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of <h1>Criminal Proceedings u/s 138 of NI Act Can Continue Despite IBC Moratorium and Resolution Plan Approval.</h1> <h3>AJAY KUMAR RADHEYSHYAM GOENKA Versus TOURISM FINANCE CORPORATION OF INDIA LTD.</h3> AJAY KUMAR RADHEYSHYAM GOENKA Versus TOURISM FINANCE CORPORATION OF INDIA LTD. - (2023) 10 SCC 545 Issues Involved:1. Whether the proceedings under Section 138 of the NI Act can continue during the pendency of proceedings under the IBC.2. Whether the status of the respondent as a Secured or Unsecured Financial Creditor affects the proceedings under the NI Act.3. Whether the approval of a resolution plan under the IBC extinguishes the criminal liability under Section 138 of the NI Act.Summary of Judgment:1. Continuation of Section 138 NI Act Proceedings During IBC Proceedings:The Supreme Court concluded that the nature of proceedings under the NI Act and the IBC are distinct and do not intercede each other. Section 14 of the IBC, which imposes a moratorium on certain proceedings, does not extend to criminal proceedings under Section 138 of the NI Act. The Court emphasized that Section 138 proceedings are penal in nature and not akin to recovery proceedings, thus they can continue simultaneously with IBC proceedings.2. Status of Respondent as Secured or Unsecured Financial Creditor:The Court noted that the issue of whether the respondent is a Secured or Unsecured Financial Creditor is a matter for the proceedings under the IBC and any appeals therefrom. This status does not affect the continuation of the Section 138 proceedings under the NI Act.3. Impact of Resolution Plan Approval on Criminal Liability:The Court held that the approval of a resolution plan under Section 31 of the IBC does not extinguish the criminal liability under Section 138 of the NI Act. The Court rejected the argument that the resolution plan, which resolves the debt, should lead to the termination of Section 138 proceedings. The Court clarified that Section 138 proceedings are not merely compensatory but also punitive, aimed at penalizing the dishonor of a negotiable instrument, which is crucial for maintaining trade integrity.Separate Judgment by J. B. Pardiwala:Justice J. B. Pardiwala, while agreeing with the main judgment, provided additional reasoning emphasizing that the criminal liability under Section 138 of the NI Act continues against the natural persons (directors/signatories) even after the approval of the resolution plan under the IBC. He highlighted that Section 32A of the IBC, which provides immunity to the corporate debtor, does not extend to the directors or persons responsible for the conduct of the business of the corporate debtor.Conclusion:The appeals were dismissed, affirming that the criminal proceedings under Section 138 of the NI Act can continue against the natural persons involved, despite the resolution of the corporate debtor's insolvency under the IBC.
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