Per Sanjay Kishan Kaul, J.

Negotiable Instruments Act, 1881 – Sections 138 and 141 – Insolvency and Bankruptcy Code, 2016 – Section 14 – Dishonour of cheque – Offence by company – Scope of nature of proceedings under two Acts and quite different and would not intercede each other – Section 138 of N.I. Act are not recovery proceedings – They are penal in character – A person may face imprisonment or fine or both under Section 138 of N.I. Act – It is not a recovery of amount with interest as a debt recovery proceedings would be – They are not akin to suit proceedings – It cannot be said that process under IBC whether under Section 31 or Sections 38 to 41 which can extinguish debt would ipso facto apply to extinguishment of criminal proceedings – Criminal liability and fines are built on principle of not honouring a negotiable instrument which affects trade – This is apart from principle of financial liability per se. (Paras 16, 17 and 18)

Per J.B. Pardiwala, J. (Separate Assenting View)

(A) Insolvency and Bankruptcy Code, 2016 – Sections 14 and 31 – Corporate Insolvency Resolution Process – Resolution plan binds even persons who have not consented – Creditor has no option but to join process under IBC – Once plan is approved, it would bind everyone under the sun – Making of a claim and accepting whatever share is allotted could be termed as an “Involuntary Act” on behalf of creditor – Making of a claim under IBC and accepting the same and not making any claim, will not make any difference in light of Section 31 of IBC – Both situations will lead to Section 31 and finality and binding value of resolution plan. (Paras 40 and 41)

(B) Negotiable Instruments Act, 1881 – Sections 138 and 141 – Insolvency and Bankruptcy Code, 2016 – Section 32A read with Section 14 – Dishonour of cheque – Offence by company – By operation of provisions of IBC, criminal prosecution initiated against the natural persons under Section 138 read with 141 of NI Act read with Section 200 of Cr.P.C. would not stand terminated – No provision of IBC bars continuation of criminal prosecution initiated against directors and officials – Where proceedings under Section 138 of NI Act had already commenced and during pendency plan is approved or company gets dissolved, directors and other accused cannot escape from their liability by citing its dissolution – What is dissolved is only company, not personal penal liability of accused covered under Section 141 of NI Act – They will have to continue to face prosecution – Where company continues to remain even at end of resolution process, only consequence is that erstwhile directors can no longer represent it – Criminal proceedings under Section 138 of NI Act will stand terminated only in relation to corporate debtor if same is taken over by a new management. (Paras 47, 49, 52, 75, 85 and 86)

(C) Negotiable Instruments Act, 1881 – Sections 138 and 147 – Criminal Procedure Code, 1973 – Sections 320 and 482 – Dishonour of cheque – Compounding of offence – ‘Compounding’ and ‘quashing’ are not synonymous terms – In law, they have different meanings and consequences – They arise from different situations and operate in different fields and stages – There is no apparent legal interdependence or interlink to the extent that one could exist only if conditions of other were satisfied or vice-versa – Quashing is one of facets of inherent powers, while compounding of an offence being a statutory expression contained under Section 320 of Cr.P.C. is entirely a different concept – Any dispute can be compromised between parties if terms are not illegal – But only a compoundable offence allowed by law can be compounded – In a compromise, consensus between parties to give and take is more important and in a compounding, decision of victim of offence not to prosecute and not to continue with prosecution is more important. (Paras 71, 72 and 73)

Facts of the case:

In order to satisfy its obligations under the Agreement, Accused company issued post-dated cheque of Rs. 25,47,945/-bearing cheque number 090656 dated 15.02.2016, drawn on Indian Overseas Bank, Kalupur Circle Branch, Railway Pura, Ahmedabad, towards payment of one of instalments. On the cheque being presented to bankers of Respondent i.e., HDFC Bank Limited, Nehru Place Branch, New Delhi, the cheque was returned vide Memo dated 07.04.2016 for the reason “Account Closed”.

Findings of Court:

Section 138 proceedings in relation to signatories/directors who are liable/covered by the two provisos to Section 32A(1) will continue in accordance with law.

Result : Appeal dismissed.