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2019 (7) TMI 1617 - HC - Indian LawsDishonor of Cheque - summon the accused persons for the offence punishable under Section 138 NI Act - petitioner contends that as per the complainant himself the cheques given were post-dated and on the given date when the cheques were presented the account of the company already stood blocked - it is argued that on the same analogy the complaint is maintainable as it is not disputed by the accused that the blocked account belongs to it which resulted in dishonour of the cheques. According to the respondent the trial Court has passed the summoning order carefully after examining the material on record and therefore the petition deserves to be dismissed. HELD THAT - This Court does not find any merit in the argument of learned counsel for the petitioner that only either of the two grounds i.e. insufficient funds or the amount exceeds the arrangement must exist as a reason for dishonour of cheque in order to launch prosecution against the accused. A careful analysis of Section 138 NI Act reveals that the first and foremost requirement to maintain the complaint under Section 138 NI Act is that the cheque issued by the account holder must be from the account maintained by account holder with the drawer-Bank for discharge in whole or in part of any debt or other liability. In the present case it is evident that the proceedings against the company were initiated under the provisions of IB Code 2016 and the order in terms of Section 14 of IB Code was passed on 21.07.2017. The provisions of IB Code 2016 makes it absolutely clear that whenever a corporate debtor is facing the proceedings before the adjudicating authority (NCLT) then the control and management of the said corporate debtor can be vested with the Interim Resolution Professional. There is no conflict between the parties regarding the material facts including the proceedings before the NCLT and its consequences - Petition allowed.
Issues Involved:
1. Maintainability of complaints under Sections 138, 141, and 142 of the Negotiable Instruments Act, 1881 (NI Act). 2. Validity of the summoning orders issued by the Judicial Magistrate First Class, Faridabad. 3. Impact of the National Company Law Tribunal (NCLT) order on the accused's ability to maintain the bank account. 4. Relevance of the statutory notice and the accused's reply in the context of the NI Act. Detailed Analysis: 1. Maintainability of Complaints under Sections 138, 141, and 142 of the NI Act: The petitioner sought to quash the criminal complaints filed under Sections 138, 141, and 142 of the NI Act, arguing that the cheques were dishonored due to the account being blocked, which does not fall under the conditions specified in Section 138 (i.e., "insufficient funds" or "amount exceeds the arrangement with the bank"). The court examined the statutory requirements of Section 138 and relevant Supreme Court judgments, noting that the dishonor of a cheque due to a "closed account" or "stop payment" instructions can still attract penal provisions under Section 138. However, the court highlighted that the account must be "maintained" by the account holder, meaning it should be active and under the account holder's control at the time of the cheque's presentation. 2. Validity of the Summoning Orders Issued by the Judicial Magistrate First Class, Faridabad: The trial court had issued summoning orders based on the pre-summoning evidence and the dishonor of cheques with the remark "account blocked." The petitioner contended that the trial court erred in summoning the accused without considering the reply to the statutory notice, which explained the account blockage due to an NCLT order. The High Court found that the trial court did not properly evaluate the reply and the context of the NCLT order, which led to a mechanical issuance of the summoning orders. 3. Impact of the NCLT Order on the Accused's Ability to Maintain the Bank Account: The NCLT order dated 21.07.2017 initiated Corporate Insolvency Resolution Process (CIRP) against the accused company, resulting in the appointment of an Interim Resolution Professional and blocking of the company's bank account. The court emphasized that the account was not "maintained" by the accused at the time of the cheque's presentation due to the NCLT order. This lack of control and authority over the account negated the condition of "account maintained by him" under Section 138, making the complaints unsustainable. 4. Relevance of the Statutory Notice and the Accused's Reply: The complainant served a statutory notice dated 04.10.2017, and the accused responded on 16.10.2017, explaining the account blockage due to the NCLT order. The court noted that the complainant did not disclose the contents of the reply in the complaint, which was a critical omission. The reply clearly indicated the legal and factual circumstances that led to the account blockage, which should have been considered by the trial court before issuing the summoning orders. Conclusion: The High Court concluded that the complaints and the summoning orders were not maintainable due to the NCLT order blocking the account, which deprived the accused of control over the account. The court quashed the criminal complaints and the respective summoning orders, emphasizing the necessity of the account being "maintained" by the account holder for prosecution under Section 138 NI Act. The petitions were allowed, and the proceedings arising from the complaints were quashed.
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