Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 Supreme(Bom) 1044

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.G.Avachat, J.
Sheetal Gupta – Appellant
Versus
National Spot Exchange Limited – Respondent
Criminal Application No. 1151 of 2022
Decided On : 10-01-2023

Advocates appeared:
Vinay J.Bhanushali, Advocate, Abhiraj Rao, Advocate, Shreya Arur, Advocate, Bhagyashree Ganwani, Advocate, Yashpal Thakur, Advocate, Nimeet Sharma, Advocate, Asim Shaikh, Advocate, A.R.Patil, Advocate, Anamika Malhotra, Advocate

The main legal point established in the judgment is that the proceedings under Sec. 138 of NI Act are covered by the term 'any legal action or proceeding pending in respect of any debt' appearing in Sec. 96(1) of IBC, and the debt incurred or likely to be incurred by the applicant in the proceedings under Sec. 138 of NI Act is covered by the term 'any debt' under IBC.

Headnote:
Sec. 138 of NI Act - Proceedings under Sec. 138 of NI Act - Sec. 96 of IBC - Sec. 94 of IBC - Sec. 95 of IBC - Sec. 96 of IBC - Sec. 101 of IBC - Sec. 102 of IBC - Sec. 103 of IBC - Indian Evidence Act, Sec. 41 - The court allowed the applications for stay of the proceedings under Sec. 138 of NI Act pending before the Metropolitan Magistrate, citing the provisions of IBC and the effect of interim moratorium. The court held that the proceedings under Sec. 138 of NI Act get covered by the term 'any legal action or proceeding pending in respect of any debt' appearing in Sec. 96(1) of IBC. The court also emphasized that the debt incurred or likely to be incurred by the applicant in the proceedings under Sec. 138 of NI Act is covered by the term 'any debt' under IBC. The court referred to the provisions of IBC and Indian Evidence Act to support its decision.
Fact of the Case:

The applicant, accused no. 5, sought to stay the proceedings under Sec. 138 of NI Act, relying on the provisions of Sec. 96 of IBC. The respondent, NSEL, opposed the stay, arguing that the effect of Sec. 96 of IBC has no application to the proceedings under Sec. 138 of NI Act pending before the Metropolitan Magistrate.
Finding of the Court:

The court allowed the applications for stay of the proceedings under Sec. 138 of NI Act pending before the Metropolitan Magistrate, citing the provisions of IBC and the effect of interim moratorium.
Issues: The main issue was whether the proceedings under Sec. 138 of NI Act should be stayed in view of the provisions of Sec. 96 of IBC.
Ratio Decidendi: The court held that the proceedings under Sec. 138 of NI Act get covered by the term 'any legal action or proceeding pending in respect of any debt' appearing in Sec. 96(1) of IBC. The court also emphasized that the debt incurred or likely to be incurred by the applicant in the proceedings under Sec. 138 of NI Act is covered by the term 'any debt' under IBC.
Final Decision: The court allowed the applications for stay of the proceedings under Sec. 138 of NI Act pending before the Metropolitan Magistrate, citing the provisions of IBC and the effect of interim moratorium.

JUDGMENT

1. Heard.

2. These applications are being decided by this common order since common questions of fact and law arise therein. Moreover, the proceedings are between the same parties.

3. The challenge in these applications, under Sec. 482 of the Code of Criminal Procedure, 1973 (for short "Cr.P.C."), is to the order/s refusing to stay the proceedings under Sec. 138 of the Negotiable Instruments Act, 1881 (for short "NI Act") initiated by respondent no. 1, National Spot Exchange Limited (for short "NSEL"). Stay of the proceedings was sought relying on the provisions of Sec. 96 of the Insolvency and Bankruptcy Code, 2016 (for short "IBC").

4. The applicant in all these applications, is an accused no. 5 in the proceedings under Sec. 138 of NI Act. She had, in a capacity as the Director (Ex), signed the cheques issued in favour of the respondent-NSEL towards discharge of liability incurred by M/s. P. D. Agro Processors Private Limited (for short "PDAPPL") (accused no. 1 in the proceedings under Sec. 138 of NI Act).

5. It is the case of respondent-NSEL that it is a company incorporated under the provisions of Companies Act, 1956. It carries on business as a spot exchange providing for an electronic trading platform for spot contracts in commodities on a compulsory delivery basis. PDAPPL was a trading-cum-clearing member of NSEL. Accused nos. 2 to 4 in the proceedings, were its Directors. The applicant herein i.e. accused no. 5, was its Exdirector. All of them were In-charge of the day to day business of PDAPPL. They signed at the relevant time, the documents pertaining to the membership, including undertaking, as was required in accordance with Rules and Bye-laws of NSEL. The applicant herein in addition thereto, is a signatory to the postdated cheques issued along with the agreement and PDC declaration.

6. There were defaults of pay-ins on NSEL by its members, including PDAPPL. On working out liability in respect of outstanding trades, it was found that Rs.687.30 crores were due from PDAPPL. The cheques bearing nos. 734357, 734358 & 734359, dtd. 05/05/2014 of Rs.50.00 crores each issued for payment of Rs.150.00 crores, were therefore presented for encashment. The cheques returned unpaid for the reasons "Stop Payment" instructions. A statutory Demand Notice/s was therefore issued. Since the notice/s was not complied with, the prosecutions under Sec. 138 of NI Act came to be initiated.

7. Learned Senior Counsel for the applicant would submit that in view of the commencement of interim moratorium in terms of Sec. 96 of IBC, the proceedings under Sec. 138 of NI Act shall be deemed to have been stayed. According to him, learned Magistrate erred in rejecting the applications preferred by the applicant for stay of those proceedings.

8. Learned Senior Counsel for the applicant relied on the following judgments of Hon'ble Apex Court and Punjab & Haryana High Court :-

* P. Mohanraj and Others v/s. Shah Brothers Ispat Private Limited, (2021)6 Supreme Court Cases 258;

* State Bank of India v/s. V. Ramakrishnan and Another, (2018)17 Supreme Court Cases 394;

* Vijay Kumar Ghai v/s. Pritpal Singh Babbar, 2022 SCC OnLine P&H 1672.

9. Learned Senior Counsel for the applicant has made many submissions, reference thereto is not made in extenso, since the submissions made by him are part of the reasons in support of this order.

10. Learned Advocate for respondent-NSEL would, on the other hand, submit that it was a proceeding under Sec. 94 of IBC initiated by the State Bank of India (for short "SBI") against M/s. Dunar Foods Limited. Similar proceedings have also been initiated by the SBI against the applicant herein. The respondent-NSEL is not a party to those proceedings. The transactions between PDAPPL and respondent-NSEL are independent one. The applicant is a signatory to the cheques, which have been bounced. According to learned Advocate for respondent-NSEL, the judgment of Hon'ble Apex Court in the case of P. Mohanraj and Others v/s. Shah Bro