TaxTMI 
TaxTMI 
2023 (9) TMI 1564
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....ication of the case at hand are that complainant bank instituted proceedings under Section 138 of the Act in the Court of learned JMFC Court No. III, Una, alleging therein that accused and his wife Smt. Shaveta Sharma applied for term loan facility as house loan for sum of Rs. 2,00,00,000/- and same was granted on 24.01.2015. Since accused failed to repay the loan amount as per the terms and conditions of agreement executed inter se accused and complainant bank and the sum of Rs. 2,04,66,124/- alongwith interest calculated up to 12.02.2019 was outstanding loan amount against the accused, he with a view to discharge his lawful liability issued cheque bearing No. 393682 dated 14.02.2019 amounting to Rs. 5,90,000/- of his account No. 35417139168 of State Bank of India, Branch Basal, District Una, H.P. in favour of complainant, but fact remains that aforesaid cheque on its presentation, was dishonoured on account of insufficient funds vide memo dated 14.02.2019. Since accused failed to make the payment good within the time stipulated in the legal notice, complainant bank was compelled to initiate proceedings before the competent Court of law under Section 138 of the Act. 3. Learned ....
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....and Bankruptcy Code are separate in nature and both the proceedings can run simultaneously. In the aforesaid background, accused has approached this Court in the instant proceedings, praying therein to set aside the aforesaid order. 5. Precisely, the grouse of the petitioner, as has been highlighted in the petition and further canvassed by Mr. Subhash Sharma, learned counsel for the petitioner, is that learned trial Court, while passing impugned order, failed to take note of the fact that accused had filed one application under Section 94 (1) of Insolvency and Bankruptcy Code, as a result thereof, interim moratorium had actually commenced on the date of filing of the petition by the company qua all the debts of the petitioner. Mr. Sharma, submitted that on account of interim moratorium all the proceedings with regard to realization of debts are deemed to be stayed and as such, there was otherwise no occasion, if any, for the learned trial Court to dismiss the application filed by the complainant bank under Section 96 of Insolvency and Bankruptcy Code. 6. To substantiate the aforesaid plea, Mr. Subhash Sharma, learned counsel for the petitioner, specifically invited attention ....
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....was a Director/Promoter of companies namely i.e. Magma Autolinks Pvt. Ltd.; Shaveta Golden Foods Pvt. Ltd.; Tanishka Agro Ventures Pvt. Ltd.; Maxim Infra Venues Pvt. Ltd. and Tanishka Automotive Pvt. Ltd. and their companies had obtained various credit facilities from the financial institutions. Accused had given a personal guarantee for repayment of said credit facilities. Since accused failed to clear the outstanding dues, lender bank issued notice under Section 13 (2) of SARFAESI Act, for payment of guarantee amount, however, accused did not make any payment in response to the said notice, as a result thereof, bank concerned issued possession notice to the Personal Guarantor i.e. accused under Section 13 (4) of SARFAESI Act, 2002. In the aforesaid background, company namely Magma Autolinks Pvt. Ltd. filed an application under Section 10 of IBC before learned National Company Law Tribunal, Chandigarh bearing Company Petition (IB) No. 127/CHD/HP/2018, titled "Magma Autolinks Pvt. Ltd." to initiate Corporate Insolvency Resolution Process ("CIRP") of the company. The CIRP of the company was initiated on 13.09.2018 and thereafter, bank concerned submitted its claim in Form-C, which w....
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....ex Court taking note of its earlier judgment passed in P. Mohanraj & Ors. (supra) has categorically held that where the proceedings under Section 138 of the Act had already commenced with the Magistrate taking cognizance upon the complaint and during pendency of the company gets dissolved, signatories, directors cannot escape from their penal liability under Section 138 of the Act by citing its resolution. Hon'ble Apex Court further held in the afore judgment that an offence under Section 138 of the Act, which has been committed by the company and is proved that offence has been committed with consent and connivance of, any neglect on the part of any director, manager, secretary or other officers of the company, such director, manager, secretary or other officers shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Relevant paras of the afore judgment reads as under: 45. In P. Mohanraj (supra), this Court in clear terms held that Section 32A only protects the corporate debtor and not the signatories/directors etc. The prosecution against the signatories/directors would continue. In P. Mohanraj (supra):- ....
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.... to 43 read thus: "39. The raison d'être for the enactment of Section 32-A has been stated by the Report of the Insolvency Law Committee of February 2020, which is as follows: "17. LIABILITY OF CORPORATE DEBTOR FOR OFFENCES COMMITTED PRIOR TO INITIATION OF CIRP [Recommendations contained herein have been implemented pursuant to Section 10 of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019.] 17.1. Section 17 of the Code provides that on commencement of the CIRP, the powers of management of the corporate debtor vest with the interim resolution professional. Further, the powers of the Board of Directors or partners of the corporate debtor stand suspended, and are to be exercised by the interim resolution professional. Thereafter, Section 29-A, read with Section 35(1)(f), places restrictions on related parties of the corporate debtor from proposing a resolution plan and purchasing the property of the corporate debtor in the CIRP and liquidation process, respectively. Thus, in most cases, the provisions of the Code effectuate a change in control of the corporate debtor that results in a clean break of the corporate debtor from its erst....
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....same time, the Committee was also conscious that authorities are duty-bound to penalise the commission of any offence, especially in cases involving substantial public interest. Thus, two competing concerns need to be balanced. Xxx xxx xxx 17.6. Given this, the Committee felt that a distinction must be drawn between the corporate debtor which may have committed offences under the control of its previous management, prior to the CIRP, and the corporate debtor that is resolved, and taken over by an unconnected resolution applicant. While the corporate debtor's actions prior to the commencement of the CIRP must be investigated and penalised, the liability must be affixed only upon those who were responsible for the corporate debtor's actions in this period. However, the new management of the corporate debtor, which has nothing to do with such past offences, should not be penalised for the actions of the erstwhile management of the corporate debtor, unless they themselves were involved in the commission of the offence, or were related parties, promoters or other persons in management and control of the corporate debtor at the time of or any time following the ....
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.... in the instant case as well. The provision deals with reference to offences committed prior to the commencement of the CIRP. With the admission of the application the management of the corporate debtor passes into the hands of the interim resolution professional and thereafter into the hands of the resolution professional subject undoubtedly to the control by the Committee of Creditors. As far as protection afforded to the property is concerned there is clearly a rationale behind it. Having regard to the object of the statute we hardly see any manifest arbitrariness in the provision." 41. Section 32-A cannot possibly be said to throw any light on the true interpretation of Section 14 (1) (a) as the reason for introducing Section 32-A had nothing whatsoever to do with any moratorium provision. At the heart of the section is the extinguishment of criminal liability of the corporate debtor, from the date the resolution plan has been approved by the adjudicating authority, so that the new management may make a clean break with the past and start on a clean slate. A moratorium provision, on the other hand, does not extinguish any liability, civil or criminal, but only casts a ....
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....he manner suggested by Shri Mehta, it will impact Section 14 by taking out of its ken Sections 138/141 proceedings, which is not the object of Section 32A (1) at all. Assuming, therefore, that there is a clash between Section 14 IBC and the first proviso of Section 32-A (1), this clash is best resolved by applying the doctrine of harmonious construction so that the objects of both the provisions get subserved in the process, without damaging or limiting one provision at the expense of the other. If, therefore, the expression "prosecution" in the first proviso of Section 32-A (1) refers to criminal proceedings properly so-called either through the medium of a first information report or complaint filed by an investigating authority or complaint and not to quasi-criminal proceedings that are instituted under Sections 138/141 of the Negotiable Instruments Act against the corporate debtor, the object of Section 14 (1) IBC gets subserved, as does the object of Section 32-A, which does away with criminal prosecutions in all cases against the corporate debtor, thus absolving the corporate debtor from the same after a new management comes in." (Emphasis applied) Thus, the....
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....e has disappeared in the modern times and now mostly the question is, "what is the true construction of the statute?" A passage in Craies on Statue Law 7th Edn. reads to the following effect:- "The distinction between a strict and a liberal construction has almost disappeared with regard to all classes of statutes, so that all statutes, whether penal or not, are now construed by substantially the same rules. 'All modern Acts are framed with regard to equitable as well as legal principles.' "A hundred years ago", said the court in Lyons' case, "statutes were required to be perfectly precise and resort was not had to a reasonable construction of the Act, and thereby criminals were often allowed to escape. This is not the present mode of construing Acts of Parliament. They are construed now with reference to the true meaning and real intention of the legislature." 56. At page-532 of the same book, observations of Sedgwick are quoted as under: "The more correct version of the doctrine appears to be that statutes of this class are to be fairly construed and faithfully applied according to the intent of the legislature without unwarrantable severity....
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....tee, such liability of the guarantor continues and the creditor can realise the same from the guarantor in view of the language of Section 128 of the Contract Act, 1872 as there is no discharge under Section 134 of that Act. This Court observed as follows: (SCC pp. 362-63, para 7) "7. Under the bank guarantee in question the Bank has undertaken to pay the Electricity Board any sum up to Rs 50,000 and in order to realise it all that the Electricity Board has to do is to make a demand. Within forty-eight hours of such demand the Bank has to pay the amount to the Electricity Board which is not under any obligation to prove any default on the part of the Company in liquidation before the amount demanded is paid. The Bank cannot raise the plea that it is liable only to the extent of any loss that may have been sustained by the Electricity Board owing to any default on the part of the supplier of goods i.e. the Company in liquidation. The liability is absolute and unconditional. The fact that the Company in liquidation i.e. the principal debtor has gone into liquidation also would not have any effect on the liability of the Bank i.e. the guarantor. Under Section 128 of ....