Directors Not Liable for Cheque Bounce After Liquidation Begins | HC

Case Details: Yatendra Singh v. Ganga Iron and Steel Trading Company Ltd. - [2025] 176 taxmann.com 242 (HC-Bombay)

Judiciary and Counsel Details

• Urmila Joshi-Phalke, J.
• Yash Venkatraman, Counsel & Ms Pragya Nawandar, Adv. for the Applicant.
• Darasingh Sindhu, Counsel for the Respondent.

Facts of the Case

In the instant case, the corporate debtor company entered into a business with the non-applicant company for purchasing goods. The corporate debtor issued cheques to a non-applicant company for the payment of goods, but the same were dishonoured.

The non-applicant company filed a complaint under section 138 of the Negotiable Instruments Act against the corporate debtor and its directors. Meanwhile, the corporate debtor was liquidated and a liquidator was appointed.

The applicants/directors of the corporate debtor filed an application for quashing of the complaint filed by the non-applicant company.

It was noted that since the moratorium was declared and the liquidation process was initiated much prior to the issuance of cheques, the directors of the corporate debtor could not be held liable for the dishonour of cheques.

High Court Held

The High Court held that once a moratorium was declared and liquidation proceedings had been completed, the directors of the corporate debtor company ceased to be in charge of the company and the powers of the Board of Directors were to be exercised by the liquidator/Resolution Professional in accordance with the provisions of the IBC. Thus, the application filed by the directors of the corporate debtor for the quashing of the complaint filed by the non-applicant company was to be allowed.

List of Cases Reviewed

• P. Mohanraj v. Shah Brothers Ispat (P.) Ltd. [2021] 125 taxmann.com 39/167 SCL 327 (SC) (para 35) distinguished.

List of Cases Referred to

• Vishnoo Mittal v. Shakti Trading Company [2025] 172 taxmann.com 452/188 SCL 271 (SC) (para 8)
• Manoj Toshniwal v. Alucast Engineering Pvt. Ltd [Criminal Writ Petition No. 1134 of 2023, dated 5.12.2023] (para 8)
• DCM Financial Services Limited v. J.N. Sareen (2008)8 SCC 1 (para 8)
• Nikhil P. Gandhi v. State of Gujarat [2016] 70 taxmann.com 237/136 SCL 355 (Gujarat) (para 8)
• P. Mohanraj v. Shah Brothers Ispat (P.) Ltd. [2021] 125 taxmann.com 39/167 SCL 327 (SC) (para 9)
• Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd. [2023] 148 taxmann.com 280/178 SCL 401 (SC) (para 9)
• K & K Foundry Pvt. Ltd. v. Goyal Iron and Steel (Nagpur) Pvt. Ltd. [Criminal Application (APL) No.1478 of 2023, dated 29.4.2024] (para 9)
• Sunita Palita v. Panchami Stone Quarry [2022] 141 taxmann.com 31/173 SCL 699 (SC) (para 9)
• S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan [2022] 142 taxmann.com 317/[2023] 175 SCL 242 (SC) (para 9)
• K.K. Ahuja v. V.K. Vora 2011 SC (CRI) 2259 (para 9)
• Nag Leathers Pvt. Ltd. v. Dynamic Marketing Partnership AIR Online 2011 SC 675 (para 9)
• Bir Singh v. Mukesh Kumar AIR OnLine 2019 SC 577 (para 9)
• Sunil Todi v. State of Gujarat AIR 2022 SC 147 (para 9)
• Asmita Sarang v. Yogesh Badoni 2023 SCC OnLine Bom 528 (para 42).