- 1 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF MARCH, 2026 BEFORE THE HON'BLE MR. JUSTICE R. NATARAJ CRIMINAL PETITION NO. 3503 OF 2018 C/W CRIMINAL PETITION NO. 3502 OF 2018, CRIMINAL REVISION PETITION NO. 442 OF 2018, CRIMINAL REVISION PETITION NO. 443 OF 2018 IN CRL.P No. 3503/2018 BETWEEN: SRI. RAJARAM KHANDIGE SON OF LATE DR. KRISHNA BHAT AGED ABOUT 68 YEARS, RESIDING AT NO.28, 5TH CROSS, KORAMANGALA BANGALORE-560 095. …PETITIONER (BY MISS/SMT. DHANUSHRI R., ADVOCATE FOR SRI. R. KIRAN, ADVOCATE) AND: 1. KARNATAKA FINANCIAL SERVICES LIMITED NO.13, KRISHNA REDDY LAYOUT DOMLUR, BANGALORE-560 038 COMPANY IS UNDER LIQUIDATION AS PER THE ORDERS HON'BLE HIGH COURT OF KARNATAKA CO.P. NO.178/2004 BEFORE WINDING UP EARLIER REPRESENTED BY ITS EXECUTIVE DIRECTOR SRI. RAJARAM KHANDIGE SON OF LATE DR. K.KRISHNA BHAT PRESENTLY REPRESENTED BY OFFICIAL LIQUIDATOR ATTACHED TO HIGH COURT OF KARNATAKA RAHEJA TOWERS, 11TH FLOOR, NEAR KIDS KEMP, MAHATMA GANDHI ROAD, BANGALORE-560 001. Digitally signed by HEMALATHA J Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER 2. SRI. SURESH M. SHENOY SON OF C.M.SHENOY, DIVISIONAL MANAGER OF M/S K.F.S.L., RESIDING AT CHANAPPA LAYOUT, GANDHINAGAR MAIN ROAD, SHIMOGA-577 201 3. S.B.ANGADI SON OF B.BASALINGAPPA, AGED ABOUT 49 YEARS, ACCOUNTS OFFICER AND AUTHORISED SIGNATORY, M/S. K.S.F.L., AKKAMAHADEVI ROAD, II MAIN, P.J. EXTN., DAVANGERE 4. SMT. T.N.SHEELA WIFE OF DR. T.G.NIRANJAN AGED ABOUT 57 YEARS, RESIDENT OF NO.3267, SHAMANUR ROAD, MCC 'B' BLOCK, DAVANGERE-577202. …RESPONDENTS (BY SRI. K.S.MAHADEVAN, ADVOCATE FOR RESPONDENT NO.1; SRI. MANMOHAN P.N., ADVOCATE FOR RESPONDENT NOS.2 AND 3; SRI. UMESH MOOLIMANI, ADVOCATE FOR SRI. S.V.PRAKASH, ADVOCATE FOR RESPONDENT NO.4) THIS CRL.P IS FILED UNDER SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE ORDER DATED 15.03.2018 PASSED BY THE PRINCIPAL SENIOR CIVIL JUDGE AND C.J.M., DAVANAGERE IN C.C.NO.1943/2009 (ANNEXURE-D) AND ETC. IN CRL.P NO. 3502/2018 BETWEEN: 1. SRI. RAJARAM KHANDIGE SON OF LATE DR.KRISHNA BHAT AGED ABOUT 68 YEARS, R/AT NO.28, 5TH CROSS, KORAMANGALA - 3 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER BANGALORE-560 095. ...PETITIONER (BY MISS/SMT. DHANUSHRI R., ADVOCATE FOR SRI. R. KIRAN, ADVOCATE) AND: 1. KARNATAKA FINANCIAL SERVICES LIMITED NO.13, KRISHNA REDDY LAYOUT DOMLUR, BANGALORE-560 038 COMPANY IS UNDER LIQUIDATION AS PER THE ORDERS HON'BLE HIGH COURT OF KARNATAKA CO.P NO.178/2004 BEFORE WINDING UP EARLIER REPRESENTED BY ITS EXECUTIVE DIRECTOR SRI. RAJARAM KHANDIGE SON OF LATE DR. K.KRISHNA BHAT PRESENTLY REPRESENTED BY OFFICIAL LIQUIDATOR ATTACHED TO HIGH COURT OF KARNATAKA RAHEJA TOWERS, 11TH FLOOR, NEAR KIDS KEMP, MAHATMA GANDHI ROAD, BANGALORE-560 001. 2. SRI. SURESH M. SHENOY SON OF C.M.SHENOY, DIVISIONAL MANAGER OF M/S. K.F.S.L., RESIDING AT CHANAPPA LAYOUT, GANDHINAGAR MAIN ROAD, SHIMOGA-577 201 3. S.B.ANGADI SON OF B.BASALINGAPPA, AGED ABOUT 49 YEARS, ACCOUNTS OFFICER AND AUTHORISED SIGNATORY, M/S. K.S.F.L, AKKAMAHADEVI ROAD, II MAIN, P.J. EXTN., DAVANAGERE 4. SRI. DR. T.G.NIRANJAN SON OF GURUSIDDAPPA AGED ABOUT 67 YEARS, RESIDENT OF NO.3267, SHAMANUR ROAD, MCC 'B' BLOCK, DAVANGERE-577202. - 4 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER ...RESPONDENTS (BY SRI. K.S.MAHADEVAN, ADVOCATE FOR RESPONDENT NO.1; SRI. MANMOHAN P.N., ADVOCATE FOR RESPONDENT NOS.2 AND 3; SRI. UMESH MOOLIMANI, ADVOCATE FOR SRI. S.V.PRAKASH, ADVOCATE FOR RESPONDENT NO.4) THIS CRL.P IS FILED UNDER SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO QUASH THE ORDER DATED 15.03.2018 PASSED BY THE PRINCIPAL SENIOR CIVIL JUDGE AND C.J.M., DAVANAGERE IN C.C.NO.1432/2009 (ANNEXURE-D) AND ETC. IN CRL.RP NO. 442/2018 BETWEEN: 1. SURESH M. SHENOY S/O C.M. SHENOY AGED 56 YEARS, PRESENTLY R/A CHANNAPPA LAYOUT, GANDHI NAGAR MAIN ROAD, SHIMOGA-577001. 2. S.B. ANGADI S/O B. BASALINGAPPA, AGED 48 YEARS, PRESENTLY R/A. NO. 3143/2, 9TH MAIN, 4TH CROSS, M.C.C. 'B' BLOCK, DAVANAGERE-577001. ...PETITIONERS (BY SRI. MANMOHAN P.N., ADVOCATE) AND: 1. SMT. T.N. SHEELA AGED 57 YEARS, W/O DR. T.G. NIRANJAN R/A NO.3267, SHAMANUR ROAD, - 5 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER MCC 'B' BLOCK, DAVANAGERE-577001. 2. M/S. KARNATAKA FINANCIAL SERVICES LTD., NO.13, KRISHNA REDDY LAYOUT, DOMLUR, BENGALURU-560029. THE COMPANY IS UNDER LIQUIDATION AS PER ORDERS OF THE HIGH COURT OF KARNATAKA IN COMPANY PETITION NO. 178/2004. REPRESENTED BY ITS EXECUTIVE DIRECTOR SRI. RAJARAM KHANDIGE S/O. LATE DR. K. KRISHNA BHAT AGED ABOUT 67 YEARS, ...RESPONDENTS (BY SRI. UMESH MOOLIMANI, ADVOCATE FOR SRI. S.V.PRAKASH, ADVOCATE FOR RESPONDENT NO.1; SRI. K.S.MAHADEVAN, ADVOCATE FOR RESPONDENT NO.2) THIS CRL.R.P IS FILED UNDER SECTION 401 READ WITH SECTION 397 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO SET ASIDE THE JUDGMENT AND ORDER DATED 17.10.2014 PASSED IN C.C.NO.1943/2009 PASSED BY THE PRINCIPAL SENIOR CIVIL JUDGE AND C.J.M., DAVANAGERE AND THE JUDGMENT AND ORDER DATED 15.02.2018 PASSED IN CRL.A.NO.126/2014 PASSED BY THE COURT OF THE I ADDITIONAL DISTRICT AND SESSIONS JUDGE, DAVANAGERE AND CONSEQUENTLY DISMISS C.C.NO.1943/2009. IN CRL.RP NO. 443/2018 BETWEEN: 1. SURESH M. SHENOY S/O C.M. SHENOY, AGED 56 YEARS, PRESENTLY R/A. CHANNAPPA LAYOUT, GANDHI NAGAR MAIN ROAD, SHIMOGA-577001. - 6 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER 2. S.B.ANGADI S/O B. BASALINGAPPA, AGED 48 YEARS PRESENTLY R/A NO.3143/2, 9TH MAIN, 4TH CROSS, M.C.C. 'B' BLOCK, DAVANAGERE-577001. ...PETITIONERS (BY SRI. MANMOHAN P.N., ADVOCATE) AND: 1. DR. T.G. NIRANJAN S/O GURUSIDDAPPA, AGED ABOUT 64 YEARS, DOCTOR BY PROFESSION, R/A. NO.3267, SHAMANUR ROAD, MCC 'B' BLOCK, DAVANAGERE-577001. 2. M/S. KARNATAKA FINANCIAL SERVICES LTD. NO.13, KRISHNA REDDY LAYOUT, DOMLUR, BENGALURU-560029 THE COMPANY IS UNDER LIQUIDATION AS PER ORDERS OF THE HIGH COURT OF KARNATAKA IN COMPANY PETITION NO.178/2004 REPRESENTED BY ITS EXECUTIVE DIRECTOR, SRI. RAJARAM KHANDIGE, S/O LATE DR. K.KRISHNA BHAT, AGED ABOUT 67 YEARS ...RESPONDENTS (BY SRI. UMESH MOOLIMANI, ADVOCATE FOR SRI. S.V.PRAKASH, ADVOCATE FOR RESPONDENT NO.1; SRI. K.S.MAHADEVAN, ADVOCATE FOR RESPONDENT NO.2) THIS CRL.R.P IS FILED UNDER SECTION 401 READ WITH SECTION 34 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO SET ASIDE THE JUDGMENT AND ORDER DATED 17.10.2014 PASSED IN C.C.NO.1432/2009 PASSED BY THE PRINCIPAL SENIOR CIVIL JUDGE AND C.J.M., DAVANAGERE AND - 7 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER THE JUDGMENT AND ORDER DATED 15.02.2018 PASSED IN CRL.A.NO.125/2014 PASSED BY THE COURT OF THE I ADDITIONAL DISTRICT AND SESSIONS JUDGE, DAVANAGERE AND CONSEQUENTLY DISMISS C.C.NO.1432/2009. THESE PETITIONS, COMING ON FOR ADMISSION, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE R. NATARAJ ORAL ORDER Crl.P. No.3502/2018 is filed by the director of accused No.1 in C.C.No.1432/2009 challenging the order dated 15.03.2018 passed by the Principal Senior Civil Judge and Chief Judicial Magistrate, Davanagere in C.C. No.1432/2009, taking cognizance of an offence punishable under Section 138 of Negotiable Instruments Act, 1881 (henceforth referred to as 'N.I. Act' for short). He has also challenged an order dated 30.04.2018 rejecting an application filed by him under Section 70(2) of Criminal Procedure Code (Cr.P.C). 2. Crl.P. No.3503/2018 is filed by the director of accused No.1 in C.C.No.1943/2009 challenging the order dated 15.03.2018 passed by the Principal Senior Civil Judge and Chief Judicial Magistrate, Davanagere (henceforth referred as 'Trial - 8 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER Court') in C.C. No.1943/2009, taking cognizance of an offence punishable under Section 138 of the N.I. Act. He has also challenged an order dated 30.04.2018 rejecting an application filed by him under Section 70(2) of Criminal Procedure Code (Cr.P.C). 3. Crl.R.P.No.442/2018 is filed by accused Nos.2 and 3 challenging the judgment of conviction and order of sentence dated 17.10.2014 passed in C.C.No.1943/2009 passed by the Trial Court and the order dated 15.02.2018 passed in Crl.A.No.126/2014 by I Additional District and Sessions Judge, Davangere (henceforth referred as 'Revisional Court'). 4. Crl.R.P.No.443/2018 is filed by accused Nos.2 and 3 challenging the judgment of conviction and order of sentence dated 17.10.2014 passed in C.C.No.1432/2009 passed by the Trial Court and the Order dated 15.02.2018 passed in Crl.A.No.125/2014 by Revisional Court. 5. The petitioner in Crl.P.Nos.3502/2018 and 3503/2018 was the Executive Director of Karnataka Financial Services Ltd., (accused No.1) while, the petitioners in Crl.R.P.Nos.442/2018 and 443/2018 were the divisional - 9 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER manager and the accounts officer of accused No.1 respectively of Karnataka Financial Services Ltd., (accused No.1). 6. Respondent No.1 in Crl.R.P.Nos.442/2018 and 443/2018 and respondent No.4 in Crl.P.No.3502/2018, and Crl.P.No.3503/2018 filed PCR No.367/2002 and PCR No.368/2002 against the accused Nos.1 to 3 alleging offences punishable under Section 138 of the N.I.Act. The Trial Court took cognizance of the offences and issued process. The accused entered appearance and were granted bail. The Trial Court recorded the evidence of the complainants in all the cases and thereafter, recorded the statement of the accused under Section 313 of Criminal Procedure Code. The Trial Court thereafter passed the judgments of conviction and order of sentence, convicting the accused Nos.2 and 3 for the offences punishable under Section 138 of the N.I. Act and sentenced them to undergo simple imprisonment for a period of six months and to pay a fine of Rs.11,66,400/- in C.C.No.1432/2009 and Rs.6,14,000/- in C.C.No.1943/2009, in default to undergo simple imprisonment for a period of one month. The accused Nos.2 and 3 challenged the aforesaid - 10 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER judgment of conviction and order of sentence before the Revisional Court in Crl.A.Nos.125/2014 and 126/2014 which were also dismissed in terms of an order dated 15.02.2018. 7. Being aggrieved by the said judgment of conviction and order of sentence and the judgment of the District Court, Crl.R.P. Nos.442/2018 and 443/2018 are filed. The earlier director of accused No.1 in PCR No.367/2008 and 368/2008 has filed Crl.P. Nos.3502/2018 and 3503/2018 challenging the proceedings initiated to prosecute him for an offence under Section 138 of NI Act. 8. Learned counsel for the petitioner in Crl.P.Nos.3502/2018 and 3503/2018 submitted that the Karnataka Financial Services Limited was already under liquidation and therefore the proceedings against the company as well as its directors were not maintainable. He invited the attention of the Court to Company Petition No.178/2004 where a Coordinate bench of this Court by the order dated 18/20.07.2005, ordered that Karnataka Financial Services Limited be wound up. He therefore contends that the judgment - 11 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER of conviction and order of sentence passed by the Trial Court on 17.10.2014 is without authority of law. 9. The learned counsel for the petitioners in Crl.R.P.Nos.442/2018 and 443/2018 specifically contended that the petitioners were only divisional manager and accounts officer of the company, respectively, and were in no way responsible for the conduct of the business of the company, but were only employees of the company. Therefore, they could not have been prosecuted for an offence punishable under Section 138 of N.I. Act. In this regard, he relied upon the judgment of the Hon'ble Apex Court in Shri Gurudatta Sugars Marketing Pvt. Ltd. Vs. Prithviraj Sayajirao, Deshmukh and Others - (2024) 246 Comp Cas 1, where it is held that an authorized signatory does not become the drawer of the cheque and cannot be prosecuted for an offence punishable under Section 138 of the N.I. Act. He therefore submits that the impugned judgment of conviction and order of sentence passed by the Trial Court and affirmed by the Revisional Court are liable to be set aside. - 12 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER 10. (i) Per contra, the learned counsel for the contesting respondent submitted that the petitioner in Crl.P. Nos.3502/2018 and 3503/2018 was the director of the company and was responsible for the conduct of the business of the company and therefore the Trial Court was justified in taking cognizance of an offence punishable under Section 138 of the N.I. Act. He contends that mere winding up of a company would not absolve the criminal liability of its directors. He therefore submits that the judgment of conviction and order of sentence passed by the Trial Court and affirmed by the Revisional Court are just and proper. (ii) As regards the contention of the learned counsel for the petitioners, in Criminal Petition Nos.442/2018 and 443/2018, he contends that though they were employees of the company, they were in charge of and responsible for the conduct of the business of the company and hence they were liable for prosecution. 11. I have considered the submissions of the learned counsel for the petitioners as well as the learned counsel for the contesting respondent. - 13 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER 12. A copy of the order dated 18/20.07.2005 passed in Company Petition No.178/2004 furnished by the learned counsel for the petitioner in Crl.P.Nos.3502/2018 and 3503/2018 shows that Karnataka Financial Services Ltd. was ordered to be wound up. In terms of Section 446 of the Companies Act, 1956 once a company is ordered to be wound up, no proceedings of whatsoever nature can be continued against such company and for the sake of convenience, the same is extracted below: 446. SUITS STAYED ON WINDING UP ORDER: (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose. (2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of - (a) any suit or proceeding by or against the company; - 14 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under Section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) 3 [***] (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court." 13. It is not in dispute that a liquidator is already appointed to liquidate the assets of the company. The contesting respondent is not a secured creditor and therefore is bound to stand in the queue and make an appropriate - 15 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER application as provided under Section 446 of the Companies Act, 1956. 14. In that view of the matter, the prosecution of the petitioner in Crl.P.Nos.3502/2018 and 3503/2018 for the offence punishable under Section 138 of the N.I. Act cannot be proceeded with before the Trial Court. Even otherwise, since the company is wound up which is now borne from the record, the petitioner is entitled to the protection as provided under Section 446 of the Companies Act, 1956. Consequently, the prosecution of the petitioner in Crl.P.No.3502/108 and 3503/2018 deserves to be quashed. 15. Likewise, the impugned judgment of conviction and order of sentence passed in C.C.No.1943/2009 and 1432/2009 convicting the petitioners for an offence punishable under Section 138 of N.I. Act deserves to be set aside, as there is nothing to show how the petitioners in Crl.R.P.Nos.442/2018 and 443/2018 were responsible for the affairs of the company and were neither directors of the company. Therefore, Crl.R.P.Nos.442/2018 443/2018 deserves to be considered favourably. - 16 - HC-KAR NC: 2026:KHC:16443 CRL.P No. 3503 of 2018 C/W CRL.P No. 3502 of 2018 CRL.RP No. 442 of 2018 AND 1 OTHER 16. Hence, Crl.R.P.Nos.442/2018 443/2018 are allowed. The judgment of conviction and order of sentence dated 15.02.2014 passed in C.C.Nos.1943/2008 and 1432/2009 by the Trial Court and affirmed by the Revisional Court are set aside and the private complaint filed by the contesting respondent is dismissed. Likewise, Crl.P.No.3502/2018 and Crl.P.No.3503/2018 are allowed and the prosecution launched against the petitioner in C.C.No.1943/2008 and 1432/2009 are quashed. 17. Any amount in deposit by the petitioner/s is ordered to be released to the respective petitioners. 18. However, liberty is reserved to the contesting respondent to file appropriate application before the liquidator who shall decide the claim in accordance with law. Sd/- (R. NATARAJ) JUDGE HJ List No.: 1 Sl No.: 8