Moratorium under IBC applies to Corporate Debtor Only: Supreme Court upholds NI Act Proceedings against Company Director [Read Judgment]

Moratorium - Corporate Debtor - Supreme Court - NI Act Proceedings - Company Director - taxscan

A three-judge bench of the Supreme Court comprising Justices UU Lalit, S. Ravindra Bhat, and PS Narasimha has reiterated that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the corporate debtor The natural persons mentioned in Section 141 of the Negotiable Instruments Act would continue to be statutorily liable under the provisions of the Act.

The bench referred to the decision in P. Mohanraj & Others v. Shah Brothers Ispat Private Limited wherein a Bench of three judges considered the matter of whether a corporate entity in respect of which moratorium had become effective could be proceeded against in terms of Sections 138 and 141 of the Negotiable Instruments Act, 1881.

Relying on the decision, the Court observed that a subsidiary issue was also about the liability of natural persons like a Director of the Company.

“In paragraph 77 of its judgment, this Court observed that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the corporate debtor and that the natural persons mentioned in Section 141 of the Act would continue to be statutorily liable under the provisions of the Act,” the Court said.

Mr. Gopal Sankaranarayanan, a learned Senior Advocate who appeared for the petitioner contended that the resolution plan having been accepted in which the dues of the original complainant also figure, the effect of such acceptance would be to obliterate any pending trial under Sections 138 and 141 of the Act.

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