1. Writ petition seeking quashing of criminal complaints under Section 138, Negotiable Instruments Act, against a corporate debtor and its directors following approval of a resolution plan under IBC. (Para 1 )
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2022 Supreme(SC) 724
SUPREME COURT OF INDIA
UDAY UMESH LALIT, S. RAVINDRA BHAT, PAMIDIGHANTAM SRI NARASIMHA, JJ.
Narinder Garg & Ors. - Petitioners
Versus
Kotak Mahindra Bank Ltd & Ors. - Respondents
W.P.(C) No. 93 of 2022, W.P(C) No. 300 of 2020
Decided On : 28-03-2022
Important Points
Moratorium provisions under the Insolvency and Bankruptcy Code, 2016 apply only to the corporate debtor and not to natural persons mentioned in Section 141 of the Negotiable Instruments Act, 1881.
Subject
Civil Law - Corporate Law
Act Referred
Headnote
The Negotiable Instruments Act, 1881 - Moratorium provisions under the Insolvency and Bankruptcy Code, 2016 - The court dismissed the writ petition seeking to quash criminal complaints under Section 138 of the Negotiable Instruments Act, 1881 against the corporate debtors and its directors, holding that the moratorium provisions apply only to the corporate debtor and not to natural persons mentioned in Section 141 of the Act. The acceptance of the resolution plan does not obliterate any pending trial under Sections 138 and 141 of the Act.
Legal Category Hierarchy
Advocates:
Advocate Appeared:
Mr. Gopal Sankarnarayanan, Adv., Mr. Aman Preet Singh Rahi, Adv., Mr. A. Venayagam Balan, AOR, Ms. V. S. Lakshmi, Adv., Mr. AVS Subramanyam, Adv., Mr. Kamil Khan, Adv., Mr. T. R. B. Sivakumar, AOR, Ms. Jaspreet Gogia, AOR, Ms. Mandakini Singh, Adv., Mr. Karanvir Gogia, Adv., Ms. Shivangi Singhal, Adv., Ms. Ashima Mandla, Adv.
Ms. Aishwarya Bhati, ASG, Ms. Sonia Mathur, Sr. Adv., Ms. Praveena Gautam, Adv., Ms. Swarupama Chaturvedi, Adv., Mr. O.P. Shukla, Adv., Mr. Kanu Agrawal, Adv., Mr. Arvind Kumar Sharma, AOR, Mr. Chetanya Singh, Adv., Mr. Nishanth Patil, AOR, Mr. Gaurav Goel, AOR, Mr. Abhinav Agrawal
Advocate Appeared:
Mr. Gopal Sankarnarayanan, Adv., Mr. Aman Preet Singh Rahi, Adv., Mr. A. Venayagam Balan, AOR, Ms. V. S. Lakshmi, Adv., Mr. AVS Subramanyam, Adv., Mr. Kamil Khan, Adv., Mr. T. R. B. Sivakumar, AOR, Ms. Jaspreet Gogia, AOR, Ms. Mandakini Singh, Adv., Mr. Karanvir Gogia, Adv., Ms. Shivangi Singhal, Adv., Ms. Ashima Mandla, Adv.
Ms. Aishwarya Bhati, ASG, Ms. Sonia Mathur, Sr. Adv., Ms. Praveena Gautam, Adv., Ms. Swarupama Chaturvedi, Adv., Mr. O.P. Shukla, Adv., Mr. Kanu Agrawal, Adv., Mr. Arvind Kumar Sharma, AOR, Mr. Chetanya Singh, Adv., Mr. Nishanth Patil, AOR, Mr. Gaurav Goel, AOR, Mr. Abhinav Agrawal
Table of Contents
2. Acceptance of a resolution plan covering the complainant's dues should obliterate pending criminal trials under Sections 138 and 141, Negotiable Instruments Act. (Para 5 )
3. The moratorium under Section 14, Insolvency and Bankruptcy Code, applies only to the corporate debtor, while natural persons remain statutorily liable under the Negotiable Instruments Act. (Para 4 , 6 )
4. Moratorium provisions under Section 14, Insolvency and Bankruptcy Code, apply only to the corporate debtor and not to natural persons liable under Section 141, Negotiable Instruments Act. (Para 4 )
5. Writ petitions dismissed. (Para 7 )
6. Does the moratorium under the Insolvency and Bankruptcy Code apply to criminal proceedings under the Negotiable Instruments Act?
The moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016, apply only to the corporate debtor. (Para 4 )
7. Are directors of a corporate debtor protected by the IBC moratorium from liability under Section 141 of the Negotiable Instruments Act?
No, natural persons mentioned in Section 141 of the Negotiable Instruments Act continue to be statutorily liable despite the moratorium applied to the corporate debtor. (Para 4 )
8. Does the approval of a resolution plan obliterate pending criminal trials under Sections 138 and 141 of the Negotiable Instruments Act?
The court held that the decision in P. Mohanraj is clear, implying that the statutory liability of natural persons under the Negotiable Instruments Act persists regardless of the corporate debtor's moratorium. (Para 4 , 6 )
ORDER
WRIT PETITION (CIVIL) NO.93 OF 2022
The instant writ petition has been filed seeking following reliefs:
“a) Issue Writ of mandamus, Order or Direction or any other appropriate writ, quashing the Criminal Complaints mentioned in para 2.46 of the Writ Petition filed against the Petitioner Company/Corporate Debtors and its Directors under Section 138 of the Negotiable Instruments Act, 1881 pending before concerned the Judicial Magistrate/Chief Metropolitan Magistrate/Judicial Magistrate of 1st Class in view of the order dated 18.3.2020 passed by the National Company Law Tribunal, Chandigarh in C.A. No.610 of 2019 in CP (IB) No.119/Chd/CHD/2018 by which the Resolution Plan was approved by the CoC under Section 30(4) of the Code and as the Respondent Complainants has accepted the approved Resolution Plan; or in the alternative.
b) Issue Writ of mandamus, Order or Direction or any other appropriate writ, quashing the Criminal Complaint mentioned in para 2.46 of the Writ Petition which were initiated after the order of moratorium dated 13.11.2018 passed by the National Company law Tribunal, Chandigarh in CP (IB) No.119/Chd/Chd/2018, as it cannot be proceeded even if the old management and its Director takes over the Corporate Debtor in view of the findings rendered in the Judgment of this Hon’ble Court in Civil Appeal No.10355 of 2018.”
2. The case of the petitioners was before the Bench which was considering the matter in P. Mohanraj & other connected matters. However, the case was de-tagged pursuant to order dated 02.02.2021.
3. In P. Mohanraj & Others v. Shah Brothers Ispat Private Limited, (2021) 6 SCC 258, a Bench of three-Judges of this Court considered the matter whether a corporate entity in respect of which moratorium had become effective could be proceeded against in terms of Sections 138 and 141 of the Negotiable Instruments Act, 1881 (“the Act” for short).
4. A subsidiary issue was also about the liability of natural persons like a Director of the Company. In paragraph 77 of its judgment, this Court observed that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the corporate debtor and that the natural persons mentioned in Section 141 of the Act would continue to be statutorily liable under the provisions of the Act.
5. It is submitted by Mr. Gopal Sankaranarayanan, learned Senior Advocate that the resolution plan having been accepted in which the dues of the original complainant also figure, the effect of such acceptance would be to obliterate any pending trial under Sections 138 and 141 of the Act.
6. The decision rendered in P. Mohanraj is quite clear on the point and, as such, no interference in this petition is called for.
7. This writ petition is, therefore, dismissed.
WRIT PETITION (CIVIL) NO.300 OF 2020
In view of the order passed in Writ Petition (Civil) No.93 of 2022, this writ petition is also dismissed.
