Director liability under cheque dishonour law fails when liquidation removes control over company accounts before notice.

A complaint under Section 138 of the Negotiable Instruments Act, 1881 is not maintainable against a director where liquidation proceedings and appointment of a provisional liquidator had already displaced the directors' control over the company's bank accounts and affairs before dishonour and statutory notice. Once that transition occurs, the directors are functus officio for operating the account or ensuring payment, and the cheque cannot be treated as one that the accused director could practically or legally honour. On that basis, the complaint was found legally non-maintainable and the criminal proceedings were quashed insofar as they concerned the petitioner.

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Issues: Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 is maintainable against a director when, prior to dishonour of the cheques and issuance of the statutory notice, the company had gone into liquidation and a provisional liquidator had been appointed, thereby divesting the director of control over the company's bank accounts and affairs.

Analysis: The appointment of a provisional liquidator under the Companies Act, 1956 does not dissolve the company, but it displaces the directors' control and transfers management of the company's affairs and assets to the provisional liquidator. Once that transition occurs, the directors become functus officio for purposes of operating the company's accounts and authorising payment. Section 138 of the Negotiable Instruments Act, 1881 contemplates a cheque drawn on an account maintained by the drawer and requires the drawer to have the practical and legal ability to operate the account and satisfy the demand notice. Where liquidation and restraint orders precede dishonour and notice, the accused director cannot be said to have control over the account or to be in a position to ensure payment.

Conclusion: The complaint under Section 138 of the Negotiable Instruments Act, 1881 was held to be legally non-maintainable against the petitioner and was liable to be quashed.

Final Conclusion: The petition succeeded and the criminal proceedings arising from the complaint were quashed insofar as they concerned the petitioner.

Ratio Decidendi: A complaint under Section 138 of the Negotiable Instruments Act, 1881 is not maintainable against a director who, by reason of prior liquidation proceedings and appointment of a provisional liquidator, has ceased to have control over the company's accounts and affairs at the time the cheque is dishonoured and statutory notice is issued.

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