The Madras High Court has held that the Imposition Of Moratorium Under IBC bars initiation of proceeding under Section 138/141 of Negotiable Instruments Act.
The petitioners, M/s. Nag Leathers Pvt. Ltd. submitted that it is arrayed as one of the accused in cases pending before the Court of Judicial Magistrate, Erode/Fast Track Court-1 and before the Court of Judicial Magistrate, Erode/Fast Track Court-II, for the offences under Section 138, 141 and 142 of the Negotiable Instrument Act, 1881. The accused Company is running a leather business in the name and style of M/s.Nag India Pvt Ltd., As per the request of the petitioners’ Company, the complainant Company agreed to supply the ”Wet Blue Cow Hides” and supplied the same. During the course of business, the accused Company was due and payable to the respondent Company for the supply made.
For which, the accused had issued various cheques on different dates for discharge of the debts arising out of supply. When the said cheques were presented in bank, it was returned and the same dishonoured by the complainant’s Bank with an endorsement of ”Payment Stopped by the Drawers”. Therefore, the respondent has filed the complaints before the Court of Judicial Magistrate, Erode.
It is further alleged by the petitioners that the respondent has admittedly not issued any legal notice to the accused as prescribed under the provisions of Negotiable Instruments Act, however, in the complaint, it is stated that a legal notice was duly served to all the Directors including the petitioners herein. Therefore, the complaint filed under Section 138 Negotiable Instrument Act, is legally unsustainable. Hence, challenging the said complaint, the present petition has been filed by the petitioners.
The single bench of Justice N.Satish Kumar held that it is evident that there is a categorical finding recorded by the Apex Court that the moratorium provision contained in Section 14 of the Insolvency Bankruptcy Code, would apply only to corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instrument Act and thereby, it is clearly settled that the criminal liability of natural persons in case of complaint filed under Section 138 and 141 of the Negotiable Instrument Act, 1881 would survive, but would not be attracted against the company. The decision of the Supreme Court squarely covers the case on hand.
“The insolvency process was initiated by NCLT on 10.07.2017 and moratorium has been declared under the Insolvency and Bankruptcy Code. Therefore, as held by the Hon’ble Supreme Court, the moratorium was only in respect of the corporate debtor and not in respect of the directors / management and therefore, the petitioners as natural persons, are liable for prosecution. However, in view of declaration of moratorium by NCLT, the prosecution against the company cannot be allowed to continue,” the court ruled.
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