High Court Declines to Quash Summons in Section 138 NI Act Case Against Liquidated Company

A Single-Judge bench of Justice Anup Jairam Bhambhani heard a petition under Section 482 Cr.P.C. challenging a summoning order dated 23.08.2018 issued by the Metropolitan Magistrate in proceedings under Section 138 of the Negotiable Instruments Act and a subsequent order dated 07.06.2023 rejecting an application by the Official Liquidator to stay those proceedings. The petition was filed by the Official Liquidator of a company in liquidation seeking quashing of criminal proceedings arising from a dishonoured cheque.

The High Court dismissed the petition and vacated an interim stay that had suspended proceedings before the learned Magistrate. The court held that the cheque was drawn by a director pursuant to a personal guarantee and that liability under Section 138 arose before initiation of CIRP and liquidation, so the summoning order could not be quashed on the present record. The Court, in its reasoning, observed: "In the present case, though the Magistrate has omitted to narrate in the impugned summoning order as to how a prima-facie case is made-out against the petitioner-company, considering that the summoning order is dated 23.08.2018, and since this court has perused the complaint, the requisite documents, including the subject cheque, the cheque dishonour memo, and the statutory notice issued under section 138 of the NI Act, that have been placed before it, this court would refrain from interfering with the impugned summoning order, though the ingredients of the offence do not find any mention in it."

Background The dispute arose from a criminal complaint based on Cheque No. 000011 dated 05.06.2018 for Rs. 2 crores, which was dishonoured on 08.06.2018. The complainant filed pre-summoning evidence and the Magistrate recorded that "All the statutory requirements for summoning of the accused for the commission of offence punishable U/s 138 NIA Act have been complied with" and that "a prima facie case for the commission of offence punishable u/s 138 of NI Act is made out against the accused." The petitioner-company submitted that CIRP was initiated on 03.01.2020 and liquidation was ordered on 26.02.2021, relying on Section 33(5) of the Insolvency & Bankruptcy Code to contend that proceedings against the company were barred thereafter. The Official Liquidator argued that the cheque was drawn on the personal account of a director and that the company was wrongly arraigned; the complainant contended that the director had issued the cheque pursuant to a Personal Guarantee Deed dated 31.03.2017 and that the cheque reflected a composite liability of the company and its directors, invoking vicarious liability under Section 141 NI Act.

The High Court examined settled legal principles requiring that a Magistrate manifest application of mind while issuing process but acknowledged that detailed reasons were not required at the summoning stage. The court reviewed precedent including Pepsi Foods Ltd., Mehmood Ul Rehman, Sunil Todi, and more recent Supreme Court rulings emphasising that summoning must not be mechanical. Applying these principles, the court found that (i) the cheque was issued pursuant to a personal guarantee and could not be said, at this stage, not to discharge a liability of the company; (ii) the cheque dishonour pre-dated CIRP and liquidation; and (iii) the Magistrate's order, though not narrating all ingredients, was supported by the complaint and documents on record. The petition was dismissed and the interim stay of proceedings against the petitioner-company was vacated. Pending applications were disposed of.

Case Details: Case No.: CRL.M.C. 5337/2024, CRL.M.A. 20405/2024 Case Title: SRK DEVBUILD PVT LTD THROUGH ITS LIQUIDATOR MR. RAVI KAPOOR versus GOVERNMENT OF NCT OF DELHI & ANR Appearances: For the Petitioner(s): Mr. Chandra Shekhar Yadav and Mr. Astitva Srivastava, Advocates (for Official Liquidator) For the Respondent(s): Mr. Shashwat Awasthi, Advocate (for Respondent No.2)

Date of Decision: 26th February 2026 Judge: Hon'ble Mr. Justice Anup Jairam Bhambhani