such
scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order
declare with respect to the sick industrial company concerned that the operation of all or any of the
contracts, assurances of property, agreements, settlements, awards, standing orders or other
instruments in force, to which such sick industrial company is a party or which may be applicable to such
sick industrial company immediately before the date of such order, shall remain suspended or that all or
any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said
date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be
specified by the Board :
Provided that such declaration shall not be made for a period exceeding two years which may be
extended by one year at a time so, however, that the total period shall not exceed seven years in the
aggregate.
(4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have
effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law, the
memorandum and articles of association of the company or any instrument having effect under the said
Act or other law or any agreement or any decree or order of a court, tribunal, officer of other authority
or of any submission, settlement or standing order and, accordingly, -
(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified
by such declaration, and all proceedings relating thereto pending before any court, tribunal, officer or
other authority shall remain stayed or be continued subject to such declaration;
and
(b) on the declaration ceasing to have effect -
(i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived
and enforceable as if the declaration had never been made; and
(ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law
which may then be in force, from the stage which had been reached when the proceedings became
stayed.
(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or
liability, the period during which it or the remedy for the enforcement thereof remains suspended under
this section shall be excluded.
922-A - Direction not to dispose of assets - The Board may, if it is of opinion that any direction is
necessary in the interest of the sick industrial company or creditors or shareholders or in the public
interest, by order in writing 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 and up to commencement of the proceedings relating to
the winding up before the High Court concerned.
SLP (Crl.) No.1550/2024 & connected matters Page 12 of 19
(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 and
up to commencement of the proceedings relating to
the winding up before the High Court concerned.
16. In the instant case, the restraint order passed
by BIFR, dated 21.08.2000, extracted in paragraph
10 of the impugned judgment of the High Court,
reads thus:
“The company/promoters were directed u/s.
22-A of the Act not to dispose of any fixed or
current assets of the company without the
consent of the BIFR. In case the company
was running, the current assets could be
drawn to the extent required for day-to-day
operations, proper account of which should
be maintained.”
17. The afore-quoted restraint order would
indicate that there was no embargo on drawing from
the assets of the company to the extent required for
day-to-day operations.
18. In the instant case, according to the
complaint allegations, the complainant company had
made supplies and in lieu thereof the cheques in
question were issued. In such circumstances, in our
view, as there would be a presumption regarding the
date on which those cheques were issued, the 
SLP (Crl.) No.1550/2024 & connected matters Page 13 of 19
question as to whether those cheques were issued for
running day-to-day operations of the company is an
issue, which would have to be addressed on the basis
of evidence led in trial.
19. The decision of this Court in Kusum Ingots
(supra) does not propound a complete bar on
proceedings against a “SICK” company under Section
138 of N.I. Act. Paragraphs 18, 19 and 20 of Kusum
Ingots are relevant, and are reproduced below:
“18. In our considered view section
22 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 NI Act against a
company or its Directors. The section as we
read it only creates an embargo against
disposal of assets of the company for recovery
of its debts. The purpose of such an embargo
is to preserve the assets of the company from
being attached or sold for realisation of dues of
the creditors. The section does not bar
payment of money by the company or its
directors to other persons for satisfaction of
their legally enforceable dues.
19. The question that remains to be
considered is whether section 22A of SICA
affects a criminal case for an offence
under section 138 NI Act. In the said section
provision is made enabling 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 
SLP (Crl.) No.1550/2024 & connected matters Page 14 of 19
up of the company under sub-section (1)
of section 20 and up to commencement of the
proceedings relating to the winding up before
the concerned High Court. This exercise of the
power by the Board is conditioned by the
prescription that the Board is of the opinion
that such a direction is necessary in the
interest of the sick industrial company or its
creditors or shareholders or in the public
interest. In a case in which the BIFR has
submitted its report declaring a 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 consent of the Board then the
contention raised on behalf of the appellants
that a criminal case for the alleged offence
under section 138 NI Act cannot be instituted
during the period in which the restraint order
passed by the BIFR remains operative cannot
be rejected outright. Whether the contention
can be accepted or not will depend on the facts
and circumstances of the case. Take for
instance, before the date on which the cheque
was drawn or before expiry of the statutory
period of 15 days after notice, a restraint order
of the BIFR under Section 22-A was passed
against the company then it cannot be said
that the offence under section 138 NI Act was
completed. In such a case it may reasonably
be said that the dishonouring of the cheque by
the bank and failure to make payment of the
amount by the company and/or its Directors
is for reasons beyond the control of the
accused. It may also be contended that the
amount claimed by the complainant is not
recoverable from the assets of the company in
view of the ban order passed by the BIFR. In
such circumstances it would be unjust and
unfair and against the intent and purpose of
the statute to hold that the Directors should
be compelled to face trial in a criminal case.
20. Except in the circumstances noted
above we do not find any good reason for 
SLP (Crl.) No.1550/2024 & connected matters Page 15 of 19
accepting the contentions raised by the
learned counsel for the appellants in favour of
the prayer for quashing the criminal
proceedings or for keeping the proceedings in
abeyance. It will be open to the appellants to
place relevant materials in this regard before
the learned Magistrate before whom the cases
are pending and the learned Magistrate will
examine the matter keeping in mind the
discussions made in this judgment. We make
it clear that we have not considered the
question whether in the facts and
circumstances of a particular case Section
138 NI Act is attracted or not, for that is a
question to be considered by the Court at the
appropriate stage of the case in the light
evidence on record. The appeals are disposed
of on the terms aforesaid.”
(Emphasis supplied)
20. A careful reading of the aforesaid extracts
from Kusum Ingots (supra) would make it clear 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 a sick company or
its Directors. However, where a direction is issued by
BIFR, under Section 22A of SICA, restraining the
company or its Directors not to dispose of any of its
assets except with consent of the Board, whether a
criminal complaint for the alleged offence under
Section 138 N.I. Act can be instituted during the
period in which the restraint order remains operative,
is a plea which would have to be considered, and 
SLP (Crl.) No.1550/2024 & connected matters Page 16 of 19
whether that plea is to be accepted or not will depend
on the facts and circumstances of the case.
21. In Southern Steel Ltd. and Others vs.
Jindal Vijayanagar Steel Ltd.
10, this Court had an
occasion to consider whether proceedings against a
company, under Sections 138 and 141 of N.I. Act,
should be interdicted only because the company has
been declared ‘SICK’ under SICA. In the said case,
the accused-company, after being declared ‘SICK’, in
lieu of purchases made from the complainant, had
issued a cheque which got dishonoured. Those
purchases were made holding out that goods will be
paid for. On non-payment of cheque amount, despite
notice, the complainant initiated criminal proceeding
against the accused-company under Section 138 of
N.I. Act. Aggrieved by the proceeding under Section
138 of N.I. Act, accused-company filed petition under
Section 482 of the Code of Criminal Procedure,
197311. The High Court dismissed the petition.
Thereafter, the accused-company approached the
trial court and sought discharge, under Section 258
of Cr.P.C., by placing order passed by BIFR under
Section 22A. The trial court dismissed the
application. The accused, thereafter, approached the
10 (2008) 5 SCC 762
11 Cr.P.C.
SLP (Crl.) No.1550/2024 & connected matters Page 17 of 19
High Court. The High Court dismissed the
application and refused to quash the proceedings.
Aggrieved therewith, the accused approached this
Court by placing reliance on Kusum Ingots (supra).
Dismissing the appeal, this Court held:-
“9. According to the High Court, admittedly
the purchase orders in question were entered
into and the purchases were made by the
appellants with full knowledge of the
proceedings that the company was declared
sick under the SICA, 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 fact that the purchases
were made with the clear promise to repay
could not be disputed by the appellants. The
Directors had in fact issued the cheques for
discharging their liability with the full
knowledge, would not only clearly show that
there was an undisputed debt, but would also
show that, right from the inception, the
appellants in fact had no intention of paying
the amount for the purchases made by them.
The intention of the appellants can be
gathered by their subsequent acts, conduct
and behaviour of taking a shelter under the
provisions of SICA. Hence, the appellants are
not entitled to any indulgence of this court
under its extraordinary jurisdiction under
Article 136 of the Constitution. The appellants
had lost their total credibility because of their
conduct. When the appellant company was
declared sick, then without disclosing this fact
the appellants ought not to have made huge
purchases from the respondent company.
Ultimately, the appellant company did not pay
for the purchases. This clearly indicates that
the appellants had no intention of making
payment of the purchases made by it.”
SLP (Crl.) No.1550/2024 & connected matters Page 18 of 19
22. Legal principles deducible from the decisions
above, inter alia, are, (a) there is no embargo on filing
a complaint under Section 138 of N.I. Act against a
‘SICK’ company; (b) even if there is a restraint order
under Section 22A of SICA, the nature of the
restraint order and the facts of that case would have
to be considered before taking a decision whether the
proceeding under Section 138 could continue or not;
and, (c) the appropriate stage for taking such a
decision would, ordinarily, be after parties have led
their evidence.
23. In the instant case, the restraint order under
Section 22A of SICA did not restrain the accusedcompany to draw on its assets to meet its day-to-day
operations and, according to the complaint
allegations, the cheques in question were issued to
discharge the liability of the accused-company
against supplies made by the complainant company.
In such circumstances, the revisional court fell in
error by recalling the processes and discharging the
accused at the threshold of the proceeding and the
High Court erred in not correcting the error so
committed by wrongly relying on Kusum Ingots &
Alloys Ltd. (supra).
24. Besides above, the prayer to recall the
processes was not maintainable in view of the 
SLP (Crl.) No.1550/2024 & connected matters Page 19 of 19
decision of this Court in Adalat Prasad (supra),
which has been affirmed by a Constitution Bench of
this Court In Re: Expeditious Trial of Cases under
Section 138 of NI Act, 1881 (supra)12.
25. For the foregoing reasons, the appeals are
allowed. The impugned judgment(s) and order(s) of
the High Court as well as of the revisional court are
set aside. The proceeding(s) on the complaints of the
appellant, under Section 138 read with Section 141
of N.I. Act, shall stand restored on the file of the
learned Magistrate. The learned Magistrate shall now
proceed in accordance with law and bring the
proceedings to its logical end.
26. Pending applications, if any, shall stand
disposed of.
 ….………….......................................J.
 (MANOJ MISRA)
……………......................................J.
 (UJJAL BHUYAN)
New Delhi;
September 02, 2025
12 24.6. The Judgments of this Court in Adalat Prasad (supra) and Subramanium Sethuraman (supra) have
interpreted the law correctly and we reiterate that there is no inherent power of Trial Courts to review or
recall the issue of summons. This does not affect the power of the Trial Court under Section 322 of the
Code to revisit the order of issue of process in case it is brought to the court’s notice that it lacks
jurisdiction to try the complaint.
at