Section 138 cheque dishonour proceedings and IBC moratorium scope referred for reconsideration by a three-Judge Bench.

Section 138 of the Negotiable Instruments Act is examined as raising distinct criminal and compensatory facets, including whether such proceedings are prosecution or recovery actions and whether the moratorium under Part III of the Insolvency and Bankruptcy Code extends to them. The analysis also addresses directors' vicarious liability under Section 141 and whether personal insolvency or bankruptcy shields them from compensatory recovery. After considering the statutory scheme, including Sections 96, 101, 124 and 128 of the Code, the questions were found to require reconsideration by a larger Bench. The appeals were therefore directed to be placed before the Chief Justice of India for constitution of an appropriate three-Judge Bench.

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Issues: Whether proceedings under Section 138 of the Negotiable Instruments Act are criminal prosecution or recovery proceedings, whether the moratorium under Part III of the Insolvency and Bankruptcy Code applies to such proceedings, and whether directors vicariously liable under Section 141 can claim the benefit of moratorium in respect of compensatory liability.

Analysis: The judgment undertakes an extensive examination of the nature of Section 138 proceedings, the distinction between the criminal aspect of cheque dishonour and the compensatory aspect of the remedy, and the scope of the moratorium provisions under Sections 96, 101, 124 and 128 of the Insolvency and Bankruptcy Code. It also considers the liability of directors under Section 141 and the effect of personal insolvency or bankruptcy on recovery of compensation. After discussing the statutory scheme and prior precedents, the matter is found to require authoritative reconsideration by a larger Bench.

Outcome: The questions arising from the appeals were directed to be placed before the Hon'ble Chief Justice of India for constitution of an appropriate three-Judge Bench.

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