### Subsequent insolvency or liquidation does not efface criminal liability incurred under Section 138 Negotiable Instruments Act.

The petitioner-company, represented by its Liquidator, sought the quashing of a summoning order dated 23.08.2018 and a subsequent order dated 07.06.2023 passed by the Metropolitan Magistrate in a complaint under Section 138 of the Negotiable Instruments (NI) Act.

The subject cheque (Rs. 2 crores) was drawn on the personal account of Accused No. 2 (a director) rather than the company’s account.

Subsequent to the cheque's dishonor, the petitioner-company entered Corporate Insolvency Resolution Process (CIRP) on 03.01.2020 and was ordered into liquidation on 26.02.2021.

The petitioner contended that Section 33(5) of the Insolvency & Bankruptcy Code (IBC) barred the proceedings and that the company could not be liable for a cheque not drawn on its account.

Whether a summoning order under Section 138 of the NI Act is vitiated if it lacks detailed reasoning or specific mention of statutory ingredients.

Whether criminal proceedings under the NI Act are barred by the initiation of liquidation proceedings under Section 33(5) of the IBC when the default occurred prior to the moratorium.

Whether a company can be arrayed as an accused when the cheque was drawn on a director's personal account to discharge the company's liability.

The court applied Section 138 (Dishonour of cheque) and Section 141 (Offences by companies) of the NI Act, 1881.

It relied on P. Mohanraj v. Shah Brothers Ispat (P) Ltd., established that Section 138 proceedings are "quasi-criminal" and continue against directors despite IBC moratoriums.

Precedents from Sunil Todi v. State of Gujarat and Mehmood Ul Rehman v. Khazir Mohammad Tunda were used to affirm that while a Magistrate must apply their mind, a summoning order need not be a detailed "speaking order".

The court also noted the bar on suits against companies in liquidation under Section 33(5) of the IBC.

The court reasoned that while the cheque was drawn on the director's personal account, it was issued pursuant to a Personal Guarantee Deed to discharge the petitioner-company's composite commercial liability; thus, the company's involvement could not be ruled out at the preliminary stage.

Regarding the IBC, the court noted that the debt and the offence arose in 2018, nearly two years before the CIRP/liquidation began (2020/2021), meaning the liability was not automatically effaced by subsequent insolvency.

On the validity of the summoning order, the court acknowledged that while the Magistrate's order was brief and omitted specific statutory ingredients, it was passed after perusing the complaint, affidavit, and original documents.

Given the long pendency since 2018 and the court’s own review of the prima facie evidence (cheque, return memo, and statutory notice), it found no grounds to interfere.

The court held that a summoning order under Section 138 of the NI Act does not require detailed reasons as long as the record indicates judicial application of mind to the prima facie facts.

It further held that the company remains answerable in the trial for liabilities accrued prior to liquidation, subject to the final determination of the impact of Sections 33(5) and 35(1)(k) of the IBC during the trial.