DAVI V. THATTIL v. ROSY JOSEPH, SOUMYA KURIES AND LOANS(P) LTD, and STATE OF KERALA

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: B. Sudheendra Kumar
Judgment Date: 2020-12-01
Court Decision / Holding: Crl.M.C. allowed; summoning order set aside; Annexure-A1 complaint quashed.
Final Disposition: Crl.M.C. allowed; summoning order set aside; Annexure-A1 complaint quashed.

Parties to the Case

Appellants / Petitioners

DAVI V. THATTIL

Respondents

Rosy Joseph
Soumya Kuries and Loans(P) Ltd
State of Kerala

Legal Representation & Advocates

Counsels for Petitioners

• Lindons C. Davis
• Smt. E. U. Dhanya
• Sri. Rajith Davis

Counsels for Respondents

• Official Liquidator, High Court of Kerala
• K. Moni, Advocate (Public Prosecutor for State of Kerala)

Case Synopsis & Summary

This is a Criminal Misc. Case (Crl.M.C. No.3652 of 2020) filed in the Kerala High Court by Davi V. Thattil challenging Annexure-A1, a complaint under Section 138 of the Negotiable Instruments Act (NI Act) filed in the JMFC court at Thrissur by Rosy Joseph and others. The core question is maintainability of a complaint against a company that was ordered to be wound up before the offence could be completed under NI Act. The petitioner contends that once the company was ordered to be wound up, the cause of action under Section 138 could not complete against the company or its erstwhile directors; reliance is placed on Francis K.P. v. Fair Kuries Pvt. Ltd. and Others (2018(3) KHC 101). Facts show that the cheque was dishonoured on 20.10.2010; a demand notice was issued on 03.11.2010; the company was wound up by an order dated 15.11.2010. The High Court thus follows the principle that if winding up occurs before completion of the offence, the complaint under Section 138 is not maintainable against the company and its directors. After hearing the petitioner and the Senior Public Prosecutor, the court held that the complainant’s action is not maintainable, set aside the summoning order, and quashed Annexure-A1. The court ultimately allows the Crl.M.C. and quashes the proceedings to the extent challenged."

Provisions of Law Cited

Section 138 of the Negotiable Instruments Act, 1881

Legal Doctrines & Maxims

The cause of action under Section 138 NI Act arises when the cheque is dishonoured and payment is not made within 15 days after demand notice.
If a company is wound up before the completion of the offence under Section 138 NI Act, the complaint against the company and its erstwhile directors is not maintainable.

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner submitted that Annexure-A1 is not maintainable since the company was already ordered to be wound up before the completion of the offence under Section 138 NI Act. Relying on Francis K.P. v. Fair Kuries Pvt. Ltd. (2018(3) KHC 101), the petition contends that the cause of action arises only when the cheque is dishonoured and payment is not made within 15 days after demand, and that the winding-up order dated 15.11.2010 means the offence could not be completed after winding up. Thus the summoning order is bad in law and should be quashed.

Contentions of Respondents

The respondents’ counsel, represented by the Senior Public Prosecutor, opposed the petition arguing that the NI Act offence is completed upon dishonour and failure to pay after demand; the winding-up status does not automatically nullify proceedings and the court should proceed in accordance with the law, unless clearly barred by binding precedent. The available material and law were to be weighed against Francis K.P. Supra.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Francis K.P. and Others v. Fair Kuries Pvt. Ltd. and Others	2018(3) KHC 101	Positive	Court relied on the principle that if winding up occurs before the completion of the offence under Section 138 NI Act, the complaint against the company and its erstwhile directors is not maintainable; this principle guided the quashing of Annexure-A1.

Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE B.SUDHEENDRA KUMAR** **TUESDAY, THE 01ST DAY OF DECEMBER 2020 / 10TH AGRAHAYANA, 1942** ## **Crl.MC.No.3652 OF 2020(F)** **AGAINST THE ORDER/JUDGMENT IN CC 2201/2011 OF JUDICIAL MAGISTRATE OF FIRST CLASS -II,THRISSUR** ## **PETITIONER/S:** **DAVI V.THATTIL, AGED 71 YEARS, S/O VARGHEESE,THATTIL PIDIYATH HOUSE, CHELAKKKOTTUKARA,KURIACHIRA.P.O, THRISSUR-680006.** **BY ADVS. SRI.LINDONS C.DAVIS SMT.E.U.DHANYA SRI.RAJITH DAVIS** ## **RESPONDENT/S:** - **1 ROSY JOSEPH,AGED 70 YEARS, ERINJERY HOUSE, NELLIKKUNNU SOUTH BAZAR, EAST FORT,THRISSUR-680005.** - **2 SOUMYA KURIES AND LOANS(P)LTD, REPRESENTED BY OFFICIAL LIQUIDATOR, HIGH COURT OF KERALA, COMPANY LAW BHAVAN,3RD FLOOR, THRIKKAKARA.PO, KOCHI-682021.** - **3 STATE OF KERALA, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA,ERNAKULAM,KOCHI-682031. R2 BY ADV. K.MONI** ## **OTHER PRESENT:** ## **SMT.M.K.PUSHPALATHA, SR.PP** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 01.12.2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **Crl.M.C.No.3652 of 2020** -2- ## **ORDER** **In this Crl.M.C., the prayer is to quash Annexure-A1 complaint filed by the first respondent herein before the court below alleging offence punishable under Section 138 of the Negotiable Instruments** **Act.** **2. Service is complete. However,** **there is no appearance for respondent Nos.1 to 2.** **3. Heard the learned counsel for the** **petitioner and the learned Senior Public Prosecutor.** **4. The petitioner was made as the first accused in Annexure-A1 complaint as he was the Managing Director of Soumya Kuries** ## **Crl.M.C.No.3652 of 2020** -3- **and Loans(P) Ltd during the period when the transaction took place.** **5. The learned counsel for the petitioner has argued that since the company was ordered to be liquidated prior to the arising of the cause of action in this case, Annexure-A1 complaint is not** **maintainable. The learned counsel relied on the decision of this Court in Francis K.P.** **and Others v. Fair Kuries Pvt. Ltd. and** **Others [2018(3) KHC 101] to support his argument.** **6. This Court in Francis K.P.** ## **(Supra) held in Para 27 thus:-** **“The upshot of the above discussion is that if the cause of action arose subsequent to the order of** ## **Crl.M.C.No.3652 of 2020** -4- **winding up of the company, it cannot be said that the offence under S.138 of the N.I. Act is completed. The date on which the cheque was handed over would have no bearing. The cause of action arises only when the cheque presented for encashment is dishonoured and the drawer fails to make payment of the cheque amount within the statutory period, after the receipt of demand notice. Therefore, if the company is wound up as per the order of the Court prior to the completion of the offence under S.138 of the N.I. Act, no complaint against the company and its erstwhile Directors, is maintainable. On the other hand, if the company is ordered to be wound up by the Court subsequent to the completion of the offence under S.138 of the N.I. Act, the prosecution under S.138 of the N.I.Act is maintainable against the company and its Directors notwithstanding the order passed by the Court for winding up of the company”.** ## **Crl.M.C.No.3652 of 2020** -5- **7. The company was ordered to be would up by the High Court as per AnnexureA2 judgment dated 15.11.2010. Annexure-A1 complaint would show that the cheque in this case was dishonoured as per memo dated 20.10.10 issued from the bank. The demand notice was sent to the petitioner on 3.11.2010. The cause of action would arise only when the drawer failed to make the payment of the cheque amount within the statutory period of 15 days after the receipt of the demand notice. The date of receipt of the demand notice is not stated in the complaint. However, since the demand notice was issued to the petitioner only on 3.11.2010, the offence under Section 138 of** ## **Crl.M.C.No.3652 of 2020** -6- **the N.I. Act was complete only after 15.11.2010, which was the date of order of winding up of the company. Thus the cause of action arose in this case only after the order of winding up of the company.** **Since the cause of action arose in this case after the order of winding up of the company, Annexure-A1 complaint filed alleging the offence under Section 138 of the Negotiable Instruments Act is not maintainable in view of the decision in Francis K.P.(Supra) and hence the summoning order issued by the court below is bad in law. Consequently, this Crl.M.C. stands allowed and the summoning order stands set** ## **Crl.M.C.No.3652 of 2020** -7- **aside and Annexure-A1 complaint stands quashed.** Sd/- **B. SUDHEENDRA KUMAR,** **JUDGE** STK ## **Crl.M.C.No.3652 of 2020** -8- ## **APPENDIX** **PETITIONER'S/S EXHIBITS:** **ANNEXURE A1 TRUE COPY OF THE COMPLAINT IN C.C.NO.2201/2011 OF THE JFCM COURT-II, THRISSUR.** **ANNEXURE A2 A COPY OF THE ORDER IN C.P.NO.11/2020 DATED 5.11.2010 PASSED BY THIS HONOURABLE COURT.**