TaxTMI 
TaxTMI 
2026 (5) TMI 635
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....dated 10.03.2010 with the deputy commissioner, MCD/Shahdara South Zone, Delhi, according to which the respondent no. 2/company had to arrange 31 Auto Tippers with Hydraulic Lifting facilities, along with one driver and two Beldars for each Auto Tipper, including T & P fuel lubricants, etc for deployment in various wards of Shahdara South Zone, Delhi. The petitioner was the director of respondent no. 2/company. 4. On the basis of aforesaid agreement, respondent no. 2/company induced the complaint/respondent no. 1 to assist in the execution of said agreement. Pursuant thereto, complainant/respondent no. 1 entered into a Memorandum of Understanding [in short "MOU"] with the respondent no. 2/company. Under the terms of the MOU, it was agreed that complainant/respondent no. 1 would purchase 18 Auto Tippers from respondent no. 2/company. Pursuant thereto, the complainant/respondent no. 1 paid a total sum of Rs. 45,00,000/- to respondent no. 2 as an advance, through various cheques and cash payments on different dates. 5. However, a dispute arose between the respondent no. 2/company and the complainant/respondent no. 1, as a result of which, complainant/respondent no. 1 had asked th....
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....rder a Provisional Liquidator was also appointed who was directed to forthwith take over the assets and records of the respondent no. 2/company. Order dated 23.05.2012 is reproduced herein below in extenso: "O R D E R 23.05.2012 Caveat 542/2012 in Co. Pet. 262/2012 Since the caveator has already put in appearance, the caveat petition stands disposed of. Co. Pet. 262/2012 and Co. Appls. 1085-1086/2012 Present winding up petition has been filed under Section 433(e) read with Sections 434 and 439 of the Companies Act, 1956, stating that respondent is unable to pay its debts allegedly amounting to Rs.1.43 crores. It is the petitioner's case that it had extended the loan of Rs.1 crore to the respondent on 13th July, 2010 and the same was to be repaid in nine months along with interest @ 2% per month. In response to the statutory winding up notice, respondent has stated as under:- "We admit and acknowledge our liability in a sum of Rs.1.43 crores as on 1.4.2012 which amount comprises of Rs.1 crore as principal loan amount and Rs. 43 lacs on account of interest till 31.3.2012 (calculated @ 2% per month). We s....
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....lication of the advertisements within a period of two weeks. Accordingly, the Co.Appls. No. 1085-1086/2012 stand disposed of. Let a fresh status report be filed by the Official Liquidator before the next date of hearing. List the matter on 16th July, 2012. Order dasti under signatures of the Court Master." (emphasis supplied) 11. Subsequently, vide order dated 21.01.2020 passed in Company Petition 262/2012, respondent no. 2/company was dissolved. 12. Thereafter, vide impugned order dated 21.12.2022, the learned JMFC, upon hearing application of the petitioner seeking discharge, proceeded with framing of notice in the matter, holding that Magistrate has no power to drop proceedings in a summons case filed on the basis of a complaint and that under Chapter XX of the CrPC there is no provision for discharge of the accused person. 13. Ms. Sangeeta Jain, learned counsel appearing on behalf of the petitioner submits that respondent no. 2/company went into liquidation and a Provisional Liquidator was appointed vide order dated 23.05.2012 in Company Petition no. 262/2012 and subsequently by order dated 21.01.2020 respondent no. 2/compan....
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....ounsels appearing on behalf of both the parties. 20. In the present case, as noted above, the liquidation proceeding was triggered on 23.05.2012, when notice was issued in the Company Petition filed for the winding up of respondent no. 2/company, and the same was admitted and a Provisional Liquidator was appointed. Crucially, this event occurred prior to the dishonour of the cheques in question, which took place on 15.06.2012. Furthermore, the statutory demand notice was issued by complainant/respondent no. 1 only subsequently, on 02.07.2012. 21. To appreciate the controversy involved in the present case, it would be apposite to refer to relevant provisions of the Companies Act, 1956 - "450. APPOINTMENT AND POWERS OF PROVISIONAL LIQUIDATOR.- (1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Tribunal may appoint the Official Liquidator to be liquidator provisionally. (2) Before appointing a provisional liquidator, the Tribunal shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing,....
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....vil or criminal, in the name and on behalf of the company; (b) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company; (c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; (ca) to sell whole of the undertaking of the company as a going concern; (d) to raise on the security of the assets of the company any money requisite; (e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets. (2) The liquidator in a winding up by the Tribunal shall have power- (i) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company's seal; ... (iii) to draw, accept, make and endorse any bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the ....
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....ad to a recent decision of the coordinate bench of this court in CRL.M.C. 4123/2017 titled as M/S Pec Ltd. vs. M/S Sabari Exim Pvt Ltd & Ors., dated 22.08.2025, wherein an identical issue with regard to maintainability of complaint under Section 138 of NI Act against the directors and the company qua which the Provisional Liquidator had been appointed prior to dishonouring of a cheque, was involved. Paragraph 33 of the said decision encapsulates the primary contention raised by the petitioner/complainant therein which reads as under: "33. Firstly, the Petitioner has argued that the liability of the Company and its Directors does not extinguish merely as the appointment of Official Liquidator under Section 450 of the Companies Act is only provisional and the erstwhile Directors continue to perform their functions in the Company except dealing with the assets of the Company which come under the exclusive domain of the Official Liquidator appointed for the said function." (emphasis supplied) 24. The court while dealing with above contention, examined the relevant provisions of the companies Act, 1956, and held as under: "35. Thus, it is evident that when ....
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....ol, the Directors (who are in fact ex-Directors) can also not be held liable. 38. Similarly, in the case of Ratan Lal Garera & Ors. vs. State (NCT of Delhi) & Anr., 2006 SCC OnLine Del 1442 the Apex Court relied on the case of M.L. Gupta, (supra) and held that as the winding-up orders have been passed and the Official Liquidator was appointed as on the date when the cheque was presented and dishonoured, the case would not fall within the parameters of Section 138 N.I. Act. (emphasis supplied) 26. Likewise, in Manju Bajad (Supra) and Vinay Kumar Tyagi (Supra) both rendered on 01.09.2023, one of the party i.e the present petitioner was same. Even the facts involved were identical. In the said two cases, the court allowed the petition of the petitioner, thereby quashing the complaint filed under Sections 138/141/142 of the N.I Act against the director i.e. the present petitioner. The relevant paragraphs from Manju Bajad (supra) are reproduced herein: "8. In the present case, admittedly, the respondent no. 2 was in liquidation vide order dated 23.05.2012 passed in Co. Pet. 262/2012 titled Rani Leasing and Finance Pvt. Ltd vs. P.R.J. Enterprises Ltd. and Ors. see....
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....ount would be void. If the cheque is presented at this stage, payment thereof is legally barred. Bank, on which cheque is issued is precluded from honouring the cheque. In the instant case itself, account was closed by the Official Liquidator and that was the reason for dishonour of cheque. It is also to be borne in kind that after the winding up orders and the taking of over the affairs of the company by the Official Liquidator since erstwhile Directors seize to be the Directors as on the date of presentation of the cheque, they are not incharge of day to day affairs of the company. Offence is committed under Section 138 of the Act only on the dishonour of the cheque and issuance of notice for demand to pay the amount. As on that date, no such notice could be issued to the company which was in liquidation and the creditors are now to be paid as per the scheme of the Companies Act. Therefore, liability on them also cannot be fastened under Section 141 of the Negotiable Instruments Act. xxx xxx xxx 16. Thus, what is emphasized is that actual offence has to be committed by the company and then alone the Directors can become liable for the offence. When the ....
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....iled under Sections 138/141/142 of the Negotiable Instruments Act, 1881 and all proceedings emanating therefrom, including the order dated 09.01.2020 passed by the learned Metropolitan Magistrate-2, Shahdara, Karkardooma Court, New Delhi, qua the petitioner, are quashed. 14. The petition, alongwith the pending application, stands disposed of." (emphasis supplied) 27. In view of the aforesaid statutory mandate, factual chronology and decisions referred above, it is clear that once the powers vested in the petitioner (in his capacity as a director) stood transferred to the Provisional Liquidator by operation of law, the petitioner was legally and practically rendered incapable of controlling the bank accounts of respondent no. 2/company. Ergo, it cannot be said that the petitioner was in a position to ensure the encashment of the cheque or to honour the demand notice, as the authority to operate the said accounts rested solely with the liquidator. 28. The use of expression "an account maintained by him" in section 138 NI Act also suggests one of the prerequisite ingredient for constituting an offence thereunder is that accused must have control over the accoun....
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.... This expression cannot be construed so narrowly as to mean that the mere ownership of an account by the accused satisfies the necessary legal ingredients. Rather, the requirement that an account be "maintained" necessarily implies that it is alive and operative, ensuring the account holder remains capable of executing commands to govern financial transactions, such as the clearance of cheques. Ultimately, the authority and control of the account holder must exist on the effective date when the cheque becomes valid for presentation at the bank. 30. This position is supported by the observations of a coordinate bench of this court in Best Buildwell Pvt. Ltd. and Others vs. R.D. Sales (2025 SCC OnLine Del 4267), wherein it was noted that - "14. Under Section 138 of the NI Act, an offence is committed when a cheque is drawn from an account maintained by the drawer and it is returned unpaid due to insufficient funds. Even though the cheque return memo may mention its reason for dishonor as "insufficient funds", the fact remains that, the petitioners' account was frozen by the CGST Department, and thus, it could not be said to be "maintained" by them at the relevant time....