Interim moratorium under insolvency law does not stop cheque dishonour prosecution under the Negotiable Instruments Act.

Interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 is confined to debt recovery proceedings and does not bar criminal prosecution for cheque dishonour under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The scheme of the Code distinguishes civil recovery from penal action, and a personal insolvency application cannot be used to stall a complaint founded on dishonour of cheque and the statutory liability attached to it. The cheque dishonour proceedings therefore continue, and the orders refusing to stay them are left undisturbed.

---

---

Issues: Whether proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 are stayed by the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 on filing of an application under Section 94 of that Code.

Analysis: The interim moratorium under Section 96 operates in relation to debts and suspends pending legal action in respect of debt during the relevant period. The scheme of the Insolvency and Bankruptcy Code distinguishes between protection against civil recovery proceedings and immunity from criminal prosecution. Proceedings under Section 138 of the Negotiable Instruments Act, 1881 are penal in character and are founded on dishonour of cheques and the statutory liability created by Sections 138 and 141. The protection available under Sections 94, 96 and 101 of the Insolvency and Bankruptcy Code, 2016 does not extend to criminal proceedings, and the filing of a personal insolvency application cannot be used to stall prosecution for cheque dishonour.

Conclusion: The interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 does not stay proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.

Final Conclusion: The criminal appeals and writ petition fail, and the orders refusing to stay the cheque dishonour proceedings are left undisturbed.

Ratio Decidendi: Interim moratorium under the Insolvency and Bankruptcy Code, 2016 is confined to debt recovery proceedings and does not bar criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881.

---