Rakesh Ramakanth v. Somashekara Gowda R.G

What happened

Giga Networks Private Limited applied to the Registrar of Companies in 2010 for closure and was struck off and declared dissolved by an endorsement dated 16 March 2011. The complainant said that in November 2014 the petitioner took a hand loan of Rs. 60 lakhs, promised to repay within thirty months, and on 30 July 2017 gave a cheque of the company for Rs. 60 lakhs, which was returned on 8 August 2017 with the endorsement 'account closed'. After a demand notice, he filed a complaint on 13 October 2017 under section 200 of the Code of Criminal Procedure, registered as PCR No. 13006 of 2017, and cognizance was taken in C.C. No. 263 of 2018. The petitioner, accused No. 1, said that the company dissolved in 2011, he borrowed Rs.20/- lakhs and had repaid over ₹80/- lakhs, and the cheque was misused; he said he was in Dubai in July 2017. The complainant relied on Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India and argued that the questions were disputed facts.

Questions before the court

• Can a section 138 prosecution against the former director continue on a cheque issued on the account of a company dissolved six years earlier?

Why the court ruled this way

Under sections 248(5) and 250 of the Companies Act, 2013 a struck-off company stands dissolved and ceases to operate as a company, as the Delhi High Court held in Krishan Lal Gulati v. State of NCT of Delhi, which treated a cheque by a dissolved company as not a legally enforceable instrument and its complaint as not maintainable (paragraphs 7 and 8.2). The Supreme Court in Vishnoo Mittal v. Shakti Trading Company held that a director whose powers had been suspended could not meet a demand, and the Delhi decisions in Raj Kumar Jain v. Shree Balaji Enterprises, M.L. Gupta v. Ceat Financial Services and Manju Bajad apply the same logic to liquidation (paragraphs 8.1 to 8.3). Here the company had stood dissolved for six years before the cheque. The complaint did not aver that the petitioner was a director in charge of the day-to-day affairs when the cheque was issued, only that accused No. 2 is the company and he its representative, so the matter need not go to trial on that ground either (paragraph 11). Ajay Kumar Goenka concerned proceedings that began after issuance of the cheque, not a company closed six years earlier (paragraph 12).

Controlling point

Both on the facts as pleaded and on the jurisdictional point of the company's dissolution, the prosecution could not continue.

Order and next steps

The petition was allowed and the proceedings in C.C. No. 263 of 2018 were quashed, with I.A. No. 2 of 2024 disposed of and the complainant left free to use any other remedy available in law.

Practical implications

A former director summoned in a cheque-bounce case on a dissolved company's cheque can rely on this decision; a complainant with a loan claim should proceed in civil law against the person who borrowed.

Limits of this ruling

• The Court did not decide the loan dispute, the petitioner's plea of repayment or whether he can be sued personally in civil law, and it treated the complaint's own averments as the basis for quashing.