Southern Steel Ltd. & Others Vs. Jindal Vijayanagar Steel Ltd  INSC 856 (8
Tarun Chatterjee & Dalveer Bhandari
NON-REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOs. 845-846 OF 2008.
[Arising out of SLP (Crl.) Nos.2351-2352 of 2005] Southern Steel Ltd. &
Others .. Appellants Versus Jindal Vijayanagar Steel Ltd. ..Respondent
Dalveer Bhandari, J.
1. Leave granted in both these Special Leave Petitions.
2. These appeals are directed against the judgment dated 3.1.2005 of the
High Court of Karnataka at Bangalore in Criminal Petition Nos. 948 and 949 of
3. The brief facts of these appeals are recapitulated as under:
On the request of the appellants (Southern Steel Ltd.), the respondent company
(Jindal Vijayanagar Steel Ltd.) had supplied HR Coils to the appellants. The
terms of payment under the purchase order dated 25.4.1998 granted 45 days
interest free credit to the appellants for the goods sold and delivered by the
1st respondent. The appellants had issued the cheques in question in favour of
the respondent company.
The said cheques were dishonoured on presentation. In response to the legal
notice sent by the respondent company, the appellants, through two
substantially identical replies dated 6.4.2000, for the first time, contended
that the appellants had been declared a sick company on 8.4.1997 under the
provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for
short "SICA") and, therefore, no legal proceedings of recovery of the
outstanding amount could be initiated against the appellant company.
4. It may be pertinent to mention that the purchases were made by the
appellants from the respondent company after 3 the appellant company was
declared sick under the provisions of SICA. The appellants could not dispute
the fact that the purchases were made after the appellant company was declared
sick under the SICA. The purchases were made holding out clear representation
that the goods will be paid for. Ultimately, on non-payment of the outstanding
amount, the respondent company initiated criminal proceedings against the
appellant company by filing a criminal complaint under section 138 of the Negotiable
Instruments Act, 1881.
5. The appellant company, aggrieved by the said proceedings, filed Criminal
Petitions Nos.3225-3226 of 2000 under section 482 Cr.P.C. for quashing the
proceedings under section 138 of the Negotiable
Instruments Act. The High Court dismissed both these petitions holding that
it was premature to analyze the entire documentary evidence as put forth by
both sides to give a finding one way or the other.
Thereafter, the appellants, subsequent to the directions given by the High
Court, approached the trial court and produced the documents including the
order passed by the Board for Industrial Financial Reconstruction (for short
"BIFR") under 4 section 22-A of SICA. They sought discharge of the
accused under section 258 of the Code of Criminal Procedure.
However, the trial court dismissed those applications.
Thereafter, the appellants again approached the High Court by filing two
criminal petitions for quashing the criminal proceedings.
6. The appellants placed reliance on the two judgments of this court in the
matter of BSI Ltd. & Another v. Gift Holdings Pvt. Ltd. & Another
(2000) 2 SCC 737 and Kusum Ingots & Alloys Ltd. v. Pennar Peterson
Securities Ltd. &
Others (2000) 2 SCC 745. In the impugned judgment, the High Court has dealt
with these two judgments along with other judgments. The High Court also
accepted the legal position that the court has the power to discharge the
accused or quash the proceedings at mid-stage, but having regard to the
peculiar facts and circumstances of the case, according to the impugned
judgment of the High Court, it would not be appropriate to interfere.
Consequently, both these petitions filed by the appellants before the High
Court were dismissed.
7. The appellants, aggrieved by the impugned order of the High Court,
preferred these appeals and submitted that the appellants' case is squarely
covered by the aforementioned cases of Kusum Ingots and BSI Ltd.
8. We have carefully analyzed the principles of law enunciated in both these
cases, along with other cases, cited by Mr. M. L. Verma, learned senior
Advocate appearing for the appellant company. There is no quarrel with the
legal proposition which has been laid down in both the aforementioned cases,
but we are in complete agreement with the view taken by the High Court in the
impugned judgment that in view of the peculiar facts and circumstances of these
cases, the aforesaid judgments have no application to these cases.
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 6 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.
10. The High Court, in the impugned order, has directed the trial court to
dispose of the cases of the appellants as early as possible, but not later than
six months from the date of its order. The appellants by approaching this Court
have caused avoidable delay in disposal of these cases before the trial court.
11. In the facts and circumstances of the case, we deem it appropriate to
request the trial court now to conclude the trial of these cases as
expeditiously as possible and, in any event, within six months from the date of
this judgment. We direct the parties to appear before the trial Court on 1st
12. The trial court is directed to decide these cases without being
influenced by any observations passed by this court or the High Court in the
impugned judgment. These appeals, being devoid of any merit, are accordingly
(Tarun Chatterjee) 8 ..............................J.
(Dalveer Bhandari) New Delhi;