M/S Chadalavada Infratech Ltd. Vs M/S Southern Power Equipement

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NC: 2026:KHC:7926 CRL.RP No. 1308 of 2016 C/W CRL.RP No. 1309 of 2016 CRL.RP No. 1310 of 2016

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10^TH DAY OF FEBRUARY, 2026 BEFORE

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THE HON'BLE MR. JUSTICE S VISHWAJITH SHETTY CRIMINAL REVISION PETITION NO. 1308 OF 2016 C/W

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CRIMINAL REVISION PETITION NO. 1309 OF 2016, CRIMINAL REVISION PETITION NO. 1310 OF 2016

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IN CRL.RP No. 1308/2016:

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BETWEEN:

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M/S CHADALAVADA INFRATECH LTD NO.8-3-988/19, SBH COLONY SRINAGAR COLONY HYDERABAD - 560 073.

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SRI RAVINDRABABU CHADALAVADA MANAGING DIRECTOR M/S CHADALAVADA INFRATECH LTD NO.8-3-988/19, SBH COLONY SRINAGAR COLONY

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HYDERABAD - 560 073.

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Digitally signed by NANDINI M S Location: HIGH COURT OF KARNATAKA

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SRI V. SUBBARAO DIRECTOR M/S CHADALAVADA INFRATECH LTD FLAT NO.302, S.S. ARCADE UPSTAIRS OF MAGMA SUPER MARKET 6TH PHASE, KPHB COLONY HYDERABAD - 560 072.

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SMT. M. RAJYA LAKSHMI DIRECTOR, M/S CHADALAVADA INFRATECH LTD. H.NO. 7404(UI) GUPTAS, SYNPHONY APARTMENTS VIP ROAD, LAWYERPET, ONGOLE HYDERABAD - 560 001.

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NOTE: ACCUSED NOS. 3 & 5 ARE NOT ARRAYED AS THE PRESENT REVISION AS THEY ARE NOT ON THE ROLL OF

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NC: 2026:KHC:7926 CRL.RP No. 1308 of 2016 C/W CRL.RP No. 1309 of 2016 CRL.RP No. 1310 of 2016

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HC-KAR

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THE ACCUSED COMPANY AS THE DIRECTORS AT PRESENT.

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…PETITIONERS

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(BY SMT. SOFIYA, FOR P-2 & P-4 (NOC) V/O/D 24.06.2025 P-3 IS DISMISSED AS ABATED)

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AND:

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M/S SOUTHERN POWER EQUIPEMENT CO PVT LTD. REGISTERED OFFICE / WORKS AT NO.42, 5TH MILE, TUMKURU ROAD YESHWANTHPURA BENGALURU - 560 022 REPRESENTED BY ITS AUTHORISED REPRESENTATIVE SRI C.S. PEREIRA.

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…RESPONDENT

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(BY SRI MARIO NOEL D'ROZARIO, ADV.)

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THIS CRL.RP IS FILED U/S.397 R/W 401 CR.P.C PRAYING TO SET ASIDE THE JUDGMENT DATED 09.08.2016 PASSED BY LXVII ADDL. CITY CIVIL AND S.J., BANGALORE (CCH-68) IN CRL.A.NO.743/2015 AND SET ASIDE THE CONSEQUENTIAL JUDGMENT DATED 05.05.2015 PASSED BY XXV ACMM, BANGALORE IN C.C.NO.7937/2012.

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IN CRL.RP NO. 1309/2016:

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BETWEEN:

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M/S CHADALAVADA INFRATECH LTD NO.8-3-988/19, SBH COLONY SRINAGAR COLONY HYDERABAD - 560 073.

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SRI RAVINDRABABU CHADALAVADA MANAGING DIRECTOR M/S CHADALAVADA INFRATECH LTD NO.8-3-988/19, SBH COLONY SRINAGAR COLONY HYDERABAD - 560 073.

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SRI V. SUBBARAO DIRECTOR M/S CHADALAVADA INFRATECH LTD

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NC: 2026:KHC:7926 CRL.RP No. 1308 of 2016 C/W CRL.RP No. 1309 of 2016 CRL.RP No. 1310 of 2016

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HC-KAR

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FLAT NO 302, S.S. ARCADE UPSTAIRS OF MAGMA SUPER MARKET 6TH PHASE KPHB COLONY, HYDERABAD - 560 072.

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SMT. M. RAJIYA LAKSMI DIRECTOR M/S CHADALAVADA INFRATECH LTD. H.NO.74044(UI), GUPTAS, SYMPHONY APARTMENTS VIP ROAD LAWYWEPET, ONONOLE HYDERABAD-56001.

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NOTE: ACCUSED NOS. 3 & 5 ARE NOT ARRAYED AS THE PRESENT REVISION AS THEY ARE NOT ON THE ROLL OF THE ACCUSED COMPANY AS THE DIRECTORS AT PRESENT.

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...PETITIONERS

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(BY SMT. SOFIYA, ADV., FOR P-2 & P-4 (NOC), ADV. V/O/D 24.06.2025 P-3 IS DISMISSED AS ABATED)

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AND:

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M/S SOUTHERN POWER EQUIPMENT CO PVT LTD, REGISTERED OFFICE WORKS AT NO 42, 5TH MILE, TUMKURU ROAD YESHWANTHPUR, BENGALURU - 560 022 REPRESENTED BY ITS AUTHORISED REPRESENTATIVE SRI C.S. PEREIRA.

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...RESPONDENT

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(BY SRI MARIO NOEL D'ROZARIO, ADV.)

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THIS CRL.RP IS FILED U/S.397 R/W 401 CR.P.C BY THE ADVOCATE FOR THE PETITIONER PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO SET ASIDE THE JUDGMENT DATED 09.08.2016 PASSED BY LXVII ADDL. CITY CIVIL AND S.J., BANGALORE (CCH-68) IN CRL.A.NO.745/2015 AND SET ASIDE THE CONSEQUENTIAL JUDGMENT DATED 05.05.2015 PASSED BY XXV ACMM, BANGALORE IN C.C.NO.5900/2012.

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IN CRL.RP NO. 1310/2016:

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BETWEEN:

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M/S CHADALAVADA INFRATECH LTD NO.8-3-988/19,SBH COLONY SRINAGAR COLONY HYDERABAD - 560 073.

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NC: 2026:KHC:7926 CRL.RP No. 1308 of 2016 C/W CRL.RP No. 1309 of 2016 CRL.RP No. 1310 of 2016

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HC-KAR

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SRI RAVINDRABABU CHADALAVADA MANAGING DIRECTOR M/S. CHADALAVADA INFRATECH LTD., NO.8-3-988/19, SBH COLONY SRINGAR COLONY HYDERABAD - 560 073.

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SRI V. SUBBARAO DIRECTOR M/S CHADALVADA INFRATECH LTD FLAT NO.302, S.S. ARCADE UPSTAIRS OF MAGAMA SUPER MARKET 6TH PHASE, KPHB COLONY HYDERABAD - 560 072.

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SMT. M. RAJIYA LAKSMI DIRECTOR M/S CHADALAVADA INFRATECH LTD., H.NO.74044(UI), GUPTAS, SYMPHONY APARTMENTS, VIP ROAD, LAWYWEPET ONGOLE, HYDERABAD - 560 001.

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NOTE: ACCUSED NOS. 3 & 5 ARE NOT ARRAYED AS THE PRESENT REVISION AS THEY ARE NOT ON THE ROLL OF THE ACCUSED COMPANY AS THE DIRECTORS AT PRESENT.

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...PETITIONERS

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(BY SMT. SOFIYA, ADV., FOR P-2 & P-4 (NOC), ADV. V/O/D 24.06.2025 P-3 IS DISMISSED AS ABATED)

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AND:

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M/S SOUTHERN POWER EQUIPEMENT CO. PVT. LTD. REGISTERED OFFICE / WORKS AT NO.42, 5TH MILE, TUMKURU ROAD YESHWANTHPUR, BENGALURU - 560 022 REPRESENTED BY ITS AUTHORISED REPRESENTATIVE SRI C.S. PEREIRA.

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...RESPONDENT

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(BY SRI MARIO NOEL D'ROZARIO, ADV.)

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THIS CRL.RP IS FILED U/S.397 R/W 401 CR.P.C PRAYING TO SET ASIDE THE JUDGMENT DATED 09.08.2016 PASSED BY LXVII ADDL. CITY CIVIL AND S.J., BANGALORE (CCH-68) IN CRL.A.NO.744/2015 AND SET ASIDE THE CONSEQUENTIAL

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NC: 2026:KHC:7926 CRL.RP No. 1308 of 2016 C/W CRL.RP No. 1309 of 2016 CRL.RP No. 1310 of 2016

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HC-KAR

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JUDGMENT DATED 05.05.2015 PASSED BY XXV ACMM, BANGALORE IN C.C.NO.5901/2012.

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THESE PETITIONS, COMING ON FOR FURTHER HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE S VISHWAJITH SHETTY

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ORAL COMMON ORDER

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These three revision petitions are arise between the

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same parties and since the subject matter of the revision petitions are inter connected, the revision petitions are heard together and disposed of by this common order, with the consent of learned counsel appearing for the parties.

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Heard the learned counsel appearing for the parties.

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Petitioner no.1 is the Company and petitioner no.2 is the Managing Director of petitioner no.1-Company. Petitioner nos.3 and 4 are the Directors of petitioner no.1 - Company. During the pendency of these petitions, petitioner no.3 has died and therefore, revision petition as against him stands abated.

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Respondent - Company had initiated three separate

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proceedings against the petitioner's and others before the jurisdictional Court of Magistrate in Bangalore in C.C.No.5901

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of 2012, C.C.No.5900 of 2012 and C.C.No.7937 of 2012. In the said proceedings, the accused were convicted and sentenced by the Trial Court for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short "N.I. Act) and in each case, the accused were sentenced to pay fine of ₹.1,50,00,000/- and in default, accused nos.2 to 6 were directed to undergo simple imprisonment for a period of one year. The said judgment and order of conviction and sentence passed by the Trial Court in C.C.No.7937 of 2012, C.C.No.5900 of 2012 and C.C.No.5901 of 2012 was confirmed by the Court of LXVII Additional City Civil and Sessions Judge, Bangalore in Criminal Appeal No.744 of 2015, Crl.A.No.745 of 2015 and Crl.A.No.743 of 2015 respectively. It is under these circumstances accused nos. 1, 2, 4 and 6 are before this Court in these three revision petitions namely Crl.R.P.No.1308 of 2016, Crl.R.P.No.1309 of 2016 and Crl.R.P.No.1310 of 2016 respectively.

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Learned counsel for the petitioners after reiterating the grounds urged in the petition submits that, during the pendency of these revision petitions, accused no.1 - Company

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has been liquidated. Accused no.4 / petitioner no.3 has died during the pendency of these petitions. Accused no.6 / petitioner no4 is neither a signatory to the cheques in question, which are subject matter of the proceedings initiated in C.C.No.5901 of 2012, C.C.No.5900 of 2012 and C.C.No.7937 of 2012 nor there is any material to show that accused no.6 was actively participating in the day to day management affairs of the accused no.1 - Company. The Courts below were therefore not justified in convicting and sentencing accused no.6 for alleged offence. She submits that, substantial amount has been received by the respondent / complainant, in COS No.13 of 2017 (old O.S.No.751 of 2014) and the amount received by the respondent / complainant is required to be adjusted towards the fine amount imposed by the Trial Court in the present proceedings. She submits that, since accused no.1 - Company has been liquidated in view of the provisions of the Insolvency and Bankruptcy Code, 2016, the Managing Director and the Directors of the liquidated Company cannot be convicted for offence punishable under Section 138 of the N.I. Act. Accordingly, she prays to allow the petitions.

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Per contra , learned counsel appearing for the respondent has argued in support of impugned judgment and order of conviction and sentence passed by the Courts below. He submits that, liquidation proceedings against the accused no.1 - Company was initiated only during the pendency of these revision petitions before this Court. It is only the Company, which is liquidated and the Managing Directors and the Directors of the Company are liable for the offence that was committed by them under Section 138 of the N.I. Act. He submits that, law in this regard has been laid down by the Hon'ble Supreme Court in the case of AJAY KUMAR RADHESHYAM GOENKA V. TOURISM FINANCE CORPORATION OF INDIA LTD., - CRIMINAL APPEAL NO.170 OF 2023 DTD. 15.03.2023 . However, he does not dispute that insofar as accused no.6 is concerned there is no sufficient material to prosecute her for the offence punishable under Section 138 of N.I. Act.

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Complainant Company has initiated three separate proceedings against the accused in the present case for the offence punishable under Section 138 of N.I. Act, namely

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C.C.No.5901 of 2012, C.C.No.5900 of 2012 and C.C.No.7937 of

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2012 alleging that the accused no..1 Company had placed purchase orders, with the respondent Company for supply of MVA Transformers and though the complainant Company had supplied the MVA Transformers for which purchase orders were placed by the accused no.1 Company, the accused no.1 Company had failed to honor their commitment under the letter of credit, which was opened. Subsequently, the parties had negotiated regarding payment of amount that was due by the accused no.1 Company and an agreement dated 02.11.2011 was executed between the parties, where the accused had undertaken to pay the outstanding amount with interest at the rate of 18% per annum and the cheques in question were issued by the accused no.1 Company towards payment of the agreed amount under the agreement dated 02.11.2011. The said cheques when presented for realization were dishonored by the drawee bank for the reason "Funds insufficient" in the bank account of the accused no.1 Company. It is under these circumstances, statutory legal notice was got issued to the accused no.1 Company and its Directors, calling upon them to pay the amount covered under the cheques in question. In

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spite of service of statutory legal notice, since the accused had

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failed to repay the amount covered under the cheques in question, three separate proceedings were initiated on behalf of the complainant Company against the accused for offence punishable under Section 138 of N.I. Act. In the said proceedings, the accused had claimed to be tried and therefore, the complainant had examined its Managing Director and authorized representative as PW1 and also had got marked several documents. On behalf of the defence, accused no.2 was examined as DW1. However, no documentary evidence was placed on the record.

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It is not in dispute that the cheque in question was drawn on the bank account of the accused no.1 Company maintained by it in State Bank of India, Nacharam Industrial Area, Hyderabad, Andhra Pradesh and it is also not in dispute that the cheques in question were signed only by accused no.2 and 3, namely Raveendrababu Chadalwada and T.V. Subbayya. There is absolutely no material produced by the complainant Company before the Trial Court to show that except accused nos.2 and 3, the other accused persons were also participating

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in the day to day affairs of the accused no.1 Company. As a matter of fact, no such averment is also found in the complaint that was filed before the Trial Court.

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Insofar as accused nos.1 to 3 are concerned, the issuance of cheques and the signature found in the cheques was not in dispute. The only defence that the accused had raised before the Trial Court was that the MVA Transformers which were supplied by the complainant Company to the accused were defective and not properly functioning.

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It is necessary to note here that, after the MVA Transformers were supplied, an agreement dated 02.11.2011 was executed between the parties, which is produced and marked as Ex.P11 in C.C.No.5901 of 2012. Perusal of the said document would go to show that, under the said agreement, which was executed undisputedly after the complainant Company had supplied the MVA Transformers to the accused no.1 Company, the payment that was due by the accused Company was acknowledged and the cheques in question were issued in favour of the complainant Company towards the payment that was acknowledged by the accused under Ex.P11.

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Therefore, the defence raised by the accused has no legs to stand.

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The Trial Court as well as the Appellate Court having appreciated the aforesaid aspects of the matter and also since the presumption that arose against the accused under Section 139 r/w 118 of the N.I. Act stood unrebutted have rightly convicted accused nos.1 to 3 for offence punishable under Section 138 of the N.I Act. Insofar as accused no.6, who is petitioner no.4 in these three revision petitions is concerned, undisputedly there is no material available on record to show that she was actively participating in the day-to-day affairs of the accused no.1 Company. It is also not in dispute that, she is not a signatory to the cheques in question. Under the circumstances, I am of the opinion that the Courts below were not justified in convicting accused no.6 / petitioner no.4 in these three revision petitions for offence punishable under Section 138 of the N.I Act.

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Insofar as the contentions raised by learned counsel

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for the petitioners that since accused no.1 Company has been now liquidated, the Managing Director and Directors of the

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accused no.1 Company cannot be convicted and sentenced for offence punishable under Section 138 of N.I. Act is concerned, the law in this regard has been laid down by the Hon'ble Supreme Court in the case of AJAY KUMAR (supra) and in paragraph Nos.51, 52 57 to 59 and 85 of the said judgment, it is observed as follows:-

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"51. What follows from the aforesaid is that for difficulty in prosecuting the corporate debtor under Section 138 of the NI Act after the approval of the resolution plan under the IBC, we need not let the natural persons ie., the signatories to the cheques/directors of the corporate debtor escape prosecution. How can one allow the natural persons to escape liability on such specious plea? In such a situation the Latin maxim Lex Non Cogit Ad Impossibilia is attracted which means law does not compel a man to do which he cannot possibly perform. Broom's "Legal Maxims" contains several illustrative cases in support of the maxim. This maxim has been referred to with approval by this Court in State of Rajasthan v. Shamsher Singh reported in 1985 supp SCC 416.

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52. Thus, where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the directors and the other accused

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cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. They will have to continue to face the prosecution in view of the law laid down in Aneeta Hada (supra). Where the company continues to remain even at the end of the resolution process, the only consequence is that the erstwhile directors can no longer represent it."

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"57. The argument that as the debt stood extinguished by virtue of Section 31 of the IBC, the proceedings under Section 138 of the NI Act cannot continue as regards the di-rector/signatory, would run contrary to the line of reasoning assigned by this Court that the "Involuntary Act" of the principal debtor would not absolve the guarantors.

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58. This Court in Lalit Kumar Jain v. Union of India and Others reported in (2021) 9 SCC 321 has held that the approval of the resolution plan per se does not operate as a discharge of guarantors' liability. That is because:

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a. an involuntary act of the principal debtor leading to loss of security, would not absolve a guarantor of its liability.

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b. a discharge which the principal debtor may secure by operation of law in bankruptcy (or in liquidation proceedings in

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the case of a com-pany) does not absolve the surety of his liability.

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59. The same principle is applicable to the signatory/director in the case 138/141 proceedings. The signatory/director cannot take benefit of discharge obtained by the corporate debtor by operation of law under the IBC.

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60. If the argument that extinguishment of debt under Section 31 of the IBC leads to the discharge of signatory/director under Section 138 proceedings is accepted, same will lead to conflict in law as laid down compared to the guarantor's liability wherein in spite of the plan being approved, the guarantor is held separately liable for the remaining amount. If the guarantor does not get the benefit of extinguishment of debt under Section 31 of the IBC, then similarly for extinguishment fo debt, the signatory/director cannot get any benefit . If accepted, this may led to uncertainty in the first Principles of law on interpretation of extinguishment of debt. In Lalit Kumar Jain (supra) this Court held as under."

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"85. Thus, the upshot of all the decisions referred to above is where the proceedings under Section 138 of the NI Act had already commenced with the Magistrate taking cognizance upon the complaint and during the pendecny, the company gets dissolved, the signatories/directors cannot escape from their penal

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liability under Section 138 of the NI Act by citing its dissolution. What is dissolved, is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act."

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It is brought to the notice of this Court by learned counsel for the petitioners that, the respondent Company has initiated separate civil proceedings to recover the amount due from the accused no.1 Company. According to the learned counsel for the petitioners, in the said proceedings namely, COS No.13 of 2017 (old O.S.No.751 of 2014), the respondent Company has received a substantial amount from the State Bank of India, which is defendant no.2 in the said proceedings and therefore, the said amount is required to be adjusted towards the fine amount to be paid by the accused in the present case. She also submits that, certain amount has been also deposited by the accused before the Trial Court in terms of the orders passed by the Appellate Court in Criminal Appeal No.743/2015, Crl.A.No.745/2015 and Crl.A.No.744 of 2015 and the said amounts were withdrawn by the respondent complainant.

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Learned counsel for the respondent Company, who

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has admitted withdrawal of the amount that was deposited during the pendency of the aforesaid three Criminal appeals submits that, the amounts that is received by the respondent Company in COS No.13 of 2017 (old O.S.No.751 of 2014) is subject to the result of the said proceedings and therefore, at this stage the said amount cannot be adjusted towards the fine amount to be paid by the accused.

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Be that as it may, at this stage this Court will not go to the disputed question of payment received by the respondent Company. It is always open to the parties to work out the said aspect of the matter under Section 357(5) of Cr.P.C, in the execution proceedings that may be initiated by

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the respondent complainant before the jurisdictional Court of Magistrate to execute the order of sentence passed in these three cases.

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Accordingly, the following:-

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ORDER

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i. Criminal revision petitions are allowed in part.

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ii. The impugned judgment and order of conviction

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and sentence passed by the Courts below in these three revision petitions is confirmed as against petitioner no. 2 / accused no.2 is concerned and is set aside as against Petitioner no.4 / accused no.6.

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iii. Petitioner no.4 / accused no.6 in C.C.No.79372012, C.C.No.5900/2012 and

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C.C.No.5901/2012 is acquitted of the offence punishable under Section 138 of the Negotiable Instruments Act and her bail bonds, if any stands cancelled.

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iv. The proceedings as against petitioner no.3 / accused No.4 stands abated since he has died during the pendency of this revision petitions.

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Sd/(S VISHWAJITH SHETTY) JUDGE

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NMS

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List No.: 1 Sl No.: 35

M/S Chadalavada Infratech Ltd. v. M/S Southern Power Equipement

Case brief

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M/S Chadalavada Infratech Ltd. v. M/S Southern Power Equipement

Case brief

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