Summary and Analysis of Shree Nagani Silk Mills Pvt Ltd vs L D Industries Ltd & Ors 2025 INSC 1064

1. Heading of the Judgment
Shree Nagani Silk Mills Pvt. Ltd. vs. L.D. Industries Ltd. & Ors.
Criminal Appeal Nos. 3821–3827 of 2025 (@ SLP (Crl.) Nos. 1550–1555 of 2024)
Supreme Court of India
Decided on September 2, 2025
Bench: Justices Manoj Misra and Ujjal Bhuyan

Citation: Shree Nagani Silk Mills Pvt. Ltd. vs. L.D. Industries Ltd. & Ors., 2025 INSC 1064 (Supreme Court of India).

2. Related Laws and Sections

• Section 138 of the Negotiable Instruments Act, 1881 (Dishonour of cheque)

• Section 141 of the Negotiable Instruments Act, 1881 (Offences by companies)

• Section 22 and Section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)

• Section 118(b) of the Negotiable Instruments Act, 1881 (Presumption as to date of cheque)

• Section 482 of the Code of Criminal Procedure, 1973 (Inherent powers of High Court)

• Article 227 of the Constitution of India (Power of superintendence over subordinate courts)

3. Basic Judgment Details
The appellant, Shree Nagani Silk Mills Pvt. Ltd., filed multiple complaints under Section 138 read with Section 141 of the Negotiable Instruments Act against L.D. Industries Ltd. (accused company) and its directors for dishonour of cheques issued in 2001. The accused contended that the company was declared "sick" by the Board for Industrial and Financial Reconstruction (BIFR) under SICA, and a restraint order under Section 22A prevented disposal of assets. The Magistrate dismissed the accused’s application to recall the summons. However, the Sessions Court allowed the revision and discharged the accused. The Bombay High Court upheld the Sessions Court’s order. The appellant then appealed to the Supreme Court.

4. Explanation of the Judgment

The Supreme Court allowed the appeals and set aside the orders of the High Court and the revisional court. The proceedings before the Magistrate were restored.

Key Points of the Judgment:

• No Automatic Bar Under SICA:
  The Court held that merely because a company is declared "sick" under SICA does not automatically bar prosecution under Section 138 of the Negotiable Instruments Act. The nature and purpose of the cheque issuance must be examined.

• Restraint Order Not Absolute:
  The BIFR’s restraint order dated August 21, 2000, allowed the company to use current assets for day-to-day operations. The cheques in question were issued in 2001, and there was a presumption under Section 118(b) of the Negotiable Instruments Act that they were issued on the date they bore. Whether they were issued for day-to-day operations is a question of fact to be decided during trial.

• Recall of Summons Not Permissible:
  The Court reiterated the legal position from Adalat Prasad vs. Rooplal Jindal (2004) and the Constitution Bench decision in In Re: Expeditious Trial of Cases under Section 138 of NI Act, 1881 (2021) that a Magistrate has no power to recall summons once issued. The revisional court and the High Court erred in recalling the processes and discharging the accused at the threshold.

• Evidence-Based Decision Required:
  The Court emphasized that the issue of whether the restraint order under SICA affects the maintainability of a complaint under Section 138 must be decided based on evidence led during trial, not at the pre-trial stage.

• Precedent Followed:
  The Court relied on Kusum Ingots & Alloys Ltd. vs. Pennar Peterson Securities Ltd. (2000) and Southern Steel Ltd. vs. Jindal Vijayanagar Steel Ltd. (2008) to hold that the intent and conduct of the accused company must be examined. If the company issued cheques with no intention to pay, it cannot take shelter under SICA to avoid criminal liability.

5. Conclusion
The Supreme Court held that the revisional court and the High Court erred in discharging the accused without a trial. The complaints were restored to the file of the Magistrate for trial in accordance with law. The Court clarified that the accused may raise the defence of the BIFR restraint order during trial, and the Magistrate shall decide the issue based on evidence.