Personal penal liability of corporate directors persists notwithstanding the entity's insolvency, allowing continuance of N.I. Act proceedings.

JUDGMENT :

Chittaranjan Dash, J.

1. By means of this application, the Petitioner seeks the indulgence of this Court directing the learned JMFC (LR), Bhubaneswar to issue summon to the Resolution Professional (RP) to represent accused No.1 and to discharge the accused No.2 against whom cognizance has been taken in 1.C.C. Case No.3236 of 2021 vide order dated 18.03.2025 rejecting his prayer in the petition dated 23.12.2024 praying for discharge of the accused Nos.1, 2 & 3.

2. The background facts of the case are that M/s. Dewy Developers Pvt. Ltd. (hereinafter referred to as the complainant) filed a complaint before the learned JMFC (LR), Bhubaneswar under Section 138 of the Negotiable Instruments Act, 1881 (in short, “the N.I. Act”). In the said complaint, a prayer was made to summon the present Petitioner, namely Zenith Mining Private Ltd., its Managing Director, Mr. Syed Najam Ahmed, and its agent, Bhimsen Apat, and to direct recovery of Rs.1 crore from the said accused persons in terms of the provisions of the N.I. Act, and further to pay double the cheque amount as compensation.

3. The case of the complainant as emerges from the case record is that, the Petitioner through its Managing Director, Mr. Syed Najam Ahmed, keeping in view their cordial relationship, persuaded to extend a friendly loan of Rs.1 crore to the Petitioner- Company. The said amount was duly credited to the Petitioner’s bank account with an assurance that it would be repaid within one year.

4. Since the Petitioner-Company failed to return the loan amount, the complainant approached accused No.2 (the Managing Director) who, for himself and on behalf of the accused-Company, issued Cheque No.978062 dated 25.06.2021 for Rs.1 crore, drawn on IndusInd Bank, in favour of the complainant. The complainant presented the said cheque with its banker, i.e., Bank of India, Chandrasekharpur Branch, Bhubaneswar, on the very same day (25.06.2021), but it got dishonoured with the endorsement “refer to drawer.” The complainant was intimated as to the of the dishonour by its banker on 29.06.2021.

5. Being so informed, the complainant requested the Petitioner to make payment of the dishonoured cheque amount. On the request of the Petitioner, the complainant waited and represented the cheque through its banker, but once again it got dishonoured with the same remark “refer to drawer.” This intimation sent by the Bank was received by the complainant on 09.07.2021. Thereafter, the complainant issued a statutory notice to the Petitioner demanding payment of the dishonoured cheque amount. As the Petitioner failed to comply with the said demand, the complainant instituted the complaint before the competent court U/s 138 of the Negotiable instrument Act.

6. In response, the Petitioner filed an application before the learned trial court seeking discharge from the prosecution on the ground that the Petitioner-Company had already been declared insolvent and a Resolution Professional had been appointed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). It was further stated that the learned NCLT, Cuttack had passed an order on 08.01.2024 to that effect. According to the Petitioner, in view of Section 32A of the IBC, 2016 and the law laid down by the Hon’ble Supreme Court in Ajay Kumar Radheshyam Goenka vs. Tourism Finance Corporation of India Ltd. , reported in (2023) 10 SCC 545, the complainant ought to have approached the Resolution Professional, who alone was competent to represent the accused-Company.

7. The learned trial court, however, rejected the Petitioner’s prayer, holding that the prosecution under Section 138 of the N.I. Ac