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Searching Case Laws & Precedent on Legal Query.....!
Analysing the retrieved Case Laws
Scanned Judgements…!
Section 138 of the NI Act - Not maintainable during NCLT proceedings, especially when liquidation or insolvency processes are ongoing. Claims under Section 138 must be made before the NCLT, and criminal proceedings under this section are penal in nature, not recovery proceedings. The pendency of NCLT proceedings does not bar criminal cases under Section 138, as they are distinct in nature. The courts emphasize that Section 138 proceedings involve imprisonment or fines, unlike debt recovery suits, and are not akin to civil or recovery proceedings ["Ghanshyam Surajbhali Kurmi VS State of Telangana - Telangana"] ["Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290"] ["Ram Kishor Arora @ R. K. Arora VS Puneet Dhar - 2023 0 Supreme(P&H) 296"].
Nature of Proceedings - Criminal in character, not recovery or civil suits. Section 14 of the IBC clarifies that criminal proceedings are to be kept in abeyance only if they are recovery-related, which does not include Section 138 NI Act cases. The Supreme Court has consistently held that Section 138 proceedings are penal and not hindered by insolvency or liquidation processes ["Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290"] ["R. K. Arora VS Devinder Singh Babla - Punjab and Haryana"] ["Ram Kishor Arora @ R. K. Arora VS Anubhav Kapoor - Punjab and Haryana"].
Maintainability of Claims and Petitions - Many petitions challenging the maintainability of proceedings before NCLT or related courts have been dismissed on grounds that such claims or petitions are not sustainable when insolvency proceedings are active. Courts have held that civil suits or criminal complaints under Section 138 are barred or not maintainable during insolvency or liquidation, as the NCLT or insolvency proceedings take precedence and have exclusive jurisdiction ["T.BEENA vs VYSALI PHARMACEUTICALS LTD - Kerala"] ["Sara Chemicals And Consultants vs Rayaprolu Prabhakar Sreenivas - Bombay"] ["Tap world, rep. By its managing partner Mr. M. K. Ansari VS Union Of India - Kerala"].
Moratorium and Criminal Proceedings - During moratorium periods declared by NCLT, criminal proceedings under Section 138 NI Act are deemed stayed. However, once the moratorium is lifted or petitions are dismissed, proceedings can resume. Courts have dismissed petitions seeking to stay criminal proceedings on the basis of moratorium, emphasizing that once the stay is lifted, criminal cases under Section 138 proceed normally ["SANJAY MAHESHWARI S/O RAMSWAROOP, Vs. KAPIL NEVAR S/O SHYAM RATAN NEVAR - Rajasthan"] ["SANJAY MAHESHWARI S/O RAMSWAROOP MAHESHWARI, Vs. MADHAVDAS LULLA S/O LATE SHYAMDAS LULLA, - Rajasthan"] ["SANJAY MAHESHWARI S/O RAMSWAROOP MAHESHWARI, Vs. PINKU AGRAWALA S/O PREM KUMAR AGARWAL - Rajasthan"].
Court Jurisdiction and Procedure - Courts have consistently emphasized that criminal proceedings under Section 138 are penal and distinct from civil or recovery proceedings, and that the NCLT's jurisdiction is limited to insolvency matters. Petitions or appeals challenging the maintainability of criminal cases or asserting jurisdictional conflicts have been dismissed, reaffirming that criminal proceedings are outside the scope of IBC and should be pursued separately ["PRECA Structures Pvt Ltd. vs Anish Reddy Chinnamile - Telangana"] ["Mr. Ghanshyam SurajbhaliKurmi vs The State of Telangana - Telangana"] ["PRECA Structures Pvt Ltd. vs Anish Reddy Chinnamile - Telangana"].
Analysis and Conclusion:Once NCLT proceedings for insolvency or liquidation under IBC have commenced, claims under Section 138 of the NI Act are generally not maintainable or are deemed to be stayed, especially when the proceedings are penal in nature. The courts have clarified that criminal proceedings under Section 138 are independent of insolvency proceedings, and the pendency of NCLT proceedings does not bar or suspend such criminal cases unless explicitly stayed during moratorium periods. Therefore, after NCLT proceedings are initiated and completed, proceedings under Section 138 are typically not maintainable or are subject to dismissal, confirming the view that such criminal cases should be pursued separately from insolvency processes ["Ghanshyam Surajbhali Kurmi VS State of Telangana - Telangana"] ["Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290"] ["T.BEENA vs VYSALI PHARMACEUTICALS LTD - Kerala"].
In the complex world of corporate finance and legal disputes, cheque dishonour cases under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) are common. But what happens when a corporate debtor faces insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal (NCLT)? A frequent question arises: Once NCLT proceedings for IBC have started, is Section 138 not maintainable?
This issue pits criminal liability for cheque bounces against the civil resolution framework of insolvency. Businesses, creditors, and directors often grapple with this, as parallel proceedings can lead to conflicting outcomes. This post breaks down the legal position, drawing from key judicial precedents and statutory provisions. Note: This is general information based on established rulings and should not be taken as specific legal advice—consult a qualified lawyer for your situation.
Section 138 of the NI Act addresses the criminal offence of cheque dishonour, typically due to insufficient funds or similar reasons. It aims to ensure trust in commercial transactions by punishing defaulters. Proceedings are quasi-criminal, focusing on compensation and penalty.
Contrast this with the IBC, a comprehensive code for resolving corporate insolvency. Once NCLT admits a petition under Sections 7, 9, or 10, it triggers a moratorium under Sections 14 (corporate debtors) or 96 (personal guarantors). This halts most legal actions against the debtor, prioritizing resolution or liquidation A. Navinchandra Steels Private Limited VS SREI Equipment Finance Limited - 2021 0 Supreme(SC) 118.
The key tension: Can criminal NI Act cases continue amid this insolvency umbrella? Courts have clarified that while criminal proceedings aren't automatically stayed, they generally become non-maintainable against the corporate debtor for related facts, to avoid undermining the IBC's objectives Ram Kishor Arora @ R. K. Arora VS Puneet Dhar - 2023 0 Supreme(P&H) 296Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290.
Once NCLT initiates IBC proceedings, Section 138 NI Act complaints against the corporate debtor are typically not maintainable for issues stemming from cheque dishonours tied to the insolvency. The IBC's framework displaces or supersedes such actions A. Navinchandra Steels Private Limited VS SREI Equipment Finance Limited - 2021 0 Supreme(SC) 118.
The moratorium under Section 14 bars the institution or continuation of suits or proceedings against the corporate debtor. Though NI Act cases are criminal, courts interpret this broadly to prevent interference with insolvency resolution A. Navinchandra Steels Private Limited VS SREI Equipment Finance Limited - 2021 0 Supreme(SC) 118SESH NATH SINGH VS BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR. - 2021 4 Supreme 496.
In Ajay Kumar Radheyshyam Goenka, the Supreme Court noted: proceedings under Section 138 of the NI Act are criminal proceedings and are of a different nature and purpose from civil insolvency proceedings. Yet, it emphasized non-compatibility of simultaneous proceedings, especially on the same facts, to uphold IBC's legislative intent Ram Kishor Arora @ R. K. Arora VS Puneet Dhar - 2023 0 Supreme(P&H) 296Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290.
Courts consistently prioritize IBC hierarchy:
Supreme Court in Ajay Kumar Case: Criminal NI Act proceedings aren't automatically terminated or stayed by IBC, but parallel pursuit on identical transactions risks conflicting judgments. Insolvency process prevails for the corporate debtor Ram Kishor Arora @ R. K. Arora VS Puneet Dhar - 2023 0 Supreme(P&H) 296Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290.
Liquidation Impact: In a case under Section 33(1)(a) IBC, once liquidation order passes, Section 138 proceedings against the company cannot continue YARLAGADA SHIVARAMPRASAD VS STATE OF GUJARAT - 2022 Supreme(Guj) 672. The court held: once the order of liquidation of accused No. 1-Company... the proceedings under Section 138 of the NI Act cannot be continued against original accused No. 1-Company.
Other rulings reinforce NCLT's primacy:
Proceedings under SARFAESI Act before DRT become non-maintainable if CIRP is ongoing; must transfer to NCLT, as per Lalit Kumar Jain v. Union of India (2021) 9 SCC 321 Kotak Mahindra Bank Ltd. vs State of Maharashtra - 2025 Supreme(Bom) 1686. The court ruled: the proceedings initiated by the 3rd Respondent before the DRT would not be maintainable and... liable to be transferred to the NCLT.
Mere filing of Section 7 IBC petition doesn't bar arbitration under Section 11 Arbitration Act until admission, but post-admission, IBC overrides via Section 238 Jasani Realty Pvt. Ltd. VS Vijay Corporation - 2022 Supreme(Bom) 1209.
Disputes on resolution plans must go to IBC forums, not writ courts Era Infra Engineering Limited vs National Asset Reconstruction Company Limited - 2025 Supreme(Del) 656.
These precedents show a pattern: NCLT/IBC jurisdiction supersedes others during active proceedings, extending to NI Act where facts overlap.
Not all Section 138 cases halt automatically:
Unrelated Transactions: If the cheque dishonour isn't linked to insolvency facts, proceedings may continue.
Personal Guarantors/Directors: Criminal liability under Section 141 NI Act against directors might persist, unless directly conflicting YARLAGADA SHIVARAMPRASAD VS STATE OF GUJARAT - 2022 Supreme(Guj) 672.
Pre-Admission Stage: Before NCLT admission, other forums retain jurisdiction Jasani Realty Pvt. Ltd. VS Vijay Corporation - 2022 Supreme(Bom) 1209.
Criminal Nature Persists: Purely punitive aspects aren't barred unless they interfere with resolution Ram Kishor Arora @ R. K. Arora VS Puneet Dhar - 2023 0 Supreme(P&H) 296.
In transfer scenarios, like winding-up to NCLT under Section 434 Companies Act, creditor interests guide decisions Tata Capital Financial Services Ltd. VS Shree Shyam Pulp & Board Mills Ltd. - 2018 Supreme(Del) 1999.
Creditors: Stay NI Act complaints relating to insolvency facts during CIRP; pursue claims via IBC process.
Debtors/Directors: Seek quashing/stay in magistrate courts citing IBC admission.
Courts: Align with precedents, avoiding parallel proceedings on same facts Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290.
Challenges to NCLT jurisdiction must be raised there first Shriraj Investment And Finance Limited VS Union Of India Thr. Secretary - 2021 Supreme(Del) 854. Supplementary filings in NCLT follow IBC Rules, not always NCLT Rules Mackeil Ispat VS State Bank of India - 2019 Supreme(Cal) 804.
Generally, once NCLT starts IBC proceedings, Section 138 NI Act actions against the corporate debtor become non-maintainable for related cheque issues, due to moratorium and IBC's overriding effect A. Navinchandra Steels Private Limited VS SREI Equipment Finance Limited - 2021 0 Supreme(SC) 118Ram Kishor Arora @ R. K. Arora VS Puneet Dhar - 2023 0 Supreme(P&H) 296Ram Kishor Arora @R. K. Arora VS Anubhav Kapoor - 2023 0 Supreme(P&H) 290. This ensures efficient resolution without judicial conflicts.
Key Takeaways:- IBC moratorium restricts parallel proceedings.- Criminal NI Act cases aren't auto-stayed but yield to insolvency on same facts.- File claims in NCLT; transfer others as needed.- Exceptions for unrelated matters or pre-admission stages.
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Section 138 of NI Act is not maintainable and that when the liquidation proceedings are pending, the claims have to be made before the NCLT only, whereas, respondent No.2 contends that criminal proceedings can be maintainable. ... On the other hand, learned counsel for respondent No.2 submitted that the proceeding before NCLT is not a bar for maintenance of Section 138 of NI Act and it is criminal proceed....
He submitted that the pendency of proceedings before the NCLT under IBC does not bar the proceedings under Section 138 of NI Act which being penal in nature. In support of his argument he referred to a Three Judge Bench of the Hon’ble Supreme Court in Ajay Kumar Radheyshyam Goenka vs. ... We cannot lose sight of the fact that Section 138 of the N.I. Act are not recovery proceedings. They are penal in character. A person may face imprisonment or fine ....
He submitted that the pendency of proceedings before the NCLT under IBC does not bar the proceedings under Section 138 of NI Act which being penal in nature. In support of his argument he referred to a Three Judge Bench of the Hon’ble Supreme Court in Ajay Kumar Radheyshyam Goenka vs. ... We cannot lose sight of the fact that Section 138 of the N.I. Act are not recovery proceedings. They are penal in character. A person may face imprisonment or fine ....
He submitted that the pendency of proceedings before the NCLT under IBC does not bar the proceedings under Section 138 of NI Act which being penal in nature. In support of his argument he referred to a Three Judge Bench of the Hon’ble Supreme Court in Ajay Kumar Radheyshyam Goenka vs. ... We cannot lose sight of the fact that Section 138 of the N.I. Act are not recovery proceedings. They are penal in character. A person may face imprisonment or fine ....
Insolvency and Bankruptcy Code , 2016 (for short ‘IBC’ Code), holding that the suit is barred by law under Section 231 of IBC is not sustainable, as the very claim petition before the NCLT is not maintainable. ... Therefore, the very suit itself is not maintainable before the Trial Court, in view of Section 33 (5) of the IBC Act, as well as the bar under Section 63 of the IBC Code; no civil court has jurisdiction to entertain any suit or any proceedings in
Accordingly, he submitted that the proceedings initiated by the 3rd Respondent before the DRT would not be maintainable and, in any event, liable to be transferred to the NCLT where the CIRP of the principal borrower is on. ... From the above observations, we are satisfied that in this case, the proceedings should have been filed with the NCLT and not the DRT. In any event, even if the proceedings before the DRT, the DRT should have transferred the s....
Hence, it is contended that the present petition is not maintainable under law. 9. ... are likely to be affected by those proceedings are entitled to maintain proceedings before the authorities, at least before the NCLT. ... An application has been filed by Respondent No.1 for vacation of stay and for dismissal of the writ petition on the ground that the writ petition is not maintainable. 30. ... Arvind Nigam, learned Senior Counsel for the Respondent No. 1, contends ....
It is true that Court-II, NCLT, Mumbai is the Forum in which the liquidation proceedings started. ... whether such application is maintainable or not and how the pleadings will impact the admission of the Section 7 petition. ... Initiate proceedings for criminal contempt of court for the incidents that have transpired in court, including, but not limited to 14-10-2025 (NCLT Mumbai), 04.11.2025 (NCLT New Delhi etc.) 3. ... Joshi in t....
f) It is submitted that it being a second Application for restoration, is not maintainable under the IBC and the NCLT Rules, 2016. The first restoration Application, RST.A. ... The present Application is not maintainable in law and is liable to be dismissed on this ground alone. ... In the absence of proper authority, the present Application is liable to be dismissed as not maintainable. ... e) It is submitted that the present application under Rule 11 read with Rul....
That, therefore, this Court may dismiss not only this application but also the Execution Application as not maintainable and for lack of jurisdiction. 11. ... Such exercise of jurisdiction by the NCLT, in my view, would not be dehors the insolvency proceedings nor would the same fall outside the realm of IBC. 39. ... That, therefore, this Interim Application as well as the Execution Application is not maintainable, as the Award Debtor is no....
It is also clear that till date the NCLT has not passed an order admitting the proceedings of the respondent filed under Section 7 of the IBC. Before examining these questions as canvassed on behalf of the parties, it needs to be noted that the respondent had filed the proceedings under Section 7 of the IBC against the applicant before the NCLT on 12 October 2021.
1-Company was passed by the NCLT, as per the provisions of the IB Code, the proceedings under Section 138 of the NI Act cannot be continued against original accused No. 1-Company, raising the contention that, once, the order of liquidation of accused No. 1-Company and its directors, i.e. the present petitioners.
It is a settled law the challenge to the jurisdiction of NCLT ought to have been raised before NCLT itself. Since the petition has already been filed under Section 241, 242 of the Companies Act; notice having been issued; the contention raised before this Court on the point of jurisdiction of NCLT can very well be raised before the NCLT. Once the proceedings have been initiated before NCLT and if the NCLT is seized with the company petition, all contentions including power of the respondent to initiate such proceedings before NCLT must be raised before such forum and be determined ....
Neither in Rule 10 nor in any other Rule of the IBC Rules, does Rule 55 of the NCLT Rules find mention. By placing reliance on Rule 10 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as "the IBC Rules") learned senior counsel argues that the specific rules of the NCLT Rules, 2016, which are applicable to IBC Proceedings, have been referred to there. In reply, learned senior counsel for the petitioner argues that Rule 55 of the NCLT Rules are not applicable to insolvency resolution proceedings under the IBC.
On payment of the expenses to the OL, the order appointing the OL as the provisional liquidator would stand revoked. Once, the orders are revoked, the proceedings may be transferred to the NCLT. Bank will file with the Registry proof of having made payment of expenses to the OL to enable the Registry of this court to initiate steps for transfer of the proceedings.
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