2019 (4) TMI 1819 - HC - Companies Law

Court dismisses application under Section 482, finds no merit in petitioners' arguments.

M/s. MBL Infrastructure Ltd. & Anr. Versus Sri Manik Chand Somani

The court dismissed the application under Section 482 of the Code of Criminal Procedure, finding no merit in the petitioners' arguments. The court ... Dishonor of Cheque - Legality and validity of the proceedings under Section 138 of the Negotiable Instruments Act - HELD THAT:- While dealing with an application under Section 482 of the Code of Criminal Procedure the High Court should not assume the jurisdiction of the trial Court and hold a parallel trial. High Court in exercise of its power under Section 482 of the Code of Criminal Procedure is not expected to discharge the function of trial judge. The Court while considering the prayer of quashing should not delving deep into the merit of the case or adjudicate upon a defence of the accused. Moreover, the petitioner is at liberty to place his plea by way of defence during trial - it is not a fit case to exercise discretion under Section 482 of the Code of Criminal Procedure and to quash the proceedings pending against the petitioner. The application under Section 482 of the Code of Criminal Procedure is dismissed. Issues Involved:1. Legality and validity of proceedings under Section 138 of the Negotiable Instruments Act.2. Applicability of moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) to criminal proceedings.3. Responsibility of petitioner no.2 during the period of moratorium.Issue-wise Detailed Analysis:1. Legality and Validity of Proceedings under Section 138 of the Negotiable Instruments Act:The petitioners filed an application under Section 482 of the Code of Criminal Procedure, seeking to quash the proceedings in connection with C.C.No.387 of 2017 for an alleged offence under Section 138 of the Negotiable Instruments Act. The complainant alleged that the petitioners issued two cheques, which were dishonored due to insufficient funds. Despite receiving a demand notice, the petitioners failed to make the payment. The court noted that the issuance and dishonor of the cheques were admitted facts, and the petitioners' liability under Section 138 was presumed under Section 139 of the Negotiable Instruments Act. The court found that the averments in the complaint prima facie indicated the commission of the alleged offence.2. Applicability of Moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) to Criminal Proceedings:The petitioners argued that the proceedings should be quashed due to the moratorium declared under Section 14 of the IBC, which prohibits the institution or continuation of suits or proceedings against the corporate debtor. The court referred to the order of moratorium dated 30.03.2017 and the relevant provisions of Section 14 of the IBC. It was emphasized that the moratorium did not prohibit the continuation of criminal proceedings. The court cited the decision in Indorama Synthetics (I) Ltd. Nagpur Vs. State of Maharashtra, which held that the moratorium under Section 14 of the IBC does not apply to criminal proceedings under Section 138 of the Negotiable Instruments Act.3. Responsibility of Petitioner No.2 During the Period of Moratorium:The petitioners contended that petitioner no.2 was not responsible for the dishonor of the cheque as he was a suspended Director during the moratorium period and the company's affairs were managed by the Interim Resolution Professional (IRP). The court noted that the declaration of moratorium did not absolve the petitioners of their liability under Section 138/141 of the Negotiable Instruments Act. The court emphasized that the plea of petitioner no.2 not being in charge of the company's affairs during the moratorium could not be accepted at this stage. The court stated that such defenses should be raised during the trial and not in an application under Section 482 of the Code of Criminal Procedure.Conclusion:The court concluded that the declaration of moratorium under the IBC does not bar the continuation of criminal proceedings under Section 138/141 of the Negotiable Instruments Act. The court dismissed the application under Section 482 of the Code of Criminal Procedure, finding no merit in the petitioners' arguments. The interim order, if any, stood vacated. The related applications, C.R.A.N.678 of 2019 and C.R.A.N.770 of 2019, were also dismissed as infructuous. The court reiterated that it should not assume the jurisdiction of the trial court and delve into the merits of the case while considering an application under Section 482.