IBC moratorium does not shield company directors from cheque dishonour prosecution under vicarious liability principles.

Section 14 moratorium under the Insolvency and Bankruptcy Code operates only against the corporate debtor and does not extinguish statutory liability of directors or other natural persons in a prosecution under Sections 138 and 141 of the Negotiable Instruments Act. Because the company is the principal offender and others are proceeded against on the basis of vicarious liability, proceedings may continue against the persons covered by Section 141 even while the corporate debtor is protected by moratorium. The challenge to continuation of the complaint therefore failed.

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Issues: Whether the moratorium under the Insolvency and Bankruptcy Code, 2016 bars continuation of a prosecution under Section 138 of the Negotiable Instruments Act, 1881 against the company's directors and other natural persons when the corporate debtor is protected by moratorium.

Analysis: The moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates only against the corporate debtor. In a prosecution under Sections 138 and 141 of the Negotiable Instruments Act, 1881, the company is the principal offender and the other persons are proceeded against on the basis of vicarious liability. The settled legal position is that although proceedings cannot continue against the corporate debtor during the moratorium period, the statutory liability of the persons covered by Section 141 continues and proceedings may proceed against them.

Conclusion: The moratorium did not bar continuation of the proceedings against the petitioners, and the challenge to the Magistrate's order failed.

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