TaxTMI 
TaxTMI 
2026 (7) TMI 445
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.... an application comes to be submitted to the Registrar of Companies to close accused No. 2/Company. Based on the said application, the Company is struck off from the array of companies under the Companies Act, 1956 and is declared as dissolved. On 16-03-2011, an endorsement is also issued by the Registrar of Companies striking off accused No. 2 Company from the register and bringing it under the list of dissolved companies. 3.2. In the month of November 2014, accused No. 1 is alleged to have taken a hand loan from the respondent/complainant to an extent of Rs.60/- lakhs on the assurance that it would be paid back within 30 months. In furtherance of the said transaction, three years later on 30-07-2017, accused No. 2/Company issues a cheque amounting to Rs.60/- lakhs. On 08-08-2017 when the cheque comes to be presented for realization, it is returned with an endorsement 'account closed'. The respondent complainant initiates statutory proceedings by issuance of a demand notice seeking payment from the hands of the Company along with interest. The demand notice was sent to accused No. 2/Company and is said to have demanded accused No. 1 to answer. It is then, the complainant regist....
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.... of the Apex Court in the case of AJAY KUMAR RADHEYSHYAM GOENKA v. TOURISM FINANCE CORPORATION OF INDIA LIMITED reported in (2023) 10 SCC 545 to buttress his submission qua the liability of the Director even in the teeth of closure of the Company. 6. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record. 7. The afore-narrated facts are not in dispute. The link in the chain of events, as narrated hereinabove, is a matter of record. They would not require reiteration. The Company that stood established in the year 2003 files an application for its closure. The closure is accepted and the Company is declared to be dissolved. The website of the Ministry of Corporate Affairs depicts the following, showing the Company as dissolved: "GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS Office of the Registrar of Companies 'E' Wing, 2nd Floor, Kendriya Sadana, Koramangala, Bangalore-560 034, Karnataka, INDIA Date: 16-03-2011 In the matter of the Companies Act, 1956 and of M/s GIGA NETWORKS PRIVATE LIMITED, U64202KA2001PTC029716 This is....
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.... 13. The bare reading of the above provision shows that the appellant did not have the capacity to fulfil the demand raised by the respondent by way of the notice issued under clause (c) of the proviso to Section 138 NI Act. When the notice was issued to the appellant, 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 on 25-7-2018. Therefore, the powers vested with the Board of Directors were to be exercised by the IRP in accordance with the provisions of IBC. 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 IBC." The Apex Court holds that proceedings under Section 138 of the Act against a Director of a company who has allegedly issued a cheque after the moratorium period had commenced under Section 14 of the Insolvency and Bankruptcy Code, 2016 would not be maintainable, since such a Director would not have the capacity to fulfil the demand raised by the complainant. 8.2. The High Court of Delhi in KRISHAN LAL GULATI v. STATE OF NCT OF D....
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....mpanies till such companies are legally restored under Section 252 of the Companies Act by an order of the National Company Law Tribunal. The restoration, as and when it happens shall be reflected by change in the status of the company from Struck of to Active. Since such "Struck off" companies have ceased to exist, action has been initiated to restrict the operation of Bank accounts of such companies. The Department of Financial Services has, through the Indian Banks Association, advised all Banks that they should take immediate steps to put restrictions on bank accounts of such struck off companies. A list of such companies, Registrar of Companies wise, has been published on the website of the Ministry of Corporate Affairs. In addition to such struck off companies, Banks have also been advised to go in for enhanced diligence while dealing with F companies in general. A company even having an active status on the website of the Ministry of Corporate Affairs but 0 defaulting in filing of its due Financial Statement (s) or Annual Return (s) of Particular of Charges on its assets on the 11 secured loan should be seen with suspicion as, prima facie, the company is no....
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.... 13. Continuation of the trial would thus serve no legal purpose when the complainant company itself has ceased to exist. Criminal prosecution cannot be maintained by or against a dissolved entity." The High Court of Delhi holds that a complaint under Section 138 of the Act would not be maintainable if the cheque is issued after the company is struck off. Once the company is struck off and stands dissolved, it loses its juristic personality, rendering any act done on behalf of the company void ab initio, unless the company is restored under Section 252 of the Companies Act, 2013. The High Court of Delhi would further hold that the cheque issued in the name of or by such a dissolved company cannot be treated as a legally enforceable instrument. 8.3. The High Court of Delhi, again in RAJ KUMAR JAIN v. SHREE BALAJI ENTERPRISES 2026 SCC OnLine Del.2599, holds as follows: ".... .... .... 20. In the present case, as noted above, the liquidation proceeding was triggered on 23-5-2012, when notice was issued in the Company Petition filed for the winding up of Respondent 2/company, and the same was admitted and a Provisional Liquidator was appointed. Cruciall....
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....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 cause to be used such force as may in his opinion be necessary. (2) All the property and effects of the company shall be deemed to be in the custody of the Tribunal as from the date of the order for the winding up of the company." "457. POWERS OF LIQUIDATOR.- (1) The liquidator in a winding up by the Tribunal shall have power, with the sanction of the Tribunal- (a) to institute or defend any suit, prosecution, or other legal proceeding, civil 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....
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....ly to the Tribunal with respect to the exercise or proposed exercise of any of the powers conferred by this section." 22. A perusal of the above reproduced provisions makes it clear that the appointment of a Provisional Liquidator does not result in the legal dissolution of the company, but rather leads to suspension of the Directors' authority, rendering them functus officio. While the company maintains its corporate existence, its internal management is effectively displaced, transitioning its executive power to the Provisional Liquidator. Under this judicial arrangement, the company's business operations, the administration of its assets, and the validity of its contractual engagements are contingent upon the oversight and formal authorization of the liquidator, who serves as the custodian of the corporate estate. 23. Reference in this regard may be had to a recent decision of the coordinate bench of this court in CRL.M.C. 4123/2017 titled as Pec Ltd. v. Sabari Exim Pvt Ltd., dated 22-8-2025, 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 ....
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....ointment of a liquidator, specifically in circumstances where such appointment preceded both, the dishonour of the cheques as well as the issuance of the statutory demand notice. The relevant paragraphs from PEC Ltd.. (supra) where said decisions have been referred read as follows: 37. In the case of M.L. Gupta v. Ceat Financial Services Ltd., (2008) 145 Comp Cas 837 : 2006 SCC OnLine Del 1448 while holding that a Complaint would not be maintainable when the cheque is presented after the Company has already been ordered to be wound up, observed that when the company goes into liquidation and the cheque is presented thereafter, it cannot be said that the company has committed the offence as it is because of legal bar that it is precluded from making the payment. Once dishonour of the cheque by the Bank and failure to make payment of amount by the company is beyond its control, the Directors (who are in fact ex-Directors) can also not be held liable. 38. Similarly, in the case of Ratan Lal Garera v. State (NCT of Delhi), 2006 SCC OnLine Del 1442 the Supreme Court relied on the case of M.L. Gupta, (supra) and held that as the winding-up orders have been passed and th....
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....rs after the company has already been ordered to be wound up. Whether such a complaint would be maintainable is the question and the legal position on this aspect is what needs to be determined. 9. To answer this question, we may have first to take note of the necessary legal consequences of the winding up of a company and orders of appointment of Official Liquidator/Liquidator. By operation of law i.e. by virtue of the Companies Act, it would result in discharge of all the employees and the Officers from the service of the company including Board of Directors. Affairs of such a company are taken over by the Official Liquidator and the Official Liquidator has to disburse the payment in accordance with the Companies Act. Section 536 of the Companies Act now comes into play fully and disbursement of any amount 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 ov....
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....resent case clearly reveal that pursuant to order dated 23-5-2012 directing Respondent 2 to be wound up, the Directors and all other persons attached to the company including the petitioner herein were restrained from utlilizing the assets of Respondent 2 and hence no payment could be made by the petitioner herein as he ceased to be in control of the day to day affairs of Respondent 2 which stood transferred to the Provisional Liquidator. 12. In light of the settled legal position and the factual matrix involved, as discussed hereinabove, the complaint as well as summoning orders passed by the learned MM are bad in law and are liable to be set aside. 13. In view of the aforesaid, the petition is allowed and the Complaint Case Misc. Crl. 1419/2016 titled Manju Bajad v. P.R.J. Enterprises Ltd. filed under Sections 138/141/142 of the Negotiable Instruments Act, 1881 and all proceedings emanating therefrom, including the order dated 9-1-2020 passed by the learned Metropolitan Magistrate-2, Shahdara, Karkardooma Court, New Delhi, qua the petitioner, are quashed. 14. The petition, along with the pending application, stands disposed of." (emphasis suppl....
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....he drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.-For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.]" (emphasis supplied) 29. It thus, appears that to legally maintain a bank account, the holder must exercise continuous authority, keeping the account in an active, operational, and functional state while actively preserving it from lapse or cessation. This continuous preservation serves as the bedrock of the drawer-banker relationship, placing the legal emphasis not merely on the opening of an account, but on the ongoing affirmative act of keeping it in proper condition. 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 transac....
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....ly divested the petitioner of his managerial authority and control over the company's bank accounts. Since the statutory mandate of Section 138 of the N.I. Act requires the account to be "maintained" by the accused at the time of the offence, the transition of executive power to the Provisional Liquidator created a legal and practical impossibility for the petitioner to satisfy the demand or operate the accounts. Concomitantly, as the petitioner was neither in charge of the company's affairs nor capable of ensuring the encashment of the cheques on the date the cause of action crystallized, therefore, the essential ingredients of the offence are not met, and the complaint against the petitioner is held to be legally non-maintainable." The High Court of Delhi holds that proceedings for the offence punishable under Section 138 of the Act would not be maintainable if the cheque is issued after proceedings for liquidation of the company is initiated. 9. On a blend of the judgments rendered by the Apex Court and that of the High Court of Delhi, what would unmistakably emerge is that, a cheque allegedly issued in the name of the company, after dissolution of the company, wou....
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....ished only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons falling within the second or third category the payee can succeed in the case only if he succeeds in showing that the offence was actually committed by the company. In such a prosecution the accused can show that the company has not committed the offence, though such company is not made an accused, and hence the prosecuted accused is not liable to be punished. The provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the company is sine qua non for convicting those other persons. But if a company is not prosecuted due to any legal snag or otherwise, the other prosecuted persons cannot, on that score alone, escape from the penal liability created through the legal fiction envisaged in Section 141 of the Act. (Emphasis supplied) 17. Aneeta Hada partially overruled the ratio of Anil Hada to the extent that it had permitted prosecution of category of person....
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....ing a legal notice on 06-09-2017 and registering a complaint on 13-10-2017, while it is an admitted fact that the Company stood dissolved with effect from 16-03-2011. Therefore, the cheque itself is allegedly issued in the name of the Company after dissolution of the Company. Therefore, the petitioner, a former Director of the said Company cannot be held liable for a cheque that is issued after dissolution of the Company. 11. The learned counsel for the respondent/complainant would vehemently contend that these are disputed questions of fact and as such further proceedings must be permitted to be continued. Therefore, it becomes necessary to notice what is the averment in the complaint. The complaint reads as follows: "COMPLAINT UNDER SECTION 200 Cr.P.C. R/W SECTIONS 138 AND 142 OF THE NEGOTIABLE INSTRUMENTS ACT. The complainant respectfully submits as follows:- 1. The address of the complainant for the purpose of the service of notice, summons etc., from this Hon'ble Court is as shown in the cause title and the complainant may also be served through his Advocates Sri Ganapathi S.Shastri & Veena C.G., No. 281, 20th Main, Vijayanagar, Bengaluru-560 0....
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.... Interest at the rate of 18% per annum along with cost within fifteen days from the receipt of the said notice. The accused No. 1 was aware that the complainant will issue demand notice, hence he managed that the said notices are retuned to sender on 8-9-2017. The copies of cheque, Bank endorsement, registered notice, postal receipt, returned cover are herewith produced. The accused No. 1 has not paid any amount to the complainant. 7. The accused has failed to repay the said amount demanded by the complainant. Hence, the accused is liable to be prosecuted under the provisions of the Negotiable Instruments Act. 8. The cause of action for this complaint arose on 22.09.2017 and subsequently thereafter at Rajajinagar Police Station, which comes under the Jurisdiction of this Hon'ble Court. 9. The complainant begs to rely on the documents produced along with the complaint. 10. This complaint is preferred being aggrieved by the dishonest and illegal intention of the accused to cheat and defraud the complainant. WHEREFORE, the complainant respectfully prays that this Hon'ble Court be pleased to-Secure the presence of the accused by issuing noti....