Point of Law : Twin contentions raised by the learned counsel for the petitioners to quash Annexure-A complaint, found to be not sustainable

ORDER :

This is a petition filed by accused Nos.1 to 7 in CMP No.3280/2019 on the files of Judicial First Class Magistrate Court (Negotiable Instruments Act Cases), Ernakulam, to quash the above CMP (Annexure-A complaint herein) by invoking power under Section 482 of the Code of Criminal Procedure (hereinafter referred as 'Cr.P.C.' for convenience).

2. Two questions require answer in this matter, are as under:

(i) Is moratorium under Section 14 (1) of the Insolvency and Bankruptcy Rules, 2016 would apply to non-corporate debtor/debtors dealt under Section 141 of the Negotiable Instruments Act ?

(ii) How vicarious liability in criminal law, in terms of Section 141 of the Negotiable Instruments Act would emerge ? and what are the essentials to be stated in the complaint to fasten vicarious liability ?

3. Heard the learned counsel for the petitioners as well as the learned Public Prosecutor and the learned counsel appearing for the 1st respondent in detail.

4. I would like to refer the parties in this petition as 'accused' and 'complainant', with reference to their status before the court below.

5. Short facts: the complainant, Dr. Satheesh Iype lodged complaint under Section 142 of the Negotiable Instruments Act (hereinafter referred as 'N.I.Act' for convenience) before the Magistrate Court alleging that the accused Nos.1 to 7 committed offence punishable under Section 138 of the N.I.Act, since the cheque jointly issued by accused Nos. 2 to 7 representing the 1st accused for Rs.37,20,000/-got dishonored for want of funds, when the cheque was presented for collection.

6. While seeking quashment of Annexure-A complaint, learned counsel for the petitioners placed reliance on a three Bench decision of the Apex Court reported in [(2021) 6 SCC 258], P.Mohanraj & Ors. v. M/s Shah Brothers Ispat Pvt. Ltd. to contend that, no prosecution against the corporate debtor and its Directors could be possible after moratorium issued in terms of Section 14 (1) of the Insolvency and Bankruptcy Rules, 2016 (hereinafter referred as 'IBC' for convenience). It is specifically pointed out that as per Annexure-B, moratorium order under Section 14 (1) of IBC has been passed in relation to M/s PVS Memorial Hospital Private Ltd., the 1st petitioner herein. Therefore, no prosecution against the petitioners is permissible.

7. In para.101 and 102 of P. Mohanraj & Ors. v. M/s.Shah Brothers Ispat Pvt. Ltd.'s case (supra) the Apex Court held the legal position as under:

“101: As far as the Directors/persons in management or control of the corporate debtor are concerned, a Sections 138/141 proceeding against them cannot be initiated or continued without the corporate debtor—see [(2012) 5 SCC 661 : (2012) 3 SCC (Civ) 351 : (2012) 3 SCC (Cri) 241], Aneeta Hada v. Godfather Travels & Tours (P) Ltd. This is because Section 141 of the Negotiable Instruments Act speaks of persons in charge of, and responsible to the Company for the conduct of the business of the Company, as well as the Company. The Court, therefore, in Aneeta Hada held as under: (SCC pp.686-88, paras 51, 56 & 58-59)

“51. We have already opined that the decision [(1984) 4 SCC 352 : 1984 SCC (Cri) 620], Sheoratan Agarwal v. State of M.P runs counter to the ratio laid down in [(1970) 3 SCC 491 : 1971 SCC (Cri) 97], State of Madras v. C.V.Parekh which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in [(2000) 1 SCC 1 : 2001 SCC (Cri) 174], Anil Hada v. Indian Acrylic Ltd. has to be treated as not laying down the correct law as far as it states that the Director or any other officer can be prosecuted without impleadment of the Company. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of tex non cogit and impossibilia gets attracted.

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59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Ac