Insolvency doesn't shield from criminal liability under Section 138 NI Act.

The court dismissed the Criminal Original Petition, ruling that criminal proceedings under Section 138 of the Negotiable Instruments Act could be maintained against the petitioner despite being declared insolvent. The judgment clarified that the Insolvency and Bankruptcy Code's Section 14 does not bar criminal actions, distinguishing them from civil proceedings. Therefore, the respondent could proceed with legal action for the dishonored cheque, as the nature of penal actions is distinct from civil claims.

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Issues:
1. Whether criminal proceedings under Section 138 of Negotiable Instruments Act can be sustained against the petitioner after being declared insolventRs.

Analysis:
The petitioner issued a post-dated cheque to the respondent, which was dishonored due to insufficient funds. The respondent initiated proceedings under Section 138 of Negotiable Instruments Act against the petitioner. The petitioner argued that the company had been taken over by an Insolvency Resolution Professional as per the National Company Law Tribunal's order. The petitioner contended that the alleged cheque was for security purposes, and there was no enforceable debt. The respondent, on the other hand, claimed that the cheque was issued to discharge a debt for tanning chemicals supplied to the petitioner.

The key question was whether there was a statutory bar to initiating proceedings under Section 138 of Negotiable Instruments Act against the petitioner after being declared insolvent. The respondent argued that the Insolvency and Bankruptcy Code's Section 14 does not prohibit criminal proceedings against the debtor. The court cited a previous judgment stating that there is no prohibition for the complainant to approach a criminal court for penal action under Section 138 of Negotiable Instruments Act, even if insolvency proceedings are pending or the debtor is declared insolvent.

The court further explained that Section 14 of the Insolvency and Bankruptcy Code pertains to civil proceedings and does not cover criminal proceedings like those under Section 138 of Negotiable Instruments Act. The court emphasized that the criminal proceedings are not subject to the prohibition mentioned in Section 14, as the nature of penal action differs from civil claims. Therefore, the court dismissed the petition, stating that the petitioner could not seek shelter under Section 14 of the Insolvency and Bankruptcy Code.

In conclusion, the court dismissed the Criminal Original Petition, stating that the criminal proceedings under Section 138 of Negotiable Instruments Act could be sustained against the petitioner even after being declared insolvent. The judgment clarified that the prohibition under the Insolvency and Bankruptcy Code's Section 14 does not extend to criminal proceedings, allowing the respondent to pursue legal action against the petitioner for the dishonored cheque.

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