Ortho Relief Hospital And Research Centre Vs Anand Distilleries (Bombay High Court)
Case Background and Facts: The present case involves a challenge under Articles 226 and 227 of the Constitution of India by Ortho Relief Hospital and Research Centre (petitioner) against the discharge of respondent directors in a complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The respondents include Anand Distilleries (Company) and its directors, who controlled the company’s financial and business operations. The dispute arose from a short-term loan of Rs. 15 lakh extended by the petitioner to the company through its directors, who issued a post-dated cheque as security. The cheque, drawn on Cosmos Bank, Amravati, was signed by respondent no.2 as Director and Authorized Signatory. Interest was paid initially, but payments ceased after January 2018.
In February 2018, the petitioner became aware of insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IB Code) initiated by Punjab National Bank against Anand Distilleries. The National Company Law Tribunal (NCLT) admitted the insolvency petition and appointed an Interim Resolution Professional (IRP). The petitioner submitted a claim to the IRP but received no communication regarding repayment. Subsequently, the petitioner attempted to encash the cheque, which was dishonored on 14.12.2018 due to insufficient funds. A legal notice was issued on 05.01.2019, and the complaint under Section 138 NI Act, along with Sections 406 and 420 of the IPC, was filed on 18.02.2019 (Criminal Complaint No. 7281/2019).
Lower Court Orders:
Respondent directors filed an application (Exh.39) seeking discharge from the Section 138 complaint on the basis of prior IB Code proceedings. The trial court allowed the application, discharging the directors from liability, and further held the complaint against the company as non-maintainable, effectively closing the case.
Petitioner’s Arguments:
The petitioner contended that proceedings under the NI Act and IB Code are distinct. The NI Act proceedings are penal, not recovery-oriented, and thus independent of insolvency processes. The petitioner argued that directors are personally liable under Section 138 and cannot evade responsibility by merely citing corporate insolvency. The petitioner also emphasized that a resolution plan under the IB Code does not absolve criminal liability, and closing the Section 138 proceedings against natural persons was erroneous. The petitioner relied on several Supreme Court judgments, including:
