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Issues: (i) Whether the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 barred prosecution under sections 138 and 141 of the Negotiable Instruments Act, 1881 against the petitioner as a director or managing director of the company; (ii) Whether the complaint and summons process against the petitioner were liable to be quashed on the ground that he was no longer in charge of the company and that disputed factual questions required trial.
Issue (i): Whether the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 barred prosecution under sections 138 and 141 of the Negotiable Instruments Act, 1881 against the petitioner as a director or managing director of the company.
Analysis: The moratorium under section 14 protects the corporate debtor during insolvency proceedings and does not extend to natural persons who fall within section 141 of the Negotiable Instruments Act, 1881. Proceedings under section 138 may not be continued against the corporate debtor during the moratorium, but they can proceed against persons responsible for the conduct of its business, including directors or managing directors, where vicarious liability is attracted.
Conclusion: The moratorium did not bar prosecution against the petitioner; the objection was rejected.
Issue (ii): Whether the complaint and summons process against the petitioner were liable to be quashed on the ground that he was no longer in charge of the company and that disputed factual questions required trial.
Analysis: The complaint alleged issuance of the cheque on behalf of the company and raised disputed questions as to the petitioner's role, the effect of the insolvency proceedings, and the circumstances surrounding issuance and presentation of the cheque. Such disputed factual matters could not be resolved in a petition under section 482 of the Code of Criminal Procedure, 1973. The complaint disclosed a case that could proceed against the petitioner, and the petitioner was left to establish his defence before the trial court.
Conclusion: The complaint was held maintainable against the petitioner and quashing was declined.
Final Conclusion: The petition for quashing was rejected, and the prosecution under the Negotiable Instruments Act was permitted to proceed against the petitioner.
Ratio Decidendi: The moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 applies only to the corporate debtor and does not immunise natural persons liable under section 141 of the Negotiable Instruments Act, 1881; disputed questions of fact in such prosecutions cannot be decided in quashing proceedings under section 482 of the Code of Criminal Procedure, 1973.
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