http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

CASE NO.: Appeal (crl.)  845-846 of 2008

PETITIONER: Southern Steel Ltd. & Others

RESPONDENT: Jindal Vijayanagar Steel Ltd

DATE OF JUDGMENT: 08/05/2008

BENCH: Tarun Chatterjee & Dalveer Bhandari

JUDGMENT: JUDGMENT

                                              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

                        JUDGMENT

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 2003.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

                                                         2

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

                                                            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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

                                                          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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

                                                           5

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

                                                        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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

                                                               7

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 July, 2008.

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 dismissed.

                                        ..............................J.                                          (Tarun Chatterjee)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

                                     8

              ..............................J.                (Dalveer Bhandari) New Delhi; May 8, 2008