Himachal Pradesh High Court
____________________________________ vs C.B. Healthcare Through Spa on 16 July, 2025
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Cr. MMO No. 552 of 2024
Reserved on: 08.07.2025
.
Date of Decision: 16.07.2024
____________________________________
Charandeep Singh Jolly ….Petitioner
Versus
C.B. Healthcare through SPA
Hatinder Chawla. …. Respondent
Coram
Hon’ble Mr Justice Rakesh Kainthla, Judge.
Whether approved for reporting? Yes
For the petitioner : Mr. Anoop Verma, Advocate
(through VC) and Mr. Rajesh
Kumar Parmar, Advocate.
For the Respondent : Mr. M.L. Sharma, Advocate.
Rakesh Kainthla, Judge
The petitioner has filed the present petition for
quashing of the criminal complaint, the summoning order
dated 17.07.2018 and proceedings pending before the learned
Additional Chief Judicial Magistrate, Nalagarh, District Solan
(the learned Trial Court). (Parties shall hereinafter be referred
to in the same manner as they are arrayed before the learned
Trial Court for convenience.)
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2. Briefly stated, the facts giving rise to the present
petition are that the complainant filed a complaint against
.
the accused for the commission of an offence punishable
under Section 138 of the Negotiable Instruments Act (NI Act).
It was asserted that the complainant is a partnership Firm
and is engaged in the business of manufacturing and
supplying pharmaceutical products/medicines. The accused
are running a business in the name and style of Alchemist
Limited. Accused No. 2 and 3 are the authorized signatories
of accused No.1. They are also managing all the affairs and
business of accused No.1. They are fully responsible and
liable for day today affairs and business of accused No.1. The
accused contacted the complainant and represented that
they had good marketing setup for the sale of
pharmaceuticals goods/products. They placed orders with
the complainant for manufacturing various pharmaceutical
products/medicines. The complainant supplied the
pharmaceutical product to the accused. The accused issued
cheques for ₹3,27,075/-, ₹29,909 and ₹3,79,825 to
discharge their legal liability. The complainant presented the
cheques to its bank, but the cheques were dishonoured with
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the endorsement “Exceeds Arrangement”. The complainant
issued a notice to the accused asking them to pay the amount
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within 15 days of the receipt of the notice. The notice was
duly served upon the accused, but the accused failed to pay
the amount. Hence, the complaint was filed before the
learned Trial Court against the accused for taking action as
per the law.
3. Learned Trial Court recorded the statement of
Hatinder Chawla, who tendered his affidavit and various
documents. Learned Trial Court held that from the perusal of
the documents, it was of the considered view that the
cheques were issued in discharge of the legally enforceable
liability, which were dishonoured with the remarks “Exceeds
Arrangement” and the accused failed to pay the amount
despite the service of a legal notice, hence, sufficient
grounds existed to summon the accused for the commission
of an offence punishable under Section 138 of the NI Act.
Accordingly, the process was ordered to be issued.
4. Being aggrieved by the filing of the complaint and
the order of summoning, the petitioner has filed the present
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petition for quashing of the complaint. It was asserted that
the complaint has been filed on false and frivolous facts. The
.
complaint is not maintainable as no allegations were made
against the Company. No vicarious liability can be attributed
to the petitioner. The petitioner is not a drawer of a cheque
but a mandate holder who was working on a salary with the
accused Company. The learned Trial Court did not mention
Section 141 of the NI Act. The petitioner is a resident of Delhi,
and the provisions of Section 202 of the CrPC applied to the
present case. The learned Trial Court failed to comply with
the requirement of Section 202 of the CrPC. The accused, M/s
Alchemist Limited, has already been declared insolvent, and
a Resolution Professional has been appointed vide order
dated 28.09.2021. The complainant has also raised a claim
before the Resolution Professional. The purpose of the
proceedings under Section 138 of the NI Act is the recovery of
money, which would be achieved in the proceedings pending
before the National Company Law Tribunal (NCLT). The
petitioner is suffering from the third stage of prostate
cancer. The petitioner never contacted the complainant.
There are no clear averments regarding the role of the
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petitioner, and the petitioner cannot be held liable. The
continuation of the proceedings would amount to an abuse
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of the process of the Court. Therefore, it was prayed that the
present petition be allowed and the complaint pending
before the learned Trial Court be quashed.
5. The petition is opposed by filing a reply making a
preliminary submission regarding the lack of
maintainability. The contents of the petition were denied on
merits. It was asserted that the criminal complaint was listed
for the first time on 19.9.2017. Learned Trial Court recorded
the preliminary evidence on 02.05.2018 and ordered the
issuance of summons on 17.07.2018 returnable for
05.10.2018. The accused appeared before the learned Trial
Court for the first time on 18.02.2019, and prayed for time to
make the payment of the cheque amount. The payment was
not made, and the accused also failed to appear before the
learned Trial Court. Bailable warrants were issued by the
Court to secure the presence of the accused. The accused are
delaying the proceedings on one pretext or another. The
petitioners are not entitled to invoke the inherent
jurisdiction of this Court. It was admitted that M/s Alchemist
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was declared insolvent vide order dated 28.09.2021, and a
Resolution Professional was appointed. However, the
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petitioner cannot escape from liability. Therefore, it was
prayed that the present petition be dismissed.
6. I have heard Mr. Anoop Verma, Advocate through
video conferencing and Mr. Rajesh Kumar Parmar, learned
counsel for the petitioner and Mr. M.L. Sharma, learned
counsel for the respondent.
7. Mr. Anoop Verma, learned counsel for the
petitioner-accused, submitted that the learned Trial Court
did not conduct an inquiry under Section 202 of CrPC, which
is mandatory. The petitioner had put his signature as an
employee, and he cannot be held liable. The complainant and
the petitioner have filed claims before the Resolution
Professional. The proceedings before the learned Trial Court
cannot proceed further in view of the Insolvency and
Bankruptcy Code (IBC). There are no averments against the
Company, and the petitioner cannot be held liable without
holding the Company guilty; therefore, he prayed that the
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present petition be allowed and the proceedings pending
before the learned trial Court be quashed.
.
8. Mr. M.L. Sharma, learned counsel for the
respondent, submitted that the petitioner is an authorised
signatory of the company and he is liable by putting his
signature. Specific averments were also made regarding the
petitioner’s liability. The petition was filed belatedly, and
this Court should not exercise its inherent jurisdiction in the
present case. The pendency of the proceedings under the IBC
does not prevent the continuation of the proceedings under
Section 138 of the NI Act against a natural person. Therefore,
he prayed that the present petition be dismissed. He relied
upon Cr. Appeal No. 172 of 2023, titled Ajay Kumar
Radheshyam Goenka vs. Tourism Finance Corporation of India
Limited, decided on 15.03.2023, HDFC Bank Limited vs State of
Maharashtra and Anr. 2025, INSC 759, Cr.MMO No. 924 of 2023,
titled Tushar Sharma vs. State Bank of India, decided on
06.09.2024 and Vishnoo Mittal vs. M/s Shakti Trading
Company, 2025 INSC No. 346 and Cr.MMO No. 156 of 2025,
titled Dr. Pushpinder Banyal vs State of H.P. & ors, decided on
19.03.2025 in support of his submission.
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9. I have given considerable thought to the
submissions made at the bar and have gone through the
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record carefully.
10. The law relating to quashing of criminal cases
was explained by the Hon’ble Supreme Court in B.N. John v.
State of U.P., 2025 SCC OnLine SC 7 as under: –
“7. As far as the quashing of criminal cases is
concerned, it is now more or less well settled as
regards the principles to be applied by the court. Inthis regard, one may refer to the decision of this Court
in State of Haryana v. Ch. Bhajan Lal, 1992 Supp (1) SCC
335, wherein this Court has summarised some of the
principles under which FIR/complaints/criminal
cases could be quashed in the following words:
“102. In the backdrop of the interpretation of the
various relevant provisions of the Code under
Chapter XIV and of the principles of lawenunciated by this Court in a series of decisions
relating to the exercise of the extraordinary powerunder Article 226 or the inherent powers under
Section 482 of the Code which we have extractedand reproduced above, we give the following
categories of cases by way of illustration wherein
such power could be exercised either to prevent
abuse of the process of any court or otherwise to
secure the ends of justice, though it may not be
possible to lay down any precise, clearly defined
and sufficiently channelised and inflexible
guidelines or rigid formulae and to give an
exhaustive list of myriad kinds of cases wherein
such power should be exercised.
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(1) Where the allegations made in the first
information report or the complaint, even if
they are taken at their face value and accepted
in their entirety, do not prima facie constitute.
any offence or make out a case against the
accused.
(2) Where the allegations in the first
information report and other materials, if
any, accompanying the FIR do not disclose a
cognizable offence, justifying an
investigation by police officers under
Section 156(1) of the Code except under an
order of a Magistrate within the purview of
Section 155(2) of the Code.
(3) Where the uncontroverted allegations
made in the FIR or complaint and the
evidence collected in support of the same do
not disclose the commission of any offence
and make out a case against the accused.
(4) Where the allegations in the FIR do not
constitute a cognizable offence but constitute
only a non-cognizable offence, no
investigation is permitted by a police officer
without an order of a Magistrate as
contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or
complaint are so absurd and inherently
improbable on the basis of which no prudent
person can ever reach a just conclusion that
there is sufficient ground for proceeding
against the accused.
(6) Where there is an express legal bar
engrafted in any of the provisions of the Code
or the concerned Act (under which a criminal
proceeding is instituted) to the institution and
continuance of the proceedings and/or where
there is a specific provision in the Code or the
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concerned Act, providing efficacious redress for
the grievance of the aggrieved party.
(7) Where a criminal proceeding is
.
manifestly attended with mala fide and/or
where the proceeding is maliciously
instituted with an ulterior motive for
wreaking vengeance on the accused and with
a view to spite him due to a private and
personal grudge.” (emphasis added)
8. Of the aforesaid criteria, clause no. (1), (4) and (6)
would be of relevance to us in this case.
In clause (1) it has been mentioned that where the
allegations made in the first information report or the
complaint, even if they are taken at their face value
rand accepted in their entirety do not prima facie
constitute any offence or make out a case against the
accused, then the FIR or the complaint can be
quashed.
As per clause (4), where the allegations in the FIR do
not constitute a cognizable offence but constitute
only a non-cognizable offence, no investigation is
permitted by a police officer without an order dated
by the Magistrate as contemplated under Section 155
(2) of the CrPC, and in such a situation, the FIR can be
quashed.
Similarly, as provided under clause (6), if there is an
express legal bar engrafted in any of the provisions of
the CrPC or the concerned Act under which the
criminal proceedings are instituted, such proceedings
can be quashed.”
11. This position was reiterated in Ajay Malik v. State
of Uttarakhand, 2025 SCC OnLine SC 185, wherein it was
observed:
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“8. It is well established that a High Court, in
exercising its
extraordinary powers under Section 482 of the CrPC,
may issue orders to prevent the abuse of court.
processes or to secure the ends of justice.
These inherent powers are neither controlled nor
limited by any other statutory provision. However,
given the broad and profound nature of this
authority, the High Court must exercise it sparingly.
The conditions for invoking such powers are
embedded within Section 482 of the CrPC itself,
allowing the High Court to act only in cases of clear
abuse of process or where intervention is essential to
uphold the ends of justice.
9. It is in this backdrop that this Court, over several
decades, has laid down the principles and guidelines
that High Courts must follow before quashing
criminal proceedings at the threshold, thereby pre-
empting the Prosecution from building its case before
the Trial Court. The grounds for quashing, inter alia,
contemplate the following situations : (i) the criminal
complaint has been filed with mala fides; (ii) the FIR
represents an abuse of the legal process; (iii) no prima
facie offence is made out; (iv) the dispute is civil in
nature; (v.) the complaint contains vague and
omnibus allegations; and (vi) the parties are willing
to settle and compound the dispute amicably (State of
Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335).
12. It was held in State of Karnataka v. L.
Muniswamy (1977) 2 SCC 699: 1977 SCC (Cri) 404 that the High
Court can quash the criminal proceedings if they amount to
an abuse of the process of the Court. It was observed at page
703:
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“7. … In the exercise of this wholesome power, the
High Court is entitled to quash a proceeding if it
concludes that allowing the proceeding to continue
would be an abuse of the process of the Court or that.
the ends of justice require that the proceeding ought
to be quashed. The saving of the High Court’s inherent
powers, both in civil and criminal matters, is designed
to achieve a salutary public purpose, which is that a
court proceeding ought not to be permitted to
degenerate into a weapon of harassment or
persecution. In a criminal case, the veiled object
behind a lame prosecution, the very nature of the
material on which the structure of the prosecution
rests, and the like would justify the High Court in
quashing the proceeding in the interest of justice. The
ends of justice are higher than the ends of mere law,
though justice has got to be administered according to
laws made by the legislature. The compelling
necessity for making these observations is that
without a proper realisation of the object and purpose
of the provision which seeks to save the inherent
powers of the High Court to do justice, between the
State and its subjects, it would be impossible to
appreciate the width and contours of that salient
jurisdiction.”
13. The term abuse of the process was explained in
Chandran Ratnaswami v. K.C. Palanisamy, (2013) 6 SCC 740:
(2014) 1 SCC (Cri) 447: 2013 SCC OnLine SC 450 at page 761:
33. The doctrine of abuse of process of court and the
remedy of refusal to allow the trial to proceed is a
well-established and recognised doctrine both by the
English courts and courts in India. There are some
established principles of law which bar the trial when
there appears to be an abuse of the process of the
court.
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34. Lord Morris in Connelly v. Director of Public
Prosecutions [1964 AC 1254: (1964) 2 WLR 1145 : (1964)
2 All ER 401 (HL)], observed: (AC pp. 1301-02)
.
“There can be no doubt that a court which is
endowed with a particular jurisdiction has powers
which are necessary to enable it to act effectively
within such jurisdiction. … A court must enjoy suchpowers to enforce its rules of practice and to
suppress any abuses of its process and to defeat
any attempted thwarting of its process.
***
The power (which is inherent in a court’s
jurisdiction) to prevent abuses of its process and to
control its procedure must in a criminal courtinclude a power to safeguard an accused person
from oppression or prejudice.”
In his separate pronouncement, Lord Delvin in the
same case observed that where particular criminal
proceedings constitute an abuse of process, the court
is empowered to refuse to allow the indictment to
proceed to trial.
35. In Hui Chi-ming v. R. [(1992) 1 AC 34: (1991) 3 WLR
495: (1991) 3 All ER 897 (PC)], the Privy Council
defined the word “abuse of process” as something so
unfair and wrong with the prosecution that the court
should not allow a prosecutor to proceed with what is,
in all other respects, a perfectly supportable case.
36. In the leading case of R. v. Horseferry Road
Magistrates’ Court, ex p Bennett [(1994) 1 AC 42: (1993) 3
WLR 90: (1993) 3 All ER 138 (HL)], on the application of
the abuse of process, the court confirms that an abuse
of process justifying the stay of prosecution could
arise in the following circumstances:
(i) where it would be impossible to give the accused
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(ii) where it would amount to
misuse/manipulation of the process because it
offends the court’s sense of justice and propriety to
be asked to try the accused in the circumstances of.
the particular case.
37. In R. v. Derby Crown Court, ex p Brooks [(1984) 80 Cr
App R 164 (DC)], Lord Chief Justice Ormrod stated:
“It may be an abuse of process if either (a) the
prosecution has manipulated or misused the
process of the court to deprive the defendant of a
protection provided by law or to take unfairadvantage of a technicality, or (b) on the balance of
probability the defendant has been, or will be,
prejudiced in the preparation of conduct of his
defence by delay on the part of the prosecutionwhich is unjustifiable.”
38. Neill, L.J. in R. v. Beckford (Anthony) [(1996) 1 Cr
App R 94: 1995 RTR 251 (CA)], observed that:
“The jurisdiction to stay can be exercised in many
different circumstances. Nevertheless, two main
strands can be detected in the authorities: (a) cases
where the court concludes that the defendantcannot receive a fair trial; (b) cases where the court
concludes that it would be unfair for the defendantto be tried.”
What is unfair and wrong will be for the court to
determine on the individual facts of each case.
14. It was held in Mahmood Ali v. State of U.P., (2023)
15 SCC 488: 2023 SCC OnLine SC 950 that where the
proceedings are frivolous or vexatious, the Court owes a duty
to quash them. However, the Court cannot appreciate the
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material while exercising jurisdiction under Section 482 of
the CrPC. It was observed at page 498:
.
13. In frivolous or vexatious proceedings, the Court
owes a duty to look into many other attending
circumstances emerging from the record of the caseover and above the averments and, if need be, with
due care and circumspection, try to read between the
lines. The Court, while exercising its jurisdiction
under Section 482CrPC or Article 226 of theConstitution, need not restrict itself only to the stage
of a case but is empowered to take into account the
overall circumstances leading to the
initiation/registration of the case as well as thematerials collected in the course of investigation.
Take, for instance, the case at hand. Multiple FIRs
have been registered over a period of time. It is in the
background of such circumstances that the
registration of multiple FIRs assumes importance,
thereby attracting the issue of wreaking vengeance
out of private or personal grudge, as alleged.
14. State of A.P. v. Golconda Linga Swamy [State of
A.P. v. Golconda Linga Swamy, (2004) 6 SCC 522: 2004
SCC (Cri) 1805], a two-judge Bench of this Court
elaborated on the types of materials the High Court
can assess to quash an FIR. The Court drew a fine
distinction between consideration of materials that
were tendered as evidence and appreciation of such
evidence. Only such material that manifestly fails to
prove the accusation in the FIR can be considered for
quashing an FIR. The Court held: (Golconda Linga
Swamy case [State of A.P. v. Golconda Linga Swamy,
(2004) 6 SCC 522: 2004 SCC (Cri) 1805], SCC p. 527,
paras 5-7)
“5. … Authority of the court exists for the
advancement of justice, and if any attempt is made
to abuse that authority so as to produce injustice,
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the court has power to prevent such abuse. It would
be an abuse of the process of the court to allow any
action which would result in injustice and prevent
the promotion of justice. In the exercise of its
.
powers court would be justified in quashing any
proceeding if it finds that initiation or continuance
of it amounts to abuse of the process of the court
or quashing of these proceedings would otherwise
serve the ends of justice. When no offence is
disclosed by the complaint, the court may examine
the question of fact. When a complaint is sought to
be quashed, it is permissible to look into the materials
to assess what the complainant has alleged and
whether any offence is made out, even if the
allegations are accepted in toto.
6. In R.P. Kapur v. State of Punjab [R.P. Kapur v. State
of Punjab, 1960 SCC OnLine SC 21: AIR 1960 SC 866],
this Court summarised some categories of cases
where inherent power can and should be exercised
to quash the proceedings: (SCC OnLine SC para 6)
(i) where it manifestly appears that there is a
legal bar against the institution or continuance,
e.g. want of sanction;
(ii) where the allegations in the first
information report or complaint taken at their
face value and accepted in their entirety do not
constitute the offence alleged;
(iii) where the allegations constitute an offence,
but there is no legal evidence adduced or the
evidence adduced clearly or manifestly fails to
prove the charge.
7. In dealing with the last category, it is important to
bear in mind the distinction between a case where
there is no legal evidence or where there is evidence
which is clearly inconsistent with the accusations
made, and a case where there is legal evidence which,
on appreciation, may or may not support the
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accusations. When exercising jurisdiction under
Section 482 of the Code, the High Court would not
ordinarily embark upon an enquiry whether the
evidence in question is reliable or not or whether, on a
.
reasonable appreciation of it, the accusation would
not be sustained. That is the function of the trial Judge.
The judicial process, no doubt, should not be an
instrument of oppression or needless harassment.
The court should be circumspect and judicious in
exercising discretion and should take all relevant
facts and circumstances into consideration before
issuing the process, lest it would be an instrument
in the hands of a private complainant to unleash
vendetta to harass any person needlessly. At the
same time, the section is not an instrument
rhanded over to an accused to short-circuit a
prosecution and bring about its sudden death.”
(emphasis supplied)
15. The present petition is to be decided as per the
parameters laid down by the Hon’ble Supreme Court.
16 It is undisputed that the petitioner is an
authorised signatory of the accused No.1/company. The
liability of the signatory was decided by the Hon’ble Supreme
Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8
SCC 89, wherein the following question inter alia was referred
for consideration by the larger bench: –
“(c) Even if it is held that specific averments are
necessary, whether, in the absence of such averments,
the signatory of the cheque and or the managing
directors or joint managing director who admittedly
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18( 2025:HHC:23006 )the company for the conduct of its business could be
proceeded against.”
17. The Hon’ble Supreme Court, after discussing the
.
entire case law on the subject, answered the reference as
under: –
“(c) The answer to Question (c) has to be in the
affirmative. The question notes that the managing
director or joint managing director would beadmittedly in charge of the company and responsible
for the company for the conduct of its business.
When that is so, holders of such positions in a
company become liable under Section 141 of the Act.
By virtue of the office, they hold as managing
director or joint managing director, these persons
are in charge of and responsible for the conduct of
the business of the company. Therefore, they get
covered under Section 141. So far as the signatory of a
cheque which is dishonoured is concerned, he is clearly
responsible for the incriminating act and will be covered
under sub-section (2) of Section 141.” (Emphasis
supplied)
18. This judgment was followed in K.K. Ahuja v. V.K.
Vora, (2009) 10 SCC 48: 2009 SCC OnLine SC 1229, wherein it
was observed at page 55:
“10. This Court in SMS Pharma (I) [(2005) 8 SCC 89:
2005 SCC (Cri) 1975] then proceeded and identified the
nature of allegations required to be made against
members of the Board of Directors and the person
signing the cheque as follows:
(i) Managing Director/Joint Managing Director. –By
virtue of the office they hold, these persons are in
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19( 2025:HHC:23006 )business of the company. Therefore, they would
fall under Section 141(1), even though there is no
specific averment against them.
.
(ii) Person signing the cheque. –The signatory of a
cheque which is dishonoured is clearly responsible
for the act and will be covered under sub-section
(2) of Section 141. Therefore, no special avermentwould be necessary to make him liable.
(iii) Director. –The fact that a person is a Director
of a company is not, by itself, sufficient to make
him liable under Section 141 of the Act. A Directorin a company cannot be deemed to be in charge of
and responsible to the company for the conduct of
its business. The requirement of Section 141 is that
the person sought to be made liable should be incharge of and responsible for the conduct of the
business of the company at the relevant time. This
has to be averred, as there is no deemed liability
upon a Director.”
19. It was laid down by the Hon’ble Supreme Court in
Shri Gurudatta Sugars Marketing (P) Ltd. v. Prithviraj Sayajirao
Deshmukh, (2024) 246 Comp Cas 1: 2024 SCC OnLine SC 1800
that an authorised signatory acts on behalf of the company
but is not liable personally. It was observed:
30. The distinction between legal entities and
individuals acting as authorised signatories is crucial.
Authorised signatories act on behalf of the company
but do not assume the company’s legal identity. This
principle, fundamental to corporate law, ensures that
while authorised signatories can bind the company
through their actions, they do not merge their legal
status with that of the company. This distinction
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supports the High Court’s interpretation that the
drawer under section 143A refers specifically to the
issuer of the cheque, not the authorised signatories.
.
20. It was held in Bijoy Kumar Moni v. Paresh Manna,
2024 SCC OnLine SC 3833, that an authorised signatory is
liable on behalf of the company but is not liable in his
individual capacity in the absence of the company. It was
observed:
“70. It would have been altogether a different situation if
the accused was prosecuted in his capacity as a Director ofthe Shilabati Hospital. In such a scenario, the cheque
drawn by him on an account maintained by the Company
would have satisfied the requirement of Section 138 of the
Act but as the accused has been proceeded against for
an offence under Section 138 of the Act in hisindividual capacity and inasmuch as the cheque
dishonoured for insufficiency of funds was drawn on
the account maintained by the Company, namely,Shilabati Hospital Pvt. Ltd., and not by the accused
herein, no offence could be said to have beencommitted under Section 138 of the Act. The High
Court rightly held that in the absence of the principal
offender having been arraigned as an accused,prosecution for the commission of an offence under
Section 138 of the NI Act could not have proceeded
against the accused.” (Emphasis supplied)
21. It is apparent from the judgment of the Hon’ble
Supreme Court that a signatory is liable by virtue of the fact
that he had signed the cheque under Section 141(2) of the
Act, and nothing more is required to be established in his
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
21( 2025:HHC:23006 )
case. Hence, the submission that the authorised signatory is
not the drawer will not help the petitioner because he is held
.
vicariously liable and not by virtue of his being a drawer.
22. It was submitted that an inquiry under Section
202 of the CrPC is mandatory, and the learned Trial Court
had failed to conduct the inquiry. This submission is not
acceptable. Hon’ble Supreme Court considered the necessity
of conducting an inquiry In re: Expeditious Trial of Cases under
Section 138 of N.I. Act 1881 2021 (16) SCC 116 and held that
when the accused is residing outside the territorial
jurisdiction of the Magistrate, the Magistrate has to conduct
the inquiry. For this purpose, he can examine the witnesses
on affidavit and only in exceptional cases, he should examine
the witnesses orally. If the Magistrate held the inquiry
himself, he need not examine the witnesses. In suitable
cases, he can examine the documents to satisfy himself
about the sufficiency of grounds for proceeding under
Section 202 of the Cr. PC. It was observed: –
“10. Section 202 of the Code confers jurisdiction on
the Magistrate to conduct an inquiry to decide
whether sufficient grounds justifying the issue of
process are made out. The amendment to Section 202::: Downloaded on – 17/07/2025 21:16:58 :::CIS
22( 2025:HHC:23006 )of the Code, with effect from 23-6-2006, vide Act 25
of 2005, made it mandatory for the Magistrate to
conduct an inquiry before the issue of process, in a
case where the accused resides beyond the area of.
jurisdiction of the court. (See: Vijay Dhanuka v. Najima
Mamtaj [Vijay Dhanuka v. Najima Mamtaj, (2014) 14
SCC 638: (2015) 1 SCC (Cri) 479], AbhijitPawar v. Hemant Madhukar Nimbalkar [Abhijit
Pawar v. Hemant Madhukar Nimbalkar, (2017) 3 SCC
528: (2017) 2 SCC (Cri) 192] and Birla Corpn.
Ltd. v. Adventz Investments & Holdings Ltd. [Birla Corpn.
Ltd. v. Adventz Investments & Holdings Ltd., (2019) 16SCC 610: (2020) 2 SCC (Civ) 713: (2020) 2 SCC (Cri)
828]) There has been a divergence of opinion amongst
the High Courts relating to the applicability of Section202 in respect of complaints filed under Section 138 of
the Act. Certain cases under Section 138 have been
decided by the High Courts, upholding the view that it
is mandatory for the Magistrate to conduct an
inquiry, as provided in Section 202 of the Code, beforeissuance of process in complaints filed under Section
138. Contrary views have been expressed in some
other cases. It has been held that merely because theaccused is residing outside the jurisdiction of the
court, it is not necessary for the Magistrate topostpone the issuance of process in each and every
case. Further, it has also been held that not
conducting an inquiry under Section 202 of the Codewould not vitiate the issuance of process if requisite
satisfaction can be obtained from materials available
on record.
11. The learned Amici Curiae referred to a judgment of
this Court in K.S. Joseph v. Philips Carbon Black
Ltd. [K.S. Joseph v. Philips Carbon Black Ltd., (2016) 11
SCC 105 : (2016) 4 SCC (Civ) 616 : (2017) 1 SCC (Cri) 270]
where there was a discussion about the requirement
of inquiry under Section 202 of the Code in relation to
complaints filed under Section 138 but the question of
law was left open. In view of the judgments of this::: Downloaded on – 17/07/2025 21:16:58 :::CIS
23( 2025:HHC:23006 )Court in Vijay Dhanuka [Vijay Dhanuka v. Najima
Mamtaj, (2014) 14 SCC 638: (2015) 1 SCC (Cri)
479], Abhijit Pawar [Abhijit Pawar v. Hemant Madhukar
Nimbalkar, (2017) 3 SCC 528: (2017) 2 SCC (Cri) 192].
and Birla Corpn. [Birla Corpn. Ltd. v. Adventz
Investments & Holdings Ltd., (2019) 16 SCC 610: (2020)
2 SCC (Civ) 713: (2020) 2 SCC (Cri) 828], the inquiry tobe held by the Magistrate before issuance of summons
to the accused residing outside the jurisdiction of the
court cannot be dispensed with. The learned Amici
Curiae recommended that the Magistrate should come
to a conclusion after holding an inquiry that there aresufficient grounds to proceed against the accused. We
are in agreement with the learned Amici Curiae.
12. Another point that has been brought to our notice
relates to the interpretation of Section 202(2), which
stipulates that the Magistrate shall take evidence of
the witness on oath in an inquiry conducted under
Section 202(1) for the purpose of issuance of process.
Section 145 of the Act provides that the evidence ofthe complainant may be given by him on affidavit,
which shall be read in evidence in any inquiry, trial or
other proceeding, notwithstanding anythingcontained in the Code. Section 145(2) of the Act
enables the court to summon and examine any persongiving evidence on affidavit as to the facts contained
therein, on an application of the prosecution or theaccused. It is contended by the learned Amici Curiae
that though there is no specific provision permitting
the examination of witnesses on affidavit, Section 145
permits the complainant to be examined by way of an
affidavit for the purpose of inquiry under Section 202.
He suggested that Section 202(2) should be read along
with Section 145, and in respect of complaints under
Section 138, the examination of witnesses also should
be permitted on affidavit. Only in exceptional cases,
the Magistrate may examine the witnesses personally.
Section 145 of the Act is an exception to Section 202 in
respect of the examination of the complainant by way::: Downloaded on – 17/07/2025 21:16:58 :::CIS
24( 2025:HHC:23006 )of an affidavit. There is no specific provision in
relation to the examination of the witnesses, also on
the affidavit in Section 145. It becomes clear that
Section 145 had been inserted in the Act, with effect.
from the year 2003, with the laudable object of
speeding up trials in complaints filed under Section
138. If the evidence of the complainant may be given
by him on affidavit, there is no reason for insisting on
the evidence of the witnesses to be taken on oath. On a
holistic reading of Section 145 along with Section 202, we
hold that Section 202(2) of the Code is inapplicable to
complaints under Section 138 in respect of theexamination of witnesses on oath. The evidence of
witnesses on behalf of the complainant shall be permitted
on the affidavit. If the Magistrate holds an inquiryhimself, it is not compulsory that he should examine
witnesses. In suitable cases, the Magistrate can examine
documents for satisfaction as to the sufficiency of grounds
for proceeding under Section 202.” (Emphasis supplied)
23. Therefore, in view of the binding precedent of the
Hon’ble Supreme Court, there is no requirement for
recording the statements of witnesses, and the learned
Magistrate was within his jurisdiction to peruse the
documents to satisfy himself while conducting an inquiry
under Section 202 of the CrPC.
24. In the present case, learned Magistrate
specifically mentioned in the order passed by him that he
had gone through the documents, complaint and the
preliminary evidence and he was of the considered view that
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
25( 2025:HHC:23006 )cheques were issued in discharge of the legally enforceable
debt, which was dishonoured with remarks “Exceeds
.
Arrangement” and the accused failed to pay the amount
despite receipt of the notice. Therefore, the learned Trial
Court had gone through the preliminary evidence, the
documents on record before satisfying himself of the
necessity of issuance of notice. Hence, the submissions that
no inquiry was conducted under Section 202 of Cr. P.C. and
all the proceedings are bad cannot be accepted.
25. It was submitted that no allegations have been
made against the accused Company. This is not correct. It
was specifically mentioned in the complaint that the
complainant had supplied pharmaceutical
products/medicines to the accused, and the accused had
made the payment. The cheque was issued by the accused,
and it was signed by accused Nos. 2 and 3. Therefore, there
were sufficient averments against the Company, and the
submissions that allegations were not made against the
Company and the petitioner cannot be held liable are not
acceptable.
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
26( 2025:HHC:23006 )
26. It was submitted that a joint complaint was filed
regarding three cheques, which is impermissible. This
.
submission is not acceptable. A single notice was issued in
respect of three cheques. The cause of action for filing the
complaint regarding the dishonour of the cheques is not the
dishonour but the failure to pay the amount of the cheques
despite the issuance of the notice. It was laid down by the
Karnataka High Court in Tiruchandoor Muruhan Spinning
Mills (P) Ltd. v. Madanlal Ramkumar Cotton and General
Merchants, 2000 SCC OnLine Kar 699: ILR 2000 Kar 5000 that
where a single notice is issued for the dishonour of more
than one cheque, a single complaint is maintainable. It was
observed:
“6. Insofar as the important question raised for
consideration in this petition that the provisions of
Section 219 Cr. P.C. are attracted to the facts of thecase is concerned, and it is contended that the cause
of action for the complainant arose only after service
of notice to the accused. It is pointed out that the
complainant has issued a single notice calling upon
the accused by way of demand to pay the cheque
amount within 15 plays from the date of service of
notice and the accused failed to pay the cheque
amount within the time stipulated under Section
138(b) of the Act and therefore the complainant filed a
complaint within one month from the date of service
of notice which is well within time. There is no bar for::: Downloaded on – 17/07/2025 21:16:58 :::CIS
27( 2025:HHC:23006 )lodging a complaint for initiation of action under
Section 138 of the Negotiable Instruments Act, as the
accused committed the offence punishable under
Section 138 of the Negotiable Instruments Act. In fact,.
it is not to his disadvantage, but it is an advantage
that a single complaint is lodged against the accused
by the complainant. The cause of action giving raise toa complaint is upon the service of the notice
contemplated under Section 138(b) of the Negotiable
Instruments Act and not upon the dishonour of the
cheques and therefore the contention canvassed by
the learned Counsel for the respondent that theprovisions of Section 219 Cr. P.C. are not applicable to
the proceeding under Section 138 of the Negotiable
Instruments Act has to be accepted.”
27. A similar view was taken in Manjula v. Colgate
Palmolive (India) Ltd., 2006 SCC OnLine Mad 912, wherein it
was observed:
“16. In the case at hand, though the act of issuance of
16 cheques was on different dates, in view of the factthat a demand was made by issuing a common notice,
the complaint cannot be said to be vitiated. To put itclear, though the giving of cheques by the accused to
the complainant may be on different dates, all thoseacts of giving those cheques were merged together to
form the same transaction viz., the presentation of
the cheques together was on one particular date. In
view of the fact that demand was also made by the
complainant on the dishonouring of the cheques by
giving one lawyer’s notice and not several demands,
we are of the view that the accused may be charged
and tried at one trial for several such offences because
the series of acts are so inter-linked or inter-
connected together so as to form the same transaction
of dishonouring the cheques, therefore, it cannot be
said that the complaint is vitiated.”
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
28( 2025:HHC:23006 )
28. Allahabad High Court also took a similar view in
Vinay Patni v. State of U.P., 2012 SCC OnLine All 3681 and
.
observed:
“The third contention of the learned Counsel for the
revisionist that the demand notice, as well as the
complaint, was illegal for combining three separate
causes of actions cannot be accepted for the reason
that though the three cheques might have been given
separately to the complainant but all these chequeswere drawn on the same account and, as per the
complaint allegations, were in lieu of payment of a
common loan amount. Further, they were presentedfor collection on the same date through a single
account, in the manner desired by the accused, and
that the information of the cheques returning unpaid
was also received on the same date, and a common
notice of demand was also made. It was, therefore,one transaction, and to state that there has to be a
separate complaint with respect to each cheque that
was dishonoured, will not be correct in view ofsubsection (1) of section 220, Cr. P.C.”
29. Hence, the complaint cannot be said to be bad
because it was filed regarding three cheques.
30. It was submitted that the learned Magistrate had
not recorded the reasons before summoning the accused.
This submission cannot be accepted. It was laid down by the
Hon’ble Supreme Court in Bhushan Kumar v. State (NCT of
Delhi), (2012) 5 SCC 424: (2012) 2 SCC (Cri) 872: 2012 SCC
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
29( 2025:HHC:23006 )
OnLine SC 325, that there is no need to record reasons while
issuing the summons. It was observed at page 429:
.
“13. Section 204 of the Code does not mandate the
Magistrate to explicitly state the reasons for issuance
of a summons. It clearly states that if, in the opinion ofa Magistrate taking cognisance of an offence, there is
sufficient ground for proceeding, then the summons
may be issued. This section mandates the Magistrate
to form an opinion as to whether there exists asufficient ground for a summons to be issued, but it is
nowhere mentioned in the section that the explicit
narration of the same is mandatory, meaning thereby
that it is not a prerequisite for deciding the validity ofthe summons issued.
14. Time and again it has been stated by this Court that
the summoning order under Section 204 of the Code
requires no explicit reasons to be stated because it is
imperative that the Magistrate must have taken noticeof the accusations and applied his mind to the
allegations made in the police report and the materials
filed therewith.
15. In Kanti Bhadra Shah v. State of W.B. [(2000) 1 SCC
722: 2000 SCC (Cri) 303], the following passage will be
apposite in this context: (SCC p. 726, para 12)
“12. If there is no legal requirement that the trialcourt should write an order showing the reasons
for framing a charge, why should the already
burdened trial courts be further burdened with
such extra work. The time has reached to adopt all
possible measures to expedite the court
procedures and to chalk out measures to avert all
roadblocks causing avoidable delays. If a
Magistrate is to write detailed orders at different
stages merely because the counsel would address
arguments at all stages, the snail-paced progress
of proceedings in trial courts would further be::: Downloaded on – 17/07/2025 21:16:58 :::CIS
30( 2025:HHC:23006 )slowed down. We are coming across interlocutory
orders of Magistrates and Sessions Judges
running into several pages. We can appreciate it if
such a detailed order has been passed for.
culminating the proceedings before them. But it is
quite unnecessary to write detailed orders at other
stages, such as issuing process, remanding theaccused to custody, framing of charges, passing
over to the next stages in the trial.” (emphasis
supplied)
16. In Nagawwa v. Veeranna Shivalingappa
Konjalgi [(1976) 3 SCC 736: 1976 SCC (Cri) 507], this
Court held that it is not the province of the Magistrate
to enter into a detailed discussion on the merits or
demerits of the case. It was further held that indeciding whether a process should be issued, the
Magistrate can take into consideration improbabilities
appearing on the face of the complaint or in the
evidence led by the complainant in support of the
allegations. The Magistrate has been given anundoubted discretion in the matter, and the discretion
has to be judicially exercised by him. It was further
held that: (SCC p. 741, para 5)“5. … Once the Magistrate has exercised his
discretion it is not for the High Court, or even
this Court, to substitute its own discretion for
that of the Magistrate or to examine the case onmerits with a view to find out whether or not the
allegations in the complaint if proved, would
ultimately end in the conviction of the accused.”
17. In Chief Controller of Imports & Exports v. Roshanlal
Agarwal [(2003) 4 SCC 139: 2003 SCC (Cri) 788], this
Court, in para 9, held as under: (SCC pp. 145-46)
“9. In determining the question whether any
process is to be issued or not, what the
Magistrate has to be satisfied of is whether there
is sufficient ground for proceeding and not
whether there is sufficient ground for conviction.
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
31( 2025:HHC:23006 )
Whether the evidence is adequate for supporting
the conviction can be determined only at the trial
and not at the stage of inquiry. At the stage of
issuing the process to the accused, the
.
Magistrate is not required to record reasons. This
question was considered recently in U.P.
Pollution Control Board v. Mohan Meakins
Ltd. [(2000) 3 SCC 745] and after noticing the law
laid down in Kanti Bhadra Shah v. State of
W.B. [(2000) 1 SCC 722: 2000 SCC (Cri) 303] it was
held as follows: (U.P. Pollution case [(2000) 3
SCC 745], SCC p. 749, para 6)
r to
‘6. The legislature has stressed the need to
record reasons in certain situations, such as
the dismissal of a complaint without issuing
a process. There is no such legal requirement
imposed on a Magistrate for passing a
detailed order while issuing a summons. The
process issued to the accused cannot be
quashed merely on the ground that the
Magistrate had not passed a speaking order.”
18. In U.P. Pollution Control Board v. Bhupendra Kumar
Modi [(2009) 2 SCC 147: (2009) 1 SCC (Cri) 679], this
Court, in para 23, held as under: (SCC p. 154)
“23. It is a settled legal position that at the
stage of the issuing process, the Magistrate is
mainly concerned with the allegations made
in the complaint or the evidence led in
support of the same, and he is only to be
prima facie satisfied whether there are
sufficient grounds for proceeding against the
accused.”
19. This being the settled legal position, the order
passed by the Magistrate could not be faulted with
only on the ground that the summoning order was
not a reasoned order.
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
32( 2025:HHC:23006 )
31. This position was reiterated in State of Gujarat v.
Afroz Mohammed Hasanfatta, (2019) 20 SCC 539 2019 SCC
.
OnLine SC 132, wherein it was observed:
22. In summoning the accused, it is not necessary for
the Magistrate to examine the merits and demerits of
the case and whether the materials collected are
adequate for supporting the conviction. The court is
not required to evaluate the evidence and its merits.
The standard to be adopted for summoning the
accused under Section 204 CrPC is not the same at the
time of framing the charge. For issuance of summons
under Section 204 CrPC, the expression used is “there
is sufficient ground for proceeding…”; whereas for
framing the charges, the expression used in Sections
240 and 246 IPC is “there is ground for presuming
that the accused has committed an offence…”. At the
stage of taking cognisance of the offence based upon a
police report and for issuance of summons under
Section 204 CrPC, a detailed enquiry regarding the
merits and demerits of the case is not required. The
fact that, after investigation of the case, the police
have filed a chargesheet along with the materials
thereon may be considered as sufficient ground for
proceeding for the issuance of summons under
Section 204 CrPC.
32. It was held by the Hon’ble Supreme Court in
Pramila Devi v. State of Jharkhand, 2025 SCC OnLine SC 886,
that a Magistrate is not supposed to write a detailed order
while summoning the accused. It is sufficient that there is an
indication that the Magistrate had applied his mind. It was
observed: –
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
33( 2025:HHC:23006 )
16. In the present case, we find that the Additional
Judicial Commissioner has taken cognisance while
recording a finding that, from a perusal of the case
diary and case record, a prima facie case was made out.
against the accused, including the Appellants.
In Bhushan Kumar v. State (NCT of Delhi), (2012) 5 SCC
424, this Court held that an order of the Magistrate
taking cognisance cannot be faulted only because it
was not a reasoned order; relevant paragraphs being
as under:
’14. Time and again, it has been stated by this
Court that the summoning order under Section
204 of the Code requires no explicit reasons to be
stated because it is imperative that the
Magistrate must have taken notice of theaccusations and applied his mind to the
allegations made in the police report and the
materials filed therewith.
15. In Kanti Bhadra Shah v. State of W.B. [(2000) 1
SCC 722: 2000 SCC (Cri) 303], the following
passage will be apposite in this context: (SCC p.
726, para 12)
“12. If there is no legal requirement that
the trial court should write an order
showing the reasons for framing a
charge, why should the already burdened
trial courts be further burdened with such
extra work? The time has come to adopt
all possible measures to expedite the
court procedures and to chalk out
measures to avert all roadblocks causing
avoidable delays. If a Magistrate is to
write detailed orders at different stages
merely because the counsel would address
arguments at all stages, the snail-paced
progress of proceedings in trial courts
would further be slowed down. We are
coming across interlocutory orders of
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
34( 2025:HHC:23006 )
Magistrates and Sessions Judges running
into several pages. We can appreciate if
such a detailed order has been passed for
culminating the proceedings before them.
.
But it is quite unnecessary to write
detailed orders at other stages, such as
issuing process, remanding the accused
to custody, framing of charges, passing
over to the next stages in the trial.”
(emphasis supplied)
16. In Nagawwa v. Veeranna Shivalingappa
Konjalgi [(1976) 3 SCC 736: 1976 SCC (Cri) 507],
this Court held that it is not the province of the
Magistrate to enter into a detailed discussion on
the merits or demerits of the case. It was further
held that in deciding whether a process should be
issued, the Magistrate can take into
consideration improbabilities appearing on the
face of the complaint or in the evidence led by the
complainant in support of the allegations. The
Magistrate has been given an undoubted
discretion in the matter, and the discretion has
to be judicially exercised by him. It was further
held that: (SCC p. 741, para 5)
“5. … Once the Magistrate has exercised
his discretion it is not for the High Court,
or even this Court, to substitute its
discretion for that of the Magistrate or to
examine the case on merits with a view to
find out whether or not the allegations in
the complaint, if proved, would
ultimately end in conviction of the
accused.”
17. In Chief Controller of Imports &
Exports v. Roshanlal Agarwal [(2003) 4 SCC
139: 2003 SCC (Cri) 788], this Court, in para 9,
held as under: (SCC pp. 145-46)
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
35( 2025:HHC:23006 )
“9. In determining the question whether
any process is to be issued or not, what
the Magistrate has to be satisfied of is
whether there is sufficient ground for
.
proceeding and not whether there is
sufficient ground for conviction. Whether
the evidence is adequate for supporting
the conviction can be determined only at
the trial and not at the stage of inquiry. At
the stage of issuing the process to the
accused, the Magistrate is not required to
record reasons. This question was
considered recently in U.P. Pollution
Control Board v. Mohan Meakins
Ltd. [(2000) 3 SCC 745] and after noticing
rthe law laid down in Kanti Bhadra
Shah v. State of W.B. [(2000) 1 SCC
722: 2000 SCC (Cri) 303] it was held as
follows: (U.P. Pollution case [(2000) 3 SCC
745], SCC p. 749, para 6)
‘6. The legislature has stressed the
need to record reasons in certain
situations, such as dismissal of a
complaint without issuing a process.
There is no such legal requirement
imposed on a Magistrate for passing a
detailed order while issuing a
summons. The process issued to the
accused cannot be quashed merely on
the ground that the Magistrate had not
passed a speaking order.”
18. In U.P. Pollution Control
Board v. Bhupendra Kumar Modi [(2009) 2
SCC 147: (2009) 1 SCC (Cri) 679], this Court, in
para 23, held as under: (SCC p. 154)
“23. It is a settled legal position that at
the stage of the issuing process, the
Magistrate is mainly concerned with the
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
36( 2025:HHC:23006 )
allegations made in the complaint or the
evidence led in support of the same, and
he is only to be prima facie satisfied
whether there are sufficient grounds for
.
proceeding against the accused.”
19. This being the settled legal position, the
order passed by the Magistrate could not be
faulted with only on the ground that the
summoning order was not a reasoned order.’
(emphasis supplied)
17. The view in Bhushan Kumar (supra) was reiterated
in Mehmood Ul Rehman v. Khazir Mohammad
Tunda, (2015) 12 SCC 420 and State of Gujarat v. Afroz
Mohammed Hasanfatta, (2019) 20 SCC 539. This Court
in Rakhi Mishra v. State of Bihar, (2017) 16 SCC
772 restated the settled proposition of law enunciated
in Sonu Gupta v. Deepak Gupta, (2015) 3 SCC 424, as
under:
‘4. We have heard the learned counsel appearing
for the parties. We are of the considered opinion
that the High Court erred in allowing the
application filed by Respondents 2, 4, 5, 6, 7, 8, 9and 10 and quashing the criminal proceedings
against them. A perusal of the FIR would clearlyshow that the appellant alleged cruelty against
Respondents 2, 4, 5, 6, 7, 8, 9 and 10. This Courtin Sonu Gupta v. Deepak Gupta [Sonu
Gupta v. Deepak Gupta, (2015) 3 SCC 424: (2015) 2
SCC (Cri) 265] held as follows: (SCC p. 429, para
8)
“8. … At the stage of cognisance and
summoning the Magistrate is required to
apply his judicial mind only with a view to
taking cognisance of the offence … to find
out whether a prima facie case has been
made out for summoning the accused
persons. At this stage, the learned::: Downloaded on – 17/07/2025 21:16:58 :::CIS
37( 2025:HHC:23006 )Magistrate is not required to consider the
defence version or materials or
arguments nor is he required to evaluate
the merits of the materials or evidence of.
the complainant, because the Magistrate
must not undertake the exercise to find
out at this stage whether the materials
would lead to conviction or not.”
5. The order passed by the trial court taking
cognisance against R-2 and R-4 to R-9 is in
conformity with the law laid down in the above
judgment. It is settled law that the power under
Section 482 CrPC is exercised by the High Court
only in exceptional circumstances only when a
prima facie case is not made out against the
accused. The test applied by this Court for
interference at the initial stage of a prosecution
is whether the uncontroverted allegations prima
facie establish a case.’ (emphasis supplied)
33. In the present case, learned Magistrate
specifically mentioned that he had gone through the
documents. He had outlined the ingredients of the
commission of an offence punishable under Section 138 of
the NI Act, namely that three cheque were issued in discharge
of the legal liability which were dishonoured with an
endorsement “Exceeds Arrangement” and the accused failed
to pay the amount despite the receipt of a valid notice of
demand. Hence, it cannot be said that the learned Magistrate
::: Downloaded on – 17/07/2025 21:16:58 :::CIS
38( 2025:HHC:23006 )
had not applied his mind, and the order of summoning is
bad.
.
34. It was submitted that the Resolution Professional
has been appointed; therefore, proceedings under Section
138 of the NI Act are not maintainable. The submissions
cannot be accepted. The complaint was filed before the
learned Trial Court on 02.05.2018. The summoning order was
passed on 17.7.2018. The resolution process commenced
from 30.11.2021, much after the issuance of the summons. It
was laid down by the Hon’ble Supreme Court in P. Mohanraj
v. Shah Bros. Ispat (P) Ltd., (2021) 6 SCC 258: (2021) 2 SCC (Cri)
818: (2021) 3 SCC (Civ) 427: (2021) 14 Comp Cas-OL 1: 2021 SCC
OnLine SC 152 that initiation of the proceedings under the IBC
will not affect the pending proceedings under Section 138 of
the NI Act against natural persons. It was observed at page
350:
“101. As far as the Directors/persons in management
or control of the corporate debtor are concerned, a
Sections 138/141 proceeding against them cannot be
initiated or continued without the corporate debtor–
see Aneeta Hada [Aneeta Hada v. Godfather Travels &
Tours (P) Ltd., (2012) 5 SCC 661: (2012) 3 SCC (Civ) 350:
(2012) 3 SCC (Cri) 241]. This is because Section 141 of
the Negotiable Instruments Act speaks of persons in::: Downloaded on – 17/07/2025 21:16:58 :::CIS
39( 2025:HHC:23006 )charge of, and responsible to the Company for the
conduct of the business of the Company, as well as the
Company. The Court, therefore, in Aneeta
Hada [Aneeta Hada v. Godfather Travels & Tours (P).
Ltd., (2012) 5 SCC 661: (2012) 3 SCC (Civ) 350 : (2012) 3
SCC (Cri) 241] held as under: (SCC pp. 686-88, paras
51, 56 & 58-59)
“51. We have already opined that the decision
in Sheoratan Agarwal [Sheoratan Agarwal v. State of
M.P., (1984) 4 SCC 352: 1984 SCC (Cri) 620] runs
counter to the ratio laid down in C.V. Parekh [State
of Madras v. C.V. Parekh, (1970) 3 SCC 491: 1971 SCC
(Cri) 97], which is by a larger Bench and hence, is a
binding precedent. On the aforesaid ratiocination,
the decision in Anil Hada [Anil Hada v. Indian
Acrylic Ltd., (2000) 1 SCC 1: 2001 SCC (Cri) 174] has to
be treated as not laying down the correct law as far
as it states that the Director or any other officer
can be prosecuted without impleadment of the
Company. Needless to emphasise, the matter
would stand on a different footing where there is
some legal impediment and the doctrine of lex non
cogit ad impossibilia gets attracted.
***
56. We have referred to the aforesaid passages only
to highlight that there has to be strict observance
of the provisions regard being had to the legislative
intendment because it deals with penal provisions
and a penalty is not to be imposed affecting the
rights of persons, whether juristic entities or
individuals, unless they are arrayed as accused. It
is to be kept in mind that the power of punishment
is vested in the legislature, and that is absolute in
Section 141 of the Act, which speaks of commission
of offence by the Company. The learned counsel for
the respondents have vehemently urged that the
use of the term “as well as” in the section is of
immense significance and, in its tentacle, it brings
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40( 2025:HHC:23006 )
in the Company as well as the Director and/or
other officers who are responsible for the acts of
the Company and, therefore, a prosecution against
the Directors or other officers is tenable even if the
.
Company is not arraigned as an accused. The
words “as well as” have to be understood in the
context.
***
58. Applying the doctrine of strict construction, we
are of the considered opinion that commission of
an offence by the Company is an express condition
precedent to attract the vicarious liability of
others. Thus, the words “as well as the Company”
appearing in the section make it absolutely
unmistakably clear that when the Company can beprosecuted, then only the persons mentioned in
the other categories could be vicariously liable for
the offence, subject to the averments in the
petition and proof thereof. One cannot be obliviousof the fact that the Company is a juristic person
and it has its own respectability. If a finding is
recorded against it, it would create a concavity in
its reputation. There can be situations when thecorporate reputation is affected when a director is
indicted.
59. In view of our aforesaid analysis, we arrive at
the irresistible conclusion that for maintaining the
prosecution under Section 141 of the Act,
arraigning of a company as an accused is
imperative. The other categories of offenders can
only be brought within the dragnet on the
touchstone of vicarious liability, as the same has
been stipulated in the provision itself. We say so on
the basis of the ratio laid down in C.V. Parekh [State
of Madras v. C.V. Parekh, (1970) 3 SCC 491: 1971 SCC
(Cri) 97], which is a three-Judge Bench decision.
Thus, the view expressed in Sheoratan
Agarwal [Sheoratan Agarwal v. State of M.P., (1984)
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41( 2025:HHC:23006 )
4 SCC 352: 1984 SCC (Cri) 620] does not correctly lay
down the law and, accordingly, is hereby
overruled. The decision in Anil Hada [Anil
Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1: 2001 SCC
.
(Cri) 174] is overruled with the qualifier as stated in
para 51. The decision in Modi Distillery [U.P.
Pollution Control Board v. Modi Distillery, (1987) 3
SCC 684: 1987 SCC (Cri) 632] has to be treated to be
restricted to its facts as has been explained by us
hereinabove.”
102. Since the corporate debtor would be covered by
the moratorium provision contained in Section 14
IBC, by which continuation of Sections 138/141
proceedings against the corporate debtor and
initiation of Sections 138/141 proceedings against the
said debtor during the corporate insolvency
resolution process are interdicted, what is stated in
paras 51 and 59 in Aneeta Hada [Aneeta
Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC
661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241]
would then become applicable. The legal impediment
contained in Section 14 IBC would make it impossible
for such a proceeding to continue or be instituted
against the corporate debtor. Thus, for the period of
moratorium, since no Sections 138/141 proceeding can
continue or be initiated against the corporate debtor
because of a statutory bar, such proceedings can be
initiated or continued against the persons mentioned
in Sections 141(1) and (2) of the Negotiable
Instruments Act. This being the case, it is clear that
the moratorium provision contained in Section 14 IBC
would apply only to the corporate debtor, the natural
persons mentioned in Section 141 continuing to be
statutorily liable under Chapter XVII of the Negotiable
Instruments Act.”
35. This position was reiterated in Ajay Kumar
Radheyshyam Goenka v. Tourism Finance Corpn. of India Ltd.,
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42( 2025:HHC:23006 )
(2023) 10 SCC 545: (2024) 1 SCC (Cri) 128: 2023 SCC OnLine SC
266 wherein it was observed at page 559:
.
“17. We have no hesitation in coming to the conclusion
that the scope of nature of proceedings under the two
Acts is quite different and would not intercede eachother. In fact, a bare reading of Section 14 IBC would
make it clear that the nature of proceedings which have
to be kept in abeyance do not include criminal
proceedings, which is the nature of proceedings under
Section 138 of the NI Act. We are unable to appreciate theplea of the learned counsel for the appellant that,
because Section 138 of the NI Act proceedings arise from
a default in financial debt, the proceedings under
Section 138 should be taken as akin to civil proceedingsrather than criminal proceedings. We cannot lose sight
of the fact that Section 138 of the NI Act is not recovery
proceedings. They are penal in character. A person may
face imprisonment, or fine or both under Section 138 of
the NI Act. It is not a recovery of the amount withinterest as a debt recovery proceeding would be. They
are not akin to suit proceedings.
18. It cannot be said that the process under IBC, whether
under Section 31 or Sections 38 to 41, which can
extinguish the debt, would ipso facto apply to theextinguishment of the criminal proceedings. No doubt
in terms of the scheme under IBC, there are sacrifices tobe made by parties to settle the debts, the company
being liquidated or revitalised. The appellant before us
has been roped in as a signatory of the cheque as well as
the Promoter and Managing Director of the accused
Company, which availed of the loan. The loan agreement
was also signed by him on behalf of the Company. What
the appellant seeks is an escape out of criminal liability,
having defaulted in payment of the amount at a very
early stage of the loan. In fact, the loan account itself
was closed. So much for the bona fides of the appellant.
19. We are unable to accept the plea that if proceedings
against the Company come to an end, then the::: Downloaded on – 17/07/2025 21:16:58 :::CIS
43( 2025:HHC:23006 )appellant, as the Managing Director, cannot be
proceeded against. We are unable to accept the plea that
Section 138 of the NI Act proceedings are primarily
compensatory in nature and that the punitive element is.
incorporated only at enforcing the compensatory
proceedings. The criminal liability and the fines are built
on the principle of not honouring a negotiable
instrument, which affects trade. This is apart from theprinciple of financial liability per se. To say that under a
scheme which may be approved, a part amount will be
recovered, or if there is no scheme, a person may stand
in a queue to recover debt, would absolve theconsequences under Section 138 of the NI Act, is
unacceptable.
Xxxx
75. Thus, where the proceedings under Section 138 of
the NI Act had already commenced and during the
pendency, the plan is approved or the company gets
dissolved, the Directors and the other accused cannot
escape from their liability by citing its dissolution. Whatis dissolved is only the company, not the personal penal
liability of the accused covered under Section 141 of the
NI Act. They will have to continue to face the
prosecution in view of the law laid down in AneetaHada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd.,
(2012) 5 SCC 661: (2012) 3 SCC (Civ) 350: (2012) 3 SCC (Cri)
241]. Where the company continues to remain even at
the end of the resolution process, the only consequenceis that the erstwhile Directors can no longer represent it.
36. A similar view was taken by this Court in Tushar
Sharma (Supra); therefore, the submission that the
proceedings cannot continue against the petitioner is not
acceptable.
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44( 2025:HHC:23006 )
37. It was submitted that the learned Trial Court did
not mention Section 141 of the NI Act, and this vitiated the
.
summoning order. This submission is not acceptable. It is
undisputed that the learned Trial Court had the jurisdiction
under Section 141 of the NI Act to proceed against the
Company and its officers. This jurisdiction is not taken away
merely because a specific Section was not mentioned or a
wrong provision was mentioned. It was laid down by the
Hon’ble Supreme Court in Pruthvirajsinh Nodhubha Jadeja v.
Jayeshkumar Chhakaddas Shah, (2019) 9 SCC 533: (2019) 4 SCC
(Civ) 638: 2019 SCC OnLine SC 1308 that mere mentioning of
an incorrect provision of law is not fatal if the power to pass
an order is available with the Court. It was observed:
8. It is well-settled law that mere non-mentioning of an
incorrect provision is not fatal to the application if the
power to pass such an order is available with the court.
38. A similar view was taken by the Delhi High Court in
Vijay Kumar Nagpal v. Parveen Kumar Nagpal, (2022) 1 HCC
(Del) 25: 2022 SCC OnLine Del 4, wherein it was observed:
11. Regarding the objection raised by the learned counsel for
the defendant that the present application is filed under
Section 151 CPC instead of under Order 9CPC. However,
under Section 151CPC, this Court has inherent power to
consider an application wherein a wrong provision is::: Downloaded on – 17/07/2025 21:16:58 :::CIS
45( 2025:HHC:23006 )mentioned. It cannot be an obstacle for granting the relief
as made out from the contents of the application as held in
the Gotham Entertainment Group LLC case [Gotham
Entertainment Group LLC v. Diamond Comics (P) Ltd., 2009.
SCC OnLine Del 4009].
12. It is trite that quoting a wrong statutory provision does
not create a bar and stand in the way of considering the
application, as held in Nitish Arora case [Nitish Arora v. State
of Delhi, 2007 SCC OnLine Del 142: (2007) 141 DLT 21]. Thus,
on this aspect, this Court is not convinced by the contention
of learned counsel for the defendant.
39. Thus, the non-mentioning of Section 141 of N.I.
Act will not affect the case of the complainant.
40. The complaint was filed in the year 2018. The
accused appeared before the learned Trial Court on 18.2.2019.
The present petition was filed on 20.06.2024. There is force
in the submission of the learned counsel for the complainant
that the petitioner has approached the Court belatedly. It was
laid down by the Delhi High Court in Sanyam Bhushan v. State
(NCT of Delhi), 2024 SCC OnLine Del 4545, that the Court
should not entertain the belated petitions for quashing the
FIR. It was observed:
“43. At the outset, I find merit in the submission made
by the learned counsel for the Complainant that the
present set of petitions is liable to be dismissed on the
ground of delay and laches as also for the failure of the
petitioners to avail of their alternate efficacious remedy
in form of Revision Petitions under Section 397 of
the Cr. P.C.::: Downloaded on – 17/07/2025 21:16:58 :::CIS
46( 2025:HHC:23006 )
44. It need not be emphasised that powers under
Section 482 of the Cr. PCs are discretionary in nature,
and though there may not be a total ban on the exercise
of such power where the situation so warrants, at the.
same time, there are limitations of self-restraint that
are recognised and followed by the Courts in exercising
this jurisdiction. One such limitation is where the
petitioner had an alternate efficacious remedy,however, did not avail of the same within the period of
limitation and thereafter filed the petition under
Section 482 of the Cr. P.C. to overcome the objection of
limitation. Similarly, the Courts have refused toentertain a petition under Section 482 of the Cr. P.C.,
where it is filed with unexplained delay and laches, and
in the meantime, the trial has proceeded.”
41. No other point was urged.
42. In view of the above, the present petition fails and
the same is dismissed, so also the pending applications, if
any.
43. The observation made here-in-above shall
remain confined to the disposal of the petition and will have
no bearing, whatsoever, on the merits of the case.
(Rakesh Kainthla)
Judge
16 July, 2025
(veena)
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