Stay Granted on Criminal Proceedings Due to Insolvency Order Under Negotiable Instruments Act Sections 138/141.

The Calcutta HC admitted the petitioner's revisional application, granting a stay on criminal proceedings under Section 138/141 of the Negotiable Instruments Act, citing the NCLT's insolvency order under the Insolvency and Bankruptcy Code, 2016. The Court held that proceedings are stayed under Section 96 of the Code. The arrest warrant was stayed for five weeks post-vacation.

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Issues: Stay of criminal proceedings under Section 138/141 of the Negotiable Instruments Act due to insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

In this judgment by the Calcutta High Court, the petitioner sought a stay on criminal proceedings under Section 138/141 of the Negotiable Instruments Act pending before the Metropolitan Magistrate's Court in Calcutta, citing an order by the National Company Law Tribunal (NCLT) in insolvency proceedings against the petitioner. The petitioner's counsel argued that the insolvency proceedings under Section 95(1) of the Insolvency and Bankruptcy Code, 2016, had been initiated against the petitioner, resulting in an order by the NCLT for personal insolvency. The counsel referred to a judgment by the Punjab and Haryana High Court, emphasizing that under Section 96 of the Code, all legal actions or proceedings in respect of any debt, including those under Section 138 of the Act, are deemed to be stayed. The petitioner's application for stay was based on this premise.

The respondent, through their counsel, contended that the petitioner had not appeared before the trial court as required and cited a decision by the Allahabad High Court in support of this argument. However, the Calcutta High Court, after considering the provisions of Sections 94 and 96 of the Insolvency and Bankruptcy Code, 2016, held that even if the accused had not personally appeared before the trial court, the fact of the NCLT order should have been brought to the attention of the Magistrate. The Court also reiterated the observation of the Punjab and Haryana High Court that proceedings under Section 138 of the Act are deemed to be stayed under Section 96, regardless of when the insolvency application was filed under Section 94 of the Code. Consequently, the revisional application for a stay on criminal proceedings was admitted by the Court.

The Court dispensed with the service of notice on the opposite party as they had already appeared, scheduling a contested application two weeks after the vacation period. It ordered a stay on further proceedings related to the criminal case pending before the Metropolitan Magistrate's Court for three weeks from the date of reopening after vacation, limited to the petitioner. Additionally, the warrant of arrest issued by the Magistrate was stayed for a period of five weeks from the date of reopening after vacation.

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