Two Business School students arrested September 16 at the School for passing bad checks were acquitted last month in Barnstable District Court.

The students, Terry Horsman and Ira Neaman, last summer operated the Mill Creek Artisan's Revival in Yarmouth, on Cape Cod, with an Amherst College student, Richard Linnell.

The Artisan's Revival was organized to sell hand-made objects, primarily to tourists.

The Barnstable Register said yesterday that Neaman, an employee of Horsman and Linnell, wrote checks at the end of August to pay the firm's bills and then left town the next day without telling his employers about the checks.

Horsman and Linnell wrote more checks the next day, overdrawing their account and causing Neaman's checks, after theirs, to bounce.

At the October 22 hearing, Judge Philip M. Boudreau entered a finding of not guilty for Neaman and consented to a dismissal of charges against Horsman and Linnell since full restitution had been made, the Register said.

Stuart I. Rosnick, Neaman's attorney, alleged Wednesday that Boudreau criticized Yarmouth Police for acting with too much haste and local merchants for attempting to use the Court as a collection agency.