The Punjab and Haryana High Court expounded that primarily civil proceedings are barred under Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”).
The Section 138 Negotiable Instruments Act of 1881(hereinafter referred to as “NIA”) proceedings are criminal in nature and have a different set of purposes. It was observed that the Complainant approached the Court to take penal action against the offence committed by the Accused by not paying the cheque amount despite the receipt of statutory notice.
It was held that the criminal prosecution against natural persons under Section 138 R/w Section 141 NIA would not be barred due to IBC provisions.
Brief Facts:
The
present petition has been filed to seek quashing of a complaint filed
under Section 138 of the NIA and summon orders. The Petitioner also
sought for staying of proceedings before the Trial Court.
Contentions of the Petitioners:
It was submitted that the Petitioners were directors of Shreeom Prime Foods Pvt. Ltd. which is undergoing a resolution process before the NCLT. In the proceedings, the Petitioners have ceased to be the directors as the Board of Directors was suspended by the NCLT.
It was argued that independent recovery and criminal proceedings cannot take place against the Directors due to the interim moratorium as per Sections 14 and 96 of the IBC.
Observations of the Court:
The issue before the Court was whether during the pendency of admitted IBC proceedings, Section 138 NIA proceedings can continue simultaneously or not.
The Bench expounded that primarily civil proceedings are barred under Section 14 IBC. The Section 138 NIA proceedings are criminal in nature and have a different set of purposes. It was observed that the Complainant approached the Court to take penal action against the offence committed by the Accused by not paying the cheque amount despite the receipt of statutory notice.
It was held that the criminal prosecution against natural persons under Section 138 R/w Section 141 NIA would not be barred due to IBC provisions.
The decision of the Court:
Based on the aforementioned findings, the High Court dismissed the petition.
Case Title: Sachin Goyal and Anr. V. M/s Rajasthan Trading Co. & Anr.
Coram: Hon’ble Mrs. Justice Manjari Nehru Kaul
Case No.: CRM-M-16158-2023
Advocate for Petitioners: Adv. Mr. Viren Jain
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