The High Court of Delhi, in a judgment delivered on October 8, 2025, has quashed two criminal complaints filed under Section 138 of the Negotiable Instruments (NI) Act, holding that the proceedings were not maintainable as the complainant company had been “struck-off” the Register of Companies and dissolved before the complaints were instituted.
Justice Arun Monga, in case bearing CRL.M.C. 7534/2023 and CRL.M.C. 7559/2023, allowed the petitions filed by Mr. Krishan Lal Gulati and another, who were directors of the accused company. The court set aside a 2022 order by aMagisterial court that had dismissed the petitioners’ applications and allowed the cheque bounce cases to proceed.
Background of the Case
The matter originated from two criminal complaints (CC No. 2619/2020 and CC No. 4735/2020) filed by a company named “Raghav Aditya Chits Pvt Ltd.” against M/S Space Services (India) Pvt Ltd. and its directors (the petitioners).
The first complaint involved a cheque dated 10.11.2019 for ₹1,93,00,000, which was dishonoured on 27.11.2019. The second involved a cheque dated 10.10.2019 for ₹1,76,00,000, dishonoured on 06.12.2019. In both cases, the reason for dishonour was “Contact Drawer/Drawee Bank and Present Again.” Legal notices were issued on 23.12.2019, and upon non-payment, the complaints were filed, leading to summoning orders against the petitioners in 2020 and 2021.
The petitioners contended that the cheques were “security cheques” issued in 2011 and were allegedly misused.
Critically, the complainant company, Raghav Aditya Chits Pvt Ltd., had been struck off from the Register of Companies (ROC), Delhi and Haryana, on 08.08.2018, and thus ceased to exist before the cheques were presented or the complaints were filed in 2020.
The petitioners filed applications before the learned Metropolitan Magistrate (MM), Rouse Avenue Courts, seeking dismissal of the complaints as non-maintainable. However, the Ld. MM, vide order dated 22.12.2022, dismissed these applications, holding that maintainability could not be decided post-cognizance, and directed the complaints to proceed to the stage of framing notice under Section 251 CrPC. This order was challenged before the High Court.
Petitioners’ Arguments
The petitioners argued before the High Court that the complainant company (Respondent No. 2) was neither a “juristic person” nor a “legal entity” when the complaints were filed in 2020, as it had been dissolved by the ROC vide notice dated 08.08.2018.
It was submitted that the ex-directors of the dissolved company had concealed this fact and falsely represented the company as operational. Consequently, any legal notices or complaints filed in the name of this “non-existent entity” were invalid, and no valid cause of action could arise from them.
The petitioners referred to Sections 248(5) and 250 of the Companies Act, 2013, arguing that only the Registrar of Companies has the authority to realize the dues of a dissolved company. It was contended that any board resolutions authorizing representatives were “false and fabricated” as the directors had ceased to hold office.
Furthermore, it was argued that upon dissolution, all assets and bank accounts of the company became “bona vacantia,” vesting in the Government, and cited Ministry of Finance notifications (dated 05.09.2017) that prohibit ex-directors of struck-off companies from operating bank accounts.
High Court’s Analysis and Observations
Justice Arun Monga found merit in the petitioners’ submissions, noting that the Trial Court “committed irregularity in law” while passing the impugned order dated 22.12.2022.
The Court also noted the absence of the complainant (Respondent No. 2) during the hearing, observing: “It so seems that in view of the detailed order dated 13.10.2023 passed by Coordinate Bench of this Court, the Complainant/Respondent No. 2 has accepted the futility of the lis as fait accompli.”
The judgment reproduced Section 248(5) (dissolution of company on notice) and Section 250 (Effect of company notified as dissolved) of the Companies Act, 2013. The Court observed that under Section 250, a dissolved company “shall… cease to operate as a company and the Certificate of Incorporation… shall be deemed to have been cancelled,” except for the limited purpose of realizing dues or discharging liabilities.
The Court heavily relied on a notification dated 05.09.2017 from the Department of Financial Services, Ministry of Finance. The judgment highlighted that this notification clarifies that companies struck off under Section 248(5) “cease to exist in law,” their directors become “ex Directors,” and they “will therefore not be able to operate bank accounts of such companies till such companies are legally restored under Section 252 of the Companies Act.”
Applying this to the facts, the Court noted that the cheques, the legal notices, and the complaints “are all actions that occurred after the company’s dissolution.”
In its key observation (Para 12), the High Court held: “Once a company is struck off and stands dissolved, it loses its juristic personality, rendering any act done on its behalf void ab initio unless the company is restored under Section 252 of the Companies Act. Consequently, a cheque issued in the name of or by such a dissolved company cannot be treated as a legally enforceable instrument, since no valid drawer or account-holder exists in law.”
The Court concluded: “Proceedings under Section 138 of the Negotiable Instruments Act, which presuppose a validly issued cheque, therefore, cannot be sustained in such circumstances.”
Finding that the continuation of the trial would “serve no legal purpose,” Justice Monga held that “Criminal prosecution cannot be maintained by or against a dissolved entity.” The Court deemed it a “fit case to exercise inherent powers to prevent a miscarriage of justice.”
Decision
The High Court allowed both petitions and quashed the criminal complaint cases (CC No. 2619/2020 and CC No. 4753/2020). The impugned order of the Trial Court dated 22.12.2022 was also set aside.
However, the Court provided liberty to the “successors in interest of the respondent no.2/complainant” to “proceed against the promoters/directors/petitioners of the accused company by resorting to any other alternative remedy, if the law so permits.”
