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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajnish Bhatnagar, J.
Amit Sureshmal Lodha & Ors. – Appellants
Versus
Alloysmin Industries & Anr. – Respondents
Cr.M.C. 2679 of 2023 & Cr.M.C. 2711 of 2023
Decided On : 19-04-2023
Negotiable Instruments Act - Corporate Insolvency Resolution Process - Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881 - [CASTINGS DYNAMICS LIMITED] - [Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881] - The court discussed the applicability of the moratorium provision under Section 14 of the Insolvency and Bankruptcy Code, 2016 to the natural persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act. The court held that the moratorium provision does not apply to the natural persons, including directors, and therefore, proceedings can be initiated or continued against them.
Fact of the Case:
The petitioners filed petitions under Section 482 Cr.P.C. seeking to quash Complaint Case No. 23326/2019 and Complaint Case No. 2992/2020 under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881. The petitioners argued that the Corporate Insolvency Resolution Process had been initiated for the respondent company, and therefore, the proceedings under the N.I. Act could not be pursued further.
Finding of the Court:
The court dismissed the petitions, holding that the moratorium provision under Section 14 of the Insolvency and Bankruptcy Code, 2016 does not apply to the natural persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act. The court emphasized that the petitioners' contentions were a matter of trial and that the N.I. Act provides sufficient opportunity for a person who issues a cheque to honor it.
Issues: The main issue was the applicability of the moratorium provision under Section 14 of the Insolvency and Bankruptcy Code, 2016 to the natural persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act.
Ratio Decidendi: The court held that the moratorium provision does not apply to the natural persons, including directors, and therefore, proceedings can be initiated or continued against them.
Final Decision: The court dismissed the petitions, finding them devoid of any merits.
JUDGMENT
Rajnish Bhatnagar, J. (Oral)
CRL.M.A. 10106/2023 (Exemption) In CRL.M.C. 2679/2023
CRL.M.A. 10212/2023 (Exemption) In CRL.M.C. 2711/2023
Exemption allowed, subject to all just exceptions.
The applications stand disposed of.
CRL.M.C. 2679/2023 & CRL.M.A. 10105/2023 (stay)
CRL.M.C. 2711/2023 & CRL.M.A. 10211/2023 (stay)
1. The present petitions have been filed by the petitioners under Section 482 Cr.P.C. for quashing of Complaint Case No. 23326/2019 and setting aside of the summoning order dated 25.02.2021 passed by Ld. MM (N.I. Act), N/W, Rohini Court, Delhi, in Complaint Case No. 23326/2019 registered under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881; and for quashing of Complaint Case No. 2992/2020 and setting aside of the summoning order dated 06.09.2022 passed by Ld. MM (N.I. Act), N/W, Rohini Courts, Delhi, in Complaint Case No. 2992/2020 registered under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881; and the proceedings emanating therefrom.
2. In brief the facts of the case are that on 01.09.1994, Castings Dynamics Limited (Respondent No. 2) was incorporated and registered with Registrar of Companies, Delhi under the Companies Act, 1956. Castings Dynamics Limited was engaged in the business of manufacturing of Insulator caps, Power Transmission Flanges, Automobile Castings, Oil, Gas Castings and Customer Specific Casting. During the usual course of business, Respondent No.2 Company had entered into transactions with Alloysmin Industries (Respondent No.1) for supply of raw materials such as Calcined Anthracite Coal, Graphitized Anthracite Coal, Ferro Silicon etc. and the accused persons had issued various cheques towards payment obligations. On 24.09.2019, NCLT, Mumbai directed to initiate Corporate Insolvency Resolution Process against Castings Dynamics Limited in the CP 4697 (IB)/MB/2018 under the Insolvency and Bankruptcy Code, 2016 and moratorium was imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016. Subsequently, all the directors stood suspended and the management was deemed to have been given to the Resolution Professional. Mr. Manish Sukhani was appointed as the Interim Resolution Professional by NCLT, Mumbai on 24.09.2019 and was confirmed as the Resolution Professional for Castings Dynamics Limited/Respondent No.2. On 15.10.2019, public announcement was made by the Interim Resolution Professional of Respondent No.2 and the creditors of Respondent No.2 were called upon to submit their claims with proof on or before 30.10.2019. On 13.12.2019, Alloysmin Industries (Respondent No.1) filed its claim of Rs.36,46,157/- as an operational creditor in the insolvency of Respondent No.2. On 30.12.2019, first invitation of expression of interest for resolution plan was published by Resolution Professional of Castings Dynamics Limited and on 10.06.2020, second invitation of expression of interest for resolution plan in the insolvency of Castings Dynamics Limited was published by Resolution Professional of Respondent No.2.
3. The complainant/Respondent No. 1 herein, had instituted a Complaint Case No. 23326/2019 under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881 against the petitioners in respect of non-payment against two dishonored cheques for the sum of Rs. 4,09,723/- and Rs. 5,87,640/- and Complaint Case No. 2992/2020 under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881 against the petitioners in respect of non-payment against three dishonored cheques for the sum of Rs. 10,28,200/-, Rs. 10,32,944/- and Rs. 5,87,640/-, issued by the petitioners in favour of the complainant/Respondent No. 1.
4. The Metropolitan Magistrate vide order dated 25.02.2021 in Complaint Case No. 23326/2019 and vide order dated 06.09.2022 in Complaint Case No. 2992/2020 issued summons requiring the petitioners to attend the Court.
5. The petitioners being aggrieved filed the present petitions invoking jurisdiction of this Court U/s 482 Cr.P.C.
6.
The moratorium provision under Section 14 of the Insolvency and Bankruptcy Code, 2016 does not apply to the natural persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act.
The imposition of moratorium under Sec. 14 of the I.B. Code applies to the corporate debtor, while the natural persons mentioned in Sec. 141 of the N.I. Act continue to be statutorily liable.
The moratorium provisions under Section 14 IBC apply only to the corporate debtor, and natural persons continue to be liable under the NI Act, and personal insolvency proceedings do not absolve natur....
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.
The moratorium under Section 14 of the IBC prohibits proceedings against the corporate debtor, including prosecution of natural persons associated with the company under Section 138 of the NI Act dur....
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....
Section 32A of the IBC extinguishes criminal liability for the corporate debtor post-resolution but not for directors under Section 138 of the NI Act.
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