Criminal liability under Section 138 of the Negotiable Instruments Act persists for natural persons despite the corporate debtor’s resolution plan under the Insolvency and Bankruptcy Code extinguishing corporate debt.

JUDGEMENT

SANJAY KISHAN KAUL, J. Factual Background: 1. M/s Rainbow Papers Limited (company incorporated and registered under the Companies Act, 1956), of which Ajay Kumar Radheyshyam Goenka, the Appellant before us, was the Promoter and Managing Director, sought loans from a public financial institution, Tourism Finance Corporation of India Limited, the Respondent before us, to fulfil its various Digitally signed by ASHA SUNDRIYAL Date: 2023.03.15 18:53:29 IST Reason:

Signature Not Verified corporate requirements. The proposal of the company was considered by the Respondent and approval was granted for a Term Loan of Rs. 30.00 crores. In pursuance to the approval, a Loan Agreement was executed on 27.03.2012 in New Delhi. 2. In order to satisfy its obligations under the Agreement, the Accused company issued post-dated cheque of Rs. 25,47,945/- bearing cheque number 090656 dated 15.02.2016, drawn on Indian Overseas Bank, Kalupur Circle Branch, Railway Pura, Ahmedabad, towards the payment of one of the instalments. On the cheque being presented to the bankers of the Respondent i.e., HDFC Bank Limited, Nehru Place Branch, New Delhi, the cheque was returned vide Memo dated 07.04.2016 for the reason “Account Closed”.

3. On 19.04.2016, a demand-cum-legal notice under Section 138 of Negotiable Instruments Act, 1881 , (hereinafter referred to as ‘the NI Act’) was issued on behalf of the Respondent calling upon the company as Accused no.1 and the Appellant herein as Accused no. 2 to settle the debt advanced by way of corporate loan dated 27.03.2012. The Accused acknowledged their liability to pay the loan amount vide reply dated 28.04.2016. The amount was not paid and, thus, on 16.05.2016, Criminal Complaint No. 632982/2016 was filed in the Court of Chief Metropolitan Magistrate, Saket Courts, New Delhi, under Section 190 of the Code of Criminal Procedure, 1973 , read with Section 138 1, Section 1412 and Section 1423 of the NI Act. The complaint was signed and verified by Mr. N. Ramachandran, Deputy General Manager (Law) of the Respondent company. An endeavor for mediation was made but was not successful and, thus, the next date was scheduled before the Magistrate for 15.01.2018. In the meantime, a development, which took place, was that in 2017 M/s Neeraj Paper Agencies Limited, styling itself as ‘Operational Creditor’, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘IBC’) read with Rule 6 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, (hereinafter referred to as ‘IB Rules, 2016’) with the request to initiate Corporate Insolvency Resolution Process against the Accused company, treating it as the 'Corporate Debtor'. The National Company Law Tribunal vide order dated 12.09.2017 admitted the aforesaid insolvency application. 4. The Respondent herein filed its claim qua the debt, which was the subject matter of the N.I. Act proceedings, on 13.10.2017. In terms of the Resolution Plan dated 26.05.2018, the Resolution Applicant (Kushal Limited) filed the Resolution Plan and during the course of meeting the 1Dishonour of cheque for insufficiency, etc., of funds in the account. 2Offences by companies.

3Cognizance of offences.

Committee of Creditors on 05.06.2018, it was informed that the respondent herein could not be considered as a Secured Financial Creditor as per definitions contained in Section 3(30) and Section