Dishonour of Cheque--Director Not Liable Where Provisional Liquidator Appointed Before Cause of Action Crystallises Rendering Account Operation Legally Impossible
A director of a company cannot be held liable for dishonour of cheque , where the company's bank accounts were placed under the control of a Provisional Liquidator before the cause of action crystallised. Appointment of a Provisional Liquidator renders the Board of Directors functus officio by operation of law, divesting directors of authority to operate or maintain company accounts. The expression "account maintained by him" under Section 138 implies a continuous and affirmative authority to govern financial transactions, which ceases upon liquidation. Inability to honour the cheque in such circumstances constitutes legal and practical impossibility, and the essential ingredients of the offence are not satisfied -- Negotiable Instruments Act, 1881, S.138
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