SUPREME COURT OF INDIA
DIPANKAR DATTA AND PRASHANT KUMAR MISHRA, JJ.
Shashankbhai Jayantibhai Shah – Appellant
Versus
HDFC Bank ltd. And others – Respondent
Criminal Appeal No. 5606 of 2024 with Criminal Appeal No.5607 of 2024
Decided on : 23-04-2025
| Table of Content |
|---|
| 1. conviction under section 138 of the n.i. act (Para 1 , 5 , 6) |
| 2. distinction between corporate insolvency and personal liabilities (Para 12 , 16) |
| 3. personal liability persists despite corporate liquidation (Para 14 , 18 , 19) |
| 4. appellant granted opportunity to make payment (Para 20 , 21 , 22) |
ORDER :
1. The appellant was convicted by the Additional Chief Metropolitan Magistrate, NIA Court No.30, Ahmedabad[Magistrate], vide judgment and order dated 03rd April, 2017, in a case registered under the provisions of Section 138 of the Negotiable Instruments Act, 1881[N.I. Act], for dishonour of a cheque. He was sentenced to undergo imprisonment for two years and to pay Rs.2,50,00,000/- (Rupees two crore fifty lakh) as compensation.
2. An appeal was carried from the said judgment and order by the appellant before the Sessions Court at Ahmedabad[sessions court].
3. During the pendency of the appeal, a petition came to be admitted by the National Company Law Tribunal, Ahmedabad against a company. The appellant happens to be one of the Directors of the company.
4. By an order dated 19th March, 2018, the National Company Law Tribunal[NCLT] passed an order for liquidation of the company.
5. Even in the wake of such development, the sessions court confirmed the order of the Magistrate convicting the appellant and dismissed the appeal on 26th July, 2018.
6. While things stood thus, by an order dated 31st July, 2018, the National Company Law Appellate Tribunal[NCLAT] while considering Company Appeal[Company Appeal (AT) (Insolvency) No.306 of 2018], which was carried from the order of the NCLT dated 19th March, 2018, permitted proceedings under Section 138 of the N.I. Act to continue despite the period of moratorium.
7. Within a week from date of such order, the appellant questioned the appellate judgment and order of the sessions court affirming the conviction and sentence recorded by the Magistrate in a revisional application[Criminal Revision Application No.955/2018] before the High Court of Judicature at Gujarat at Ahmedabad.
8. By an order dated 13th August, 2018, a learned single judge of the High Court directed suspension of sentence pending hearing of the revisional application on condition that the appellant deposits 25% of the amount of the dishonoured cheque without fail within a period of three months from date. Conditions regarding release of the appellant on bail bond were also imposed.
9. This order dated 13th August, 2018 is the subject matter of challenge, by special leave, in Criminal Appeal No.5606/2024.
10. The appellant failed to deposit 25% of the cheque amount as directed by the order dated 13th August, 2018. This triggered an application[Criminal Misc. Application No.1 of 2019 in CRA No.955/ 2018] from the side of the complainant seeking cancellation of bail. It was alleged therein that despite expiry of the time limit fixed by the earlier order dated 13th August, 2018, the appellant had not deposited any sum.
11. Learned counsel representing the appellant before the High Court urged that he was not required to make payment of any sum in terms of the earlier direction.
12. The learned judge disagreed and overruled such contention. The application filed by the complainant was allowed by an order dated 25th September, 2019 and the order dated 13th August, 2018, passed on the revisional application, was recalled. The trial court was left free to proceed in accordance with law.
13. In Criminal Appeal No.5607 of 2024, the order dated 25th September, 2019 is under challenge by special leave.
14. We have heard learned counsel appearing for the appellant who submits that in view of liquidation of the company as well as lack of financial resources of the appellant, he is not in a position to make payment of 25% of the cheque amount. She urges that in the event the court does not come to the appellant's rescue, he would be remediless in the sense that the revisional application would not be heard.
15. Learned counsel appear
The court ruled that proceedings under Section 138 of the NI Act are penal and cannot be stayed by the interim moratorium under Section 96 of the IBC, affirming the distinction between criminal and c....
The moratorium under the Insolvency and Bankruptcy Code does not protect individuals from criminal liability under the Negotiable Instruments Act for cheque dishonour.
The moratorium under the IBC does not protect directors from criminal liability under Section 138 of the N.I. Act, as these proceedings are distinct from civil recovery actions.
Individual directors remain liable for dishonoured cheques even after a corporate debtor enters insolvency, as personal criminal liability under the NI Act persists irrespective of corporate status.
IBC moratorium applies solely to corporate debtor, not shielding directors from Section 138 NI Act criminal proceedings, which continue independently despite company liquidation.
The interim moratorium under the Insolvency and Bankruptcy Code does not protect individuals from criminal liability for dishonouring cheques under the Negotiable Instruments Act.
The moratorium under the Insolvency and Bankruptcy Code does not protect individuals who are directors or guarantors of a corporate debtor from criminal proceedings under the Negotiable Instruments A....
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