Case Note & Summary
The applicants, four individuals who were directors or former directors of Venus Rolling Mills Private Limited (accused No.1), filed six criminal applications before the High Court of Judicature at Bombay, Nagpur Bench, seeking quashing of Criminal Case Nos.691/2023, 696/2023, 695/2023, 693/2023, 692/2023, and 694/2023 filed under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The non-applicant, Ganga Iron and Steel Trading Company Limited, had supplied goods to the accused company on credit, and sixteen cheques drawn on Federal Bank, Nagpur Branch, allegedly issued by applicant No.1 against the outstanding dues, were dishonoured with the endorsement 'account closed'. The cheques were dated between 27.10.2022 and 02.11.2022. The Additional Chief Judicial Magistrate, Nagpur, issued process in all complaints. The applicants contended that applicant No.2 (Smt. Neha Panwar) resigned as director on 10.06.2017 and applicant No.4 (Mr. Narendra Singh) resigned on 21.05.2015, long before the cheques were issued in October 2022. Applicant No.1 and applicant No.3 ceased to be in charge of the company after the National Company Law Tribunal, Mumbai, admitted the company's petition for Corporate Insolvency Resolution Process (CIRP) on 22.04.2019 and declared a moratorium under the Insolvency and Bankruptcy Code, 2016. A Resolution Professional was appointed, and a public announcement was made on 03.05.2019. The non-applicant was intimated on 09.05.2019 not to deposit the cheques. The Committee of Creditors resolved to liquidate the company, and an application under Section 33 of the Insolvency and Bankruptcy Code, 2016 was filed. The company was eventually sold to Shantech International Private Limited on 30.03.2023, and the liquidation proceeding closed on 18.06.2024. The NCLT Mumbai by order dated 18.06.2024 held that remaining dues against the erstwhile accused company shall be paid by the successful auction purchaser. The applicants argued that at the time of issuance and dishonour of the cheques, they were not in charge of the company and could not be held liable. The non-applicant opposed the applications, asserting that the cheques were issued against a legally enforceable debt and that the applicants, being directors and in charge of the company, were liable. The court heard arguments on 23.06.2025 and pronounced the judgment on 03.07.2025. The provided excerpt does not contain the final decision or operative order.
Headnote
A) Negotiable Instruments - Dishonour of Cheque - Sections 138 and 141 of Negotiable Instruments Act, 1881 - Liability of Directors - Applicants contended that applicant No.2 and No.4 resigned on 10.06.2017 and 21.05.2015 respectively, and applicant No.1 and No.3 ceased to be in charge after CIRP initiation on 22.04.2019; thus they were not in charge when cheques were dishonoured in 2022. (Paras 3-6)
B) Insolvency and Bankruptcy - Moratorium and Liquidation - Section 33 of Insolvency and Bankruptcy Code, 2016 - Effect on Criminal Proceedings - Moratorium declared on 22.04.2019 prohibited initiation or continuation of suits or proceedings; resolution professional took over authority for signing cheques; cheques deposited after moratorium may not be valid. (Paras 4-8)
C) Criminal Procedure - Quashing of Criminal Complaints - Inherent Jurisdiction - Applications under Section 482 CrPC sought quashing of six criminal complaints; court heard arguments but judgment not disclosed in provided text. (Paras 1, 8)
Issue of Consideration
Whether criminal proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against the applicants, who were directors or former directors of the accused company, are liable to be quashed in light of their resignations and the initiation of Corporate Insolvency Resolution Process and subsequent liquidation under the Insolvency and Bankruptcy Code, 2016.
Final Decision
Not mentioned in the provided judgment excerpt.
Law Points
- Cheque dishonour liability under Section 138/141 of the Negotiable Instruments Act
- 1881
- liability of directors of a company
- effect of resignation of directors
- initiation of Corporate Insolvency Resolution Process and moratorium under the Insolvency and Bankruptcy Code
- 2016
- authority of Resolution Professional
- validity of cheques issued before moratorium
- quashing of criminal complaints under Section 482 CrPC
Case Details
2025 LawText (BOM) (07) 152
Criminal Application (APL) No.1679 of 2024 with Criminal Application (APL) Nos.1680, 1681, 1685, 1686, and 1687 of 2024
Shri Yash Venkatraman, Ms. Pragya Nawandar (for applicants); Shri Darasingh Sindhu (for non-applicant)
Mr. Yatendra Singh s/o Rajendra Singh Panwar, Smt. Neha Panwar, Mr. Shivam Panwar, Mr. Narendra Singh s/o Rajendra Singh Panwar
Ganga Iron and Steel Trading Company Limited
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Nature of Litigation
Criminal applications for quashing of criminal complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
Remedy Sought
Applicants sought quashing of Criminal Case Nos.691/2023, 696/2023, 695/2023, 693/2023, 692/2023, and 694/2023 pending before Additional Chief Judicial Magistrate, Nagpur.
Filing Reason
Applicants were directors or former directors of Venus Rolling Mills Private Limited and contended that they were not in charge of the company at the time of dishonour of cheques due to resignations or initiation of Corporate Insolvency Resolution Process.
Previous Decisions
NCLT Mumbai order dated 22.04.2019 admitted CIRP petition and declared moratorium; Resolution Professional appointed; company went into liquidation under Section 33 IBC; NCLT Mumbai order dated 18.06.2024 rejected IA No.610/2024 and held that remaining dues shall be paid by auction purchaser Shantech International Private Limited.
Issues
Whether criminal proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against the applicants are liable to be quashed on the ground that they were not in charge of the accused company at the time of dishonour of cheques.
Whether the moratorium declared under the Insolvency and Bankruptcy Code, 2016 and subsequent liquidation proceedings bar initiation or continuation of criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881.
Submissions/Arguments
Applicants contended that applicant No.2 and No.4 resigned on 10.06.2017 and 21.05.2015 respectively, and applicant No.1 and No.3 ceased to be in charge after CIRP initiation on 22.04.2019; hence they were not in charge when cheques were dishonoured in 2022.
Applicants argued that the moratorium declared on 22.04.2019 prohibited initiation or continuation of any suit or proceeding, and the authority for signing cheques remained with the Resolution Professional, making the cheques invalid.
Non-applicant opposed the applications, contending that cheques were issued against a legally enforceable debt and that applicants, being directors and in charge of the company, were liable under Section 138/141 of the Negotiable Instruments Act, 1881.
Judgment Excerpts
These applications are filed by applicants for quashing Criminal Case Nos.691/2023; 696/2023; 695/2023; 693/2023; 692/2023; and 694/2023 filed under Section 138 read with 141 of the Negotiable Instruments Act (the NIA).
As per contentions of applicants, applicant No.2 Smt.Neha Panwar resigned as Director of the accused company on 10.6.2017 and applicant No.4 Mr.Narendra Singh s/o Rajendra Singh Panwar resigned as Director on 21.5.2015.
Vide order dated 22.4.2019, the NCLT Mumbai admitted the petition of the company and declared moratorium thereby prohibiting initiation or continuation of any suits or proceedings against the accused company.
The Committee of Creditors (COC) constituted by the Resolution Professional could not reach a successful Resolution Plan for the accused company. It unanimously resolved to liquidate the accused company. Accordingly, the Resolution Professional filed an application under Section 33 of the Insolvency Bankruptcy Code 2016 (IBC 2016) before the NCLT Mumbai to initiate liquidation of the accused company and appointed Resolution Professional as official liquidator.
Procedural History
Applicants filed Criminal Applications (APL) Nos.1679/2024, 1680/2024, 1681/2024, 1685/2024, 1686/2024, and 1687/2024 seeking quashing of Criminal Case Nos.691/2023, 696/2023, 695/2023, 693/2023, 692/2023, and 694/2023 pending before Additional Chief Judicial Magistrate, Nagpur. Earlier, Venus Rolling Mills Private Limited filed CP No.(IB) 350/MB/C-III/2019 before NCLT Mumbai, which was admitted on 22.04.2019, declaring moratorium and initiating CIRP. Resolution Professional was appointed, and public announcement was made on 03.05.2019. On 09.05.2019, Resolution Professional intimated the non-applicant not to deposit cheques. The Committee of Creditors resolved to liquidate the company, and an application under Section 33 of Insolvency and Bankruptcy Code, 2016 was filed. The accused company was sold to Shantech International Private Limited on 30.03.2023, and liquidation proceeding closed on 18.06.2024. NCLT Mumbai by order dated 18.06.2024 rejected IA No.610/2024 and held that remaining dues shall be paid by the auction purchaser. The High Court heard arguments on 23.06.2025 and pronounced judgment on 03.07.2025.
Acts & Sections
- Negotiable Instruments Act, 1881: Sections 138, 141
- Insolvency and Bankruptcy Code, 2016: Section 33
