TaxTMI 
TaxTMI 
2026 (5) TMI 575
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....gistered under the provisions of Companies Act, 1956, having its registered office at Hansalaya, 15, Barakhamba Road, New Delhi 110001. The present Petition is being filed by Mr. S.F. Ahmed, Joint General Manager, who has been duly authorized vide General Power of Attorney (GPA) dated 30.08.2017. 3. Respondent No. 1/M/s Sabari Exim Pvt. Ltd. is a Company registered under the Companies Act, 1956. Respondent No.2/Mr. Shashi Kumar Nair and Respondent No.3/Mrs. Leena Shashi are Managing Director and Director of Respondent No. 1 Company, respectively looking after the day-to-day affairs of the Respondent No. 1 Company. 4. In the year 2012, the Respondent approached the Petitioner for availing financial facilities for import of shredded steel scrap ISRI 211 of USA, origin ("the material") from M/s Schnitzer Steel Industries Inc., 3200 NW Yon Avenue, Portland Oregon, 97210 USA. The terms of import, quality and quantity of cargo, in terms of payment, delivery, schedule, etc. was settled by the Respondent with M/s Schnitzer Steel Industries Inc. 5. The Petitioner entered into an Associateship Agreement dated 23.07.2012, based on the warranties and representations of the Respondent.....
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....ssued a Second Undertaking dated 24.04.2015 whereby the Respondent replaced the previously issued cheques with ten (10) new un-dated cheques bearing no. 161682, 161683, 161684, 161685, 161686, 161687, 161688, 161690, 161691 & 161693 for a total amount of Rs. 46,99,99,800/-. 10. Under this Second Undertaking, the Respondent agreed to pay the remaining outstanding principal amount for which the aforementioned cheques were issued. In the event of non-payment, the Respondent committed to honour the cheques upon presentation and not to issue any stop payment instructions to the bank or close the Account. Additionally, it was agreed that if the Respondent defaulted on the payment, the Petitioner would have full authority to fill in the inchoate cheques and present them for encashment. 11. The Respondent No. 1 further issued Third Undertaking dated 21.05.2015 whereby three (03) new cheques bearing no. 169165, 169166 & 169167 for a total amount of Rs. 1,14,36,000/- were issued in pursuance to the interest accrued on the outstanding payment. The Respondent further undertook to sell off the properties situated in Tamil Nadu in order to secure the interests of the Petitioner and reduce ....
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....provisional, which means that the Company continues to function albeit under the supervision of Provisional Liquidator, subject to terms of the supervision as stipulated by the Hon'ble High Court at the time of appointment of the Provisional Official Liquidator, but cannot deal with its assets, as the same are now subject to the charge of the Provisional Liquidator. Thus, in the present case, the Respondents No. 2 and 3 continued to perform their function in accordance with the Companies Act. 20. Reliance has been placed on the case of Pankaj Mehra and Anr. vs. State of Maharashtra and Ors., 2000 (1) ACR 692 (SC) wherein it has held that there is no provision in the Companies Act which prohibits enforcement of the debt due from a Company. When a Company goes into liquidation, enforcement of debt due from the Company is only made subject to the conditions prescribed therein. However, that does not mean that the debt has become unenforceable altogether. It has been further held that special provisions incorporated in the Companies Act regarding the debts and liabilities due from the company, cannot render the debt unenforceable. 21. Further, reliance has been placed on Vishwana....
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....s. Shakti Trading, 2025 SCC OnLine SC 558; Vijay Chaudhary vs. Gian Chand Jain, 2008 (104) DRJ 349; M.L. Gupta vs. Ceat Financial Services, 136 (2007) DLT 308; Shankar Lal Sharda vs. State of NCT, ILR 2007 (98) DRJ 148. Submissions heard and record perused. 29. Respondent No.1/ M/s Sabari Exim Pvt. Ltd. is Company of which Respondent No. 2/Mr. Shashi Kumar Nair and Respondent No.3/Mrs. Leena Shashi are Directors. The Petitioner/M/s PEC Ltd., entered into an import financing arrangement with the Respondent No.1/M/s Sabari in 2012, for which the Respondent No.1 Company and its Directors issued multiple Undertakings and cheques totaling approximately Rs. 46,99,99,800/- to secure the outstanding dues. 30. After the Respondent No. 1 gave the Second Undertaking on 24.04.2015, the Madras High Court appointed an Official Liquidator (OL) as Provisional Liquidator for the Respondent No.1 Company vide Order dated 30.04.2015, in a winding up Petition under the Companies Act. 31. The Petitioner allegedly became aware of the said fact in August 2015. It is only thereafter, the Petitioner filled in the inchoate cheques given by Respondent No. 1 [given on 24.04.2015 and (07 cheques) an....
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....r his control, all the property, effects and actionable claims to which the company is or appears to be entitled. (1A) For the purpose of enabling the liquidator or the provisional liquidator, as the case may be, to take into his custody or under his control, any property, effects or actionable claims to which the company is or appears to be entitled, the liquidator or the provisional liquidator, as the case may be, may by writing request the Chief Presidency Magistrate or the District Magistrate within whose jurisdiction such property, effects or actionable claims or any books of account or other documents of the company may be found, to take possession thereof, and the Chief Presidency Magistrate or the District Magistrate may thereupon after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with the provisions of sub-section (1A), the Chief Presidency Magistrate or the District Magistrate may take or cause to be taken such steps and use or....
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....ts, duties and privileges of any Administrator-General; (v) to appoint an agent to do any business which the liquidator is unable to do himself. (2-A) ...... (2-B) ... ...... (2-G) The liquidator appointed shall- (a) maintain a separate bank account for each company under his charge for depositing the sale proceeds of the assets and recovery of debts of each company; (b) maintain proper books of account in respect of all receipts and payments made by him in respect of each company and submit half yearly return of receipts and payments to the Tribunal. (3) The exercise by the liquidator in a winding up by the Tribunal of the powers conferred by this section shall be subject to the control of the Tribunal; and any creditor or contributory may apply to the Tribunal with respect to the exercise or proposed exercise of any of the powers conferred by this section." 35. Thus, it is evident that when a Court appoints an Official Liquidator as Provisional Liquidator under Section 450, the Company does not cease to exist; rather the said Company's Board of Directors become functus officio. All the business operatio....
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....nding up proceedings and/or IBC proceedings, the proceedings under Section 138 of the NI Act cannot continue not only against the corporate debtor but also its directors. It is pertinent to mention that this Court in an earlier case titled Govind Prasad Todi v. Govt. of NCT of Delhi, 2023 SCC OnLine Del 3717 rightly distinguished the aspect in the case P. Mohanraj (supra), wherein 51 cheques were issued by the company in favour of the respondent towards the amounts payable from 21.09.2015 to 11.11.2016 and it was a case where statutory notice of demand under Section 138 read with Section 141 of the NI Act was issued on 21.03.2017 while the commencement of Corporate Insolvency Resolution Process (CIRP) under Section 14 of the IBC came to be enforced on 06.06.2017. It was a case where the cheques had got dishonoured and even demand notices were issued prior to the moratorium kicking in. In other words, if the statutory demand notice is issued before the moratorium sets in or winding up proceedings are initiated and cognizance of the offence is taken subsequent to the moratorium or winding up proceedings kicking in, the prosecution against the corporate debtor and its directors cannot....
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....tself underwent fundamental change due to Court ordered liquidation proceedings. The Appointment of Provisional renders all actions of the erstwhile Management invalid and the control of the affairs of the Company shifts from its Management to the Liquidator, who is the only competent authority thereafter to deal with the assets of the Company in Liquidation. Thus, this contention of the Petitioner is also not tenable. Whether Dishonour of Cheques due to Account Closed, would Constitute an Offence Under Section 138 N.I. Act: 44. The last aspect which needs to be considered is whether the cheque dishonoured for the reason Account Blocked would be covered in the term insufficiency of funds, as mandated in Section 138 N.I. Act. 45. To constitute an offence under Section 138 N.I. Act, mere issuance of a cheque is not sufficient; it becomes punishable only when the cheque is dishonoured for the reason insufficiency of funds. Likewise, merely showing that the holder of an account with the particular bank would also not sufficient to show that it is being maintained by the account holder, unless he has the authority and control over the said account. If the holder is deprived of ....
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....nce as envisaged in Section 138 of N. I. Act would not be made out. 48. Similar facts as in present case, were considered by the Apex Court in the case of Vishnoo Mittal vs. Shakti Trading, 2025 SCC OnLine SC 558, in 2018, wherein the moratorium was imposed and management of the Corporate Debtor was taken over by the Interim Resolution Professional as per Section 17 of the Insolvency and Bankruptcy Code, 2016 (Management of Affairs of Corporate Debtor by Interim Resolution Professional). When the notice was issued to the Appellant in said case, he was not in charge of the Corporate Debtor as he was suspended from his position as the Director of the Corporate Debtor as soon as IRP was appointed in 2018. It was thus, held that all the bank accounts of the Corporate Debtor were operating under the instructions of the IRP, hence, it was not possible for the Appellant to repay the amount in light of Section 17. 49. In the present case as well, the cheques were filled up on 24.01.2017 and were dishonoured on 27.01.2017 with remarks of "Account Blocked". The dishonour clearly occurred not due to insufficiency of funds but due to statutory prohibition on payments during winding-up pr....