Insolvency moratorium bars cheque dishonour prosecution against a corporate debtor when no natural person is arraigned as accused.

A Section 138 prosecution against a corporate debtor is stayed by the insolvency moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016. The later three-judge Bench rulings were applied to hold that cheque dishonour proceedings cannot continue against the company during moratorium. Where the complaint arraigns only the corporate entity and no natural person alleged to be in charge is made an accused, the exception permitting continuation against individuals does not apply. On that basis, the complaint was liable to be quashed and the challenge succeeded.

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Issues: Whether proceedings under Section 138 of the Negotiable Instruments Act, 1881 against a corporate debtor are barred by moratorium under the Insolvency and Bankruptcy Code, 2016, and whether such proceedings are liable to be quashed when no natural person is arrayed as accused.

Analysis: The governing principle was taken from the later three-judge Bench rulings which held that a proceeding under Section 138 against a corporate debtor is covered by the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016. The case was distinguishable because the complaint was filed only against the corporate entity and not against any natural person alleged to be in charge of its affairs. In the absence of any individual accused, the exception permitting continuation against natural persons did not apply.

Conclusion: Proceedings under Section 138 of the Negotiable Instruments Act, 1881 could not continue against the corporate debtor during the moratorium and were liable to be quashed; the decision under challenge was set aside and the complaint was allowed.

Final Conclusion: The corporate debtor was protected by the insolvency moratorium, and the cheque dishonour prosecution against it could not be sustained in the facts of the case.

Ratio Decidendi: A Section 138 prosecution against a corporate debtor is hit by the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016, and where only the company is arraigned as accused, the proceedings cannot continue during the moratorium.

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