TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 1113
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....ere presented. They were, however, returned for the reason "insufficient funds". The returned cheques were re-presented. Again, they were dishonoured. Thereupon, Tap Engineering issued legal notices. Though a partial payment was made in respect of one dishonoured cheque, Tecpro Systems Limited failed to make payments with regard to the other cheques. 2. In view of the non compliance of the demand set out in the legal notices, Tap Engineering represented by its Proprietor filed C.C Nos.160, 161, 162, 163, 164, 165 and 166 of 2014 before the jurisdictional Magistrate court. Cognizance of the offence under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 was taken and summons were issued. Tecpro Systems Limited was shown as the first accused. The petitioner herein was shown as the second accused in each of the complaints. 3. During the pendency of these complaints, Tecpro Systems Limited came under Corporate Insolvency Resolution Process. One of its financial creditors filed application under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, New Delhi. The application was admitted and by order dated 07.08.2017, an Interim Reso....
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....that the Insolvency and Bankruptcy Code, 2016 is a self contained enactment which has an overriding effect over other laws. Therefore, continuation of the impugned prosecution would only amount to an abuse of legal process. He, therefore, called upon this Court to quash the impugned proceedings. 5. I am unable to agree with any of the contentions advanced by the learned counsel appearing for the petitioner. Section 14 of the Insolvency and Bankruptcy Code, 2016 contemplates declaration of moratorium. The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority is prohibited. Question arose before various judicial fora as to whether the expression "proceedings" will include criminal prosecution. 6. The High Court of Calcutta in C.R.R No.3455 of 2018 vide judgment dated 16.04.2019, declined to quash the complaint under Section 138 of the Negotiable Instruments Act, 1881 merely on account of the declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. The learned Judge held that declaration of....
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....te and intentional. The legislature did not intend to bar criminal prosecution even though moratorium has been declared. 10. Realizing this position, the learned counsel for the petitioner went on to argue that he is not anchoring his contention on Section 14 of the Code. He drew my attention to Section 31 of the Code which states that after the resolution plan is approved, moratorium order passed by the adjudicating authority under Section 14 of the Code, shall cease to have effect. The petitioner's counsel wanted me to focus my attention on Section 31(1) of the Code which states that the order of the adjudicating authority approving the resolution plan shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. 11. Of course, no exception can be taken to this contention. But, the question that arises for consideration is whether the statutory effect of Section 31(1) of the Insolvency and Bankruptcy Code, 2016 is the extinguishment of the criminal prosecution instituted by one of the operational creditors under Section 138 r/w.141 of the Negotiable Instruments Act, 1881. 12. The very obje....
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....arantor. This is for the reason that otherwise, Under Section 133 of the Indian Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the Resolution Plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) referred to above, require information as to personal guarantees that have been given in relation to the debts of the corporate debtor. Far from supporting the stand of the Respondents, it is clear that in point of fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him. 26. ** ** ** 26.1.Section 14 refers only to debts due by corporate debtors, who are limited liability companies, and it is clear that in t....
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....he criminal prosecution initiated under Section 138 r/w.141 of the Negotiable Instruments Act, 1881 r/w. 200 of Cr.Pc, can be terminated. The categorical answer is "No". In JIK Industries Limited v. Amarlal V.Jumani [2012] 3 SCC 255, the Hon'ble Supreme Court held that sanction of a scheme under Section 391 of the Companies Act, 1956 will not lead to any automatic compounding of offence under Section 138 of the Act without the consent of the complainant. Neither Section 14 nor Section 31 of the Code can produce such a result. The binding effect contemplated by Section 31 of the Code is in respect of the assets and management of the corporate debtor. No clause in the Corporate Insolvency Resolution Plan even if accepted by the adjudicating authority/appellate Tribunal can take away the power and jurisdiction of the criminal court to conduct and dispose of the proceedings before it in accordance with the provisions of the Code of Criminal Procedure. 17 .It is true that by virtue of Section 238 of the Insolvency and Bankruptcy Code, 2016. the provisions of the Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in f....
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....the law laid down in Aneeta Hada case. Where the company continues to remain even at the end of the resolution process, the only consequence is that the erstwhile directors can no longer represent it. 20. In the case on hand, the accused company had not been dissolved. Its management has been taken over. Therefore, there is absolutely no difficulty in coming to the conclusion that the impugned prosecution against Tecpro Systems can also continue. The petitioner contends that his right to fair trial has been seriously infringed. He claims that the principles of natural justice stand violated as at the stage of evidence, he cannot lead any documentary evidence at all. According to him, that would be the resultant position since he has been totally deprived of any access to any of the company records. 21. This contention is without any merit. Section 247 of Cr.PC states that when the accused is called upon to enter upon his defence and produce his evidence, the provisions of Section 243 shall apply to the case. Section 243 of Cr.Pc reads as follows : 243. Evidence for defence.- (1) The accused shall then be called upon to enter upon his defence and produce his evidence; and if t....
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....t be imprisoned. But then, the person in charge of the entity as per Section 141 of the Negotiable Instruments Act can be imprisoned. The amount of fine/compensation can also be recovered from the assets of the corporate entity or that of its directors and officials who have been found guilty and vicariously liable in the same trial. The Code of Criminal Procedure provides the mode of recovery in Section 421. It reads as follows : "421. Warrant for levy of fine.- (1) When an offender has been sentenced to pay a fine, the Court passing the sentence may take action for the recovery of the fine in either or both of the following ways, that is to say, it may- (a) issue a warrant for the levy of the amount by attachment and sale of any movable property belonging to the offender; (b) issue a warrant to the Collector of the district, authorising him to realise the amount as arrears of land revenue from the movable or immovable property, or both, of the defaulter: Provided that, if the sentence directs that in default of payment of the fine, the offender shall be imprisoned, and if such offender has undergone the whole of such imprisonment in default, no Court shall issue such wa....