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 civil actions.

JUDGMENT :

AMIT MAHAJAN, J.

1. The present petitions are filed under Section 528 of the Bhartiya Nagarik Suraksha Sanhita, 2023 seeking quashing of the orders dated 08.01.2025 passed by the learned Magistrate, Tis Hazari Courts, Delhi in CC No. 3480/2021 and 3481/2021 (hereafter ‘impugned orders’) whereby the complaints filed by the petitioners under Section 138 of the Negotiable Instruments Act, 1881 were adjourned sine die after allowing applications of the respondent under Sections 96 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’).

2. Briefly stated, the petitioner in allegedly advanced a friendly loan to the respondent and for the purposes of securing the said loan the respondent had issued a cheque bearing no. 175894 dated 12.03.2021 for Rs. 10,00,000/- to the petitioner. It is alleged that the said cheque was presented for encashment but was returned with the remarks “Payment stopped by Drawer” on 22.03.2021.

3. It is alleged that the petitioner in CRL. M.C. 1536/2025 advanced a friendly loan to the respondent of Rs.17,00,000/- and the respondent in order to refund the said loan amount issued a cheque bearing no. 175895 dated 12.03.2021 for Rs.17,00,000/-. It is alleged that the said cheque was presented for encashment but was returned with the remarks “Payment stopped by Drawer” on 22.03.2021.

4. It is alleged that the respondent failed to pay the said amounts even after receipt of legal notices and the petitioners filed complaint cases under Section 138 of the NI Act against the respondent. This led to filing of complaints being CC No. 3480/2021 and CC No. 3481/2021 respectfully.

5. Thereafter, Punjab National Bank, being the financial creditor of M/s Magppie International Limited (Corporate Debtor), filed an application under Section 95 (1) of the IBC read with rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution process for Personal Guarantors to Corporate Debtor) Rules, 2019 (‘Personal Guarantors Rules') and regulation 4(2) of IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 ('Personal Guarantors Regulations') for initiating insolvency resolution process against the Respondent being the personal guarantor of the Corporate Debtor. Mr. Deepak Mittal was appointed as the Resolution Professional in the matter.

6. The respondent filed applications under Section 96 read with Section 238 of the IBC seeking stay of proceedings in CT No. 3480/2021 and 3481/2021. The learned Magistrate vide separate impugned orders allowed the applications of the respondent and adjourned the proceedings sine die in CT No. 3480/2021 and 3481/2021. This led to filing of the present petitions.

7. The learned Magistrate noted that upon Punjab National Bank filing an application under Section 95 of the IBC against the respondent, the interim moratorium period commenced as stipulated under Section 96 (1)(a) in relation to all debts of the personal guarantor. It was further noted that the proceedings under Section 138 of the NI Act would be covered within the meaning of ‘any legal action or proceedings’ which shall be stayed during the interim moratorium period as provided in Section 96 of the IBC.

8. The learned Counsel for the petitioners submitted that the impugned orders are not sustainable in the eyes of law. He submitted that the proceedings under Section 138 of the NI Act are not recovery proceedings and are penal in nature. He submitted that a person may face imprisonment or fine or both fo