The Delhi High Court has quashed criminal proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) against the former directors of a private limited company. The Court held that dishonour of cheques with the remark “ACCOUNT BLOCKED” due to ongoing insolvency and liquidation proceedings does not constitute an offence under Section 138, as the directors cease to have control over the company’s bank accounts once an Interim Resolution Professional (IRP) or Liquidator is appointed.
Case Background
The judgment was delivered in a batch of petitions filed by Farhad Suri and Dhiren Navlakha (Petitioners), challenging the summoning orders issued by the Metropolitan Magistrate in January…