Company Liable Under Section 138 NI Act Despite Liquidation: Delhi High Court

The Delhi High Court has held that a company can still attract liability under Section 138 of the Negotiable Instruments Act if a cheque issued before liquidation is dishonoured after liquidation proceedings commence.

The Court observed that criminal liability for cheque dishonour does not automatically extinguish merely because the company has entered liquidation under the Insolvency and Bankruptcy Code.

It clarified that the offence under Section 138 is completed upon fulfilment of statutory conditions following dishonour of the cheque.

The judgment reinforces that directors and companies may continue to face prosecution despite subsequent insolvency or liquidation proceedings.

[Raj Kumar Jain v. M/S Shree Balaji Enterprisies & Anr.]