{"id":315798,"date":"2024-03-01T18:00:56","date_gmt":"2024-03-01T12:30:56","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=315798"},"modified":"2024-03-07T09:58:41","modified_gmt":"2024-03-07T04:28:41","slug":"directors-liability-for-dishonored-cheque-despite-companys-struck-off-status-calcutta-high-court-scc-times","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/03\/01\/directors-liability-for-dishonored-cheque-despite-companys-struck-off-status-calcutta-high-court-scc-times\/","title":{"rendered":"Calcutta High Court holds Directors liable for dishonored cheque despite company\u2019s \u201cstruck-off\u201d status"},"content":{"rendered":"
\n

Calcutta High Court:<\/span> In a revision application against the rejection of an application for Substitute Service of Summons under Section 65<\/a> of the Criminal Procedure Code, 1973<\/a> (CrPC), a single-judge bench comprising of Shampa Dutt (Paul),* J.<\/span>, allowed the revision, setting aside the order of the Metropolitan Magistrate and held that the denial of the application for Substitute Service of Summons under Section 65<\/a> of the Code of Criminal Procedure, 1973<\/a>, was unjustified. The Court directed the trial court to proceed against the directors of the dissolved company for offenses committed while the company was operational.<\/p>\n

Factual Matrix<\/p>\n

In the instant matter, the petitioner, Biman Bangladesh Airlines Limited is an International Airlines Company incorporated and registered under the Companies Act of Bangladesh. The opposite party 1, Kuka Travels Private Limited, issued an Account Payee Cheque to the petitioner, which was dishonored due to insufficient funds and despite issuing a legal demand notice, the respondents failed to make payment. The petitioner filed a complaint under Sections 138 and 141<\/a> of the Negotiable Instrument Act, 1881<\/a>. The complaint was transferred to the Metropolitan Magistrate at Calcutta, who issued summons to the Respondents. The opposite party 2 and 3 appeared before the trial court, but service upon respondent 1 could not be effected due to its undisclosed new address. The petitioner contended that since the new address of the respondent is not known, the service of the summon upon the opposite party 1 can only be effected if the Serving Officer affix one of the duplicates of the summons on some conspicuous part of the house or homestead where the Registered Office of the opposite party 1 was situated when the dishonoured cheque was issued and applied for substitute service under Section 65 of the CrPC, but the application was rejected. The trial court, vide order dated 27-08-2018, held that there was no provision for substituted service of summons under the CrPC. Aggrieved by the impugned order passed by the Metropolitan Magistrate, the petitioner preferred the present revisional application before the High Court.<\/p>\n

Parties’ Contentions<\/p>\n

The opposite party 2 contented that they were no longer the directors of the company, and the impugned cheque was issued when the company was in existence and the opposite parties were its directors. 24. It was contended that the status of the Company is “Strike Off”. The petitioner, in return, contended that since opposite party 1 was struck off from the register of companies, its directors, opposite Party 2 and 3, are liable for the company’s liabilities.<\/p>\n

Moot Point<\/p>\n

    \n
  1. \n

    Whether substituted service of summons can be allowed under Section 65 of the CrPC in cases where the accused’s address is unknown?<\/p>\n<\/li>\n

  2. \n

    Whether the company’s dissolution affects the liability of its directors for offenses committed while the company was operational?<\/p>\n<\/li>\n<\/ol>\n

    Court’s Analysis<\/p>\n

    The Court emphasised that Section 65 of the CrPC provides for substituted service of summons when service cannot be effected despite due diligence and the section also provides for various methods of service, including service through the Indian embassy and affixation of the summons. The Court noted that the word “person” in Section 65 includes a company, which is a juristic person and a legal entity. The Court asserted that the court must apply its judicial mind and make inquiries before declaring the summons as duly served and in the present case, since conventional service failed due to the unknown whereabouts of opposite party 1, Substitute Service should have been allowed.\\<\/p>\n

    “Company Status “Strike Off” is a legal process, that a company’s directors can initiate to close the business officially. When a business is voluntarily struck off, it is removed from the official register of companies, and its legal existence is ended.”<\/p>\n

    The Court noted that “Once the strike-off order is issued, the company’s name will be removed from the Registrar’s records and the company will no longer exist. This means that the company’s assets will be distributed among its creditors according to the terms of the strike-off order.”<\/span> The Court asserted that the liability for the dishonored cheque extends to the directors of the struck-off company as they were responsible for the company’s affairs when the offense occurred. The Court held that the company’s dissolution does not absolve its directors of liability for offenses committed while the company was operational.<\/p>\n

    Court’s Decision<\/p>\n

    While allowing the revision application and setting aside the order of trial court, the Court directed the trial court to proceed against the directors of the “strike off” company in accordance with the law. All connected applications were disposed of, and any interim orders were vacated.<\/p>\n

    [Biman Bangladesh Airlines Ltd. v. Kuka Travels (P) Ltd., 2024 SCC OnLine Cal 2142<\/a>, order dated 28-02-2024<\/span>]<\/p>\n

    *Judgment by Justice Shampa Dutt (Paul)<\/span><\/strong><\/p>\n\n

    Advocates who appeared in this case :<\/p>\n

    Mr. Partha Chakraborty, Ms. Poulami Dutta, Counsel for the Appellant<\/p>\n

    Mr. Aasish Choudhury, Ms. Minal Palana, Ms. Meera Agarwal, Counsel for the Opposite Pary 2 and 3<\/p>\n

    None, Counsel for the Opposite Pary 1\/State<\/p>\n

    Buy Code of Criminal Procedure, 1973  HERE<\/a><\/h3>\n

    \"Code<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    The Calcutta High Court opined that the trial court failed to consider the provisions of Section 65 which allow for alternate methods of service when due diligence fails.<\/p>\n","protected":false},"author":67514,"featured_media":314821,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[2689,58955,65954,59921,30798,65955],"class_list":["post-315798","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-Calcutta_High_Court","tag-directors-liability","tag-dishonored-cheque-lies","tag-justice-shampa-dutt-paul","tag-struck-off","tag-substituted-service"],"yoast_head":"\nDirector\u2019s Liability for dishonored cheque, despite company\u2019s \u201cstruck-off\u201d status: Calcutta High Court | SCC Times<\/title>\n<meta name=\"description\" content=\"Director\u2019s 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