Section 138 liability requires lawful control and statutory dishonour; provisional liquidation and an account-blocked return defeated the complaint.

A cheque complaint under Section 138 of the Negotiable Instruments Act was held unsustainable where the company had already come under provisional liquidation and the former management no longer controlled its affairs. Once the provisional liquidator was appointed, authority over the company's assets and instruments vested in the liquidator, so cheques filled and presented without such authority could not found criminal liability. Dishonour marked "Account Blocked" also did not satisfy Section 138 on these facts because the dishonour arose from the liquidation-related loss of control, not from insufficiency of funds or an equivalent statutory condition. The criminal petition therefore failed.

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Issues: (i) Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 remained maintainable when the cheques were filled and presented after appointment of a provisional liquidator and the company's management had ceased to control its affairs. (ii) Whether dishonour of the cheques with the remark "Account Blocked" attracted liability under Section 138 of the Negotiable Instruments Act, 1881.

Issue (i): Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 remained maintainable when the cheques were filled and presented after appointment of a provisional liquidator and the company's management had ceased to control its affairs.

Analysis: On appointment of a provisional liquidator under the Companies Act, 1956, the company's property comes under the custody and control of the liquidator and the erstwhile board of directors becomes functus officio. The authority to deal with the company's assets and instruments thereafter vests in the liquidator, and cheques issued or presented without such authority cannot sustain criminal liability under Section 138. Since the cheques in question were filled and presented after the winding-up order and after the petitioner had knowledge of the changed legal status, the directors were no longer in control of the company's banking operations.

Conclusion: The complaint was not maintainable on these facts, and the dismissal of the complaint and revision was correct.

Issue (ii): Whether dishonour of the cheques with the remark "Account Blocked" attracted liability under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: Section 138 is attracted only when dishonour is referable to insufficiency of funds or an equivalent statutory condition. Where the account is blocked because of liquidation proceedings and the drawer has no authority or control over it, the dishonour is caused by a circumstance beyond the drawer's control and not by want of funds. In such a situation, the essential ingredient of the offence is not established.

Conclusion: Dishonour for "Account Blocked" did not constitute the offence under Section 138 on the facts of the case.

Final Conclusion: The criminal petition failed, as the impugned orders rightly held that the prosecution under Section 138 could not proceed in the changed liquidation circumstances and the dishonour reason did not satisfy the statutory ingredients.

Ratio Decidendi: A cheque dishonoured after the company has come under provisional liquidation, and returned for "Account Blocked" due to loss of control over the account, does not satisfy the essential ingredients of Section 138 of the Negotiable Instruments Act, 1881.

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