TaxTMI 
TaxTMI 
2025 (4) TMI 775
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....29 OF 2023) CRIMINAL APPEAL NO. 1612 OF 2025 (Arising out of SLP (Crl.) No. 6835 OF 2024) CRIMINAL APPEAL NO(S). 1613-1649 OF 2025 (Arising out of SLP (Crl.) Nos. 9104 - 9140 OF 2024) W.P. (C) NO.469 OF 2024 CRIMINAL APPEAL NOS. 1650-1652 OF 2025 (Arising out of SLP (Crl.) NOS. 272-274 of 2025) CRIMINAL APPEAL NOS. 1653-1688 OF 2025 (Arising out of SLP (Crl.) NOS. 4822-4857 of 2025) CRIMINAL APPEAL NO. 1689 OF 2025 (Arising out of SLP (Crl.) No. 15852 OF 2024) CRIMINAL APPEAL NO. 1690 OF 2025 (Arising out of SLP (Crl.) No. 15813 OF 2024) CRIMINAL APPEAL NO. 1691 OF 2025 (Arising out of SLP (Crl.) No. 15933 OF 2024) CRIMINAL APPEAL NO. 1692 OF 2025 (Arising out of SLP (Crl.) No. 15905 OF 2024) J. B. Pardiwala And R. Mahadevan, JJ. For the Petitioner : Dr. Yusuf Iqbal Yusuf, Adv. Mr. Bhavya Sethi, Adv. Ms. Gyanika Kochar, Adv. Mr. Mohd. Abid Sheikh, Adv. Ms. Neelam Singh, AOR Mr. Jawahar Lal, Adv. Mr. R K Rathore, Adv. Mr. Danish Saifi, Adv. Mr. Subramaniam S, Adv. Mr. Naman Dwivedi, Adv. Mr. Shafik Ahmed, Adv. Ms. J Vijayakumari, Adv. Mr. A Syed Musthaba, Adv. Mr. V. Elanchezhiyan, AOR Mr. Abhimanyu Tewari, AOR Mr. Siddhant Saroha, Adv. Mr. Jaydip Pati, AOR Mr. Chritarth Palli....
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.... of the Negotiable Instruments Act, 1881 For short, "N.I. Act, 1881", sine die till the conclusion of the proceedings initiated Under Section 94 of the Insolvency and Bankruptcy Code, 2016 For short, "IBC", before the National Company Law Tribunal. A writ petition has also been filed for declaration and direction that Section 138 proceedings shall be deemed to be stayed during the operation of the moratorium period Under Section 96 IBC. The details of the cases are tabulated below : Case No. Name of the parties Order impugned before this Court Order impugned before the High Court SLP(Crl) No.6087 of 2023 Rakesh Bhanot v. M/s. Gurdas Agro Pvt. Ltd Order dated 23.3.2023 passed by the High Court of Punjab and Haryana, Chandigarh in CRM - M -37169/ 2022 (O&M) Order dated 23.05.2022 passed by the Judicial Magistrate First Class, Bathinda in complaint No. COMA 1059/2019 SLP(Crl) No.9316 of 2023 Sandeep Gupta v. M/s. Sri Ram Steel Traders and another Order dated 15.5.2023 passed by the High Court of Delhi at New Delhi, in Crl.M.C. No.381 of 2022 Order dated 03.12.2021 passed by the Metropolitan Magistrate Patiala House Courts, New Delhi, in CT No.12161/....
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....024 Stay further proceedings with respect to the recovery of debt u/s. 138 of the N.l. Act, 1881, qua the appellants in view of Sections 94, 96 and 101 of the IBC. SLP(Crl) Nos. 4822- 4857 of 2025 Jitender Singh Sodhi and another v. Deputy Commissioner of Income Tax and another Order dated 13.03.2024 passed by the High Court of Punjab and Haryana, Chandigarh in CRM - M - 52874/ 2023 etc. cases Order dated 21.08.2023 passed by the Judicial Magistrate First Class, Chandigarh, in Complaint No. NACT /3656/2015 SLP(Crl) No.15852 of 2024 Yogesh Jogindernath Mehra and another v. State of Maharashtra and another Order dated 15.10.2024 passed by the High Court of Bombay, in Criminal Writ Petition (ST) No. 11799 of 2024 Stay the proceedings in CC No.186/SS/ 2018 pending before the 30th Metropolitan Magistrate, Kurla, Mumbai SLP(Crl) No.15813 of 2024 Yogesh Jogindernath Mehra and another v. State of Maharashtra and another Order dated 15.10.2024 passed by the High Court of Bombay, in Criminal Writ Petition (ST) No. 11800 of 2024 Stay the proceedings in CC No.186/SS/ 2018 pending before the 30th Metropolitan Magistrate, Kurla, Mumbai SLP(Crl) No.15933 ....
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....cation in CP(IB) No. 147/CHD/PB/2021 Under Section 94 IBC before the National Company Law Tribunal, Chandigarh Bench, for personal insolvency. His wife, who is a co-Accused, also filed a similar application. The said applications are pending adjudication. Pending the said proceedings, the Appellant moved an application before the trial Court for adjourning the Section 138 proceedings sine die, in view of the pendency of Section 94 IBC petition as well as the injunctive provision as envisaged Under Section 96 IBC. 5.3. The trial Court, vide order dated 23.05.2022, rejected the aforesaid application. Aggrieved by the same, the Appellant approached the High Court of Punjab and Haryana, Chandigarh, by filing a criminal petition bearing No. CRM-M- 37169-2022 (O&M) Under Section 482 Code of Criminal Procedure. By order dated 23.03.2023, the said criminal petition came to be dismissed by the High Court. Challenging the same, the Appellant is before us with the present appeal. 6. The other appeals as well as the writ petition arising out of similar set of facts, have been filed by the respective Appellants/Petitioners before this Court. 7. The learned Counsel appearing for all the....
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....all not initiate any legal action or proceeding in respect of any debt. (v) In the present case, the moratorium came into effect in a proceeding Under Section 96 IBC and not Under Section 14 IBC. However, the High Court erroneously relied on the judgment in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd (2021) 6 SCC 258, as in that case, this Court was concerned only with the proceedings Under Section 14 IBC and not Section 96 IBC. Hence, the observations made therein can be read only in the context of a moratorium Under Section 14 IBC. (vi) Further, the reliance placed in the decision in Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd. (2023) 10 SCC 545, is misconceived, since the said judgment merely holds that the moratorium Under Section 14 IBC shall not protect the signatories and the directors of the corporate debtor because the said moratorium is only with respect to the corporate debtor, and not the individuals. (vii) Once the application Under Section 94 or 95 IBC has been admitted, Section 101 IBC states that "the debtor shall not transfer, alienate, encumber, or dispose of any of his assets of his legal rights or benefici....
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....ceedings till the conclusion of the insolvency proceedings pending before the Tribunal. Hence, the impugned orders passed by them are liable to be set aside. 7.2. On the side of the applicant(s)/intervenor(s) Since the decision on the question of law involved herein, shall impact on the applicants/intervenors undergoing insolvency proceedings, they sought to make their submissions. (i) The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted in order to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. Further, it was enacted with an object to maximize the wealth of person undergoing insolvency proceedings, to enable a purposeful and constructive interpretation. (ii) On initiation of insolvency proceedings under IBC, Section 14 provides for a moratorium during which all legal proceedings against the insolvent Company stand stayed. Whereas, on the filing/initiation of personal insolvency, mora....
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.... from criminal liability. (ii) Furthermore, the interim moratorium Under Section 96 IBC is intended to operate in respect of debt as opposed to a debtor and that the purpose of interim moratorium Under Section 96 is to restrain the initiation or continuation of legal action or proceedings against the debt. The words used both in Clause (b) (i) and Clause (b) (ii) of Section 96(1) are "in respect of any debt" and therefore, moratorium would strictly apply to the security interest created by the debtors/Appellants/Petitioners herein in their personal capacity, wherein personal guarantee is given in respect of a debt and in no manner can be stretched to include the criminal proceedings Under Section 138 of the N.I. Act, 1881, since the same is not qua the debt, but is built on the principle of not honouring the cheques, when presented for encashment which in turn attract the criminal liability and fines. (iii) The interim moratorium Under Section 96 IBC will not apply to the criminal proceedings Under Section 138 of the N.I. Act, 1881 and hence, there is no bar for continuation of the said proceedings. In this regard, reference was made to the decisions of this Court....
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....considered the contentions made by the learned Counsel appearing for all the parties and also perused the materials available on record. 9. Vide order dated 16.05.2023 in SLP (Crl) No. 6087 of 2023 titled "Rakesh Bhanot v. M/s. Gurdas Agro Pvt. Ltd..", this Court granted an order of stay of further proceedings in COMA No. 1059 of 2019. Following the same, an order of interim stay of further proceedings pending before the trial Court was subsequently granted in all other connected matters as well. 10. At the outset, it will be useful to refer to the relevant provisions of law connected to the issues at hand, which are as follows: (A) The Insolvency and Bankruptcy Code, 2016. 14. Moratorium - (1) Subject to provisions of Sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: (a) 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; (b) transferring, encumberin....
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....shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan Under Sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor Under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be." "Section 94 - Application by Debtor to Initiate Insolvency Resolution Process: "(1) A debtor who commits a default may apply, either personally or through a resolution professional, to the Adjudicating Authority for initiating the insolvency resolution process, by submitting an application. (2) Where the debtor is a partner of a firm, such debtor shall not apply under this Chapter to the Adjudicating Authority in respect of the firm unless all or a majority of the partners of the firm file the application jointly. (3) An application Under Sub-section (1) shall be submitted only in respect of debts which are not excluded debts. (4) A debtor shall not....
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....eneficial interest therein; (3) Where an order admitting the application Under Section 96 has been made in relation to a firm, the moratorium Under Sub-section (1) shall operate against all the partners of the firm. (4) The provisions of this Section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator." 10.1. From the above provisions, it is clear that the term "Corporate Person" includes a company as defined Under Section 2(20) of the Companies Act, 2013, and a Limited Liability Partnership. However, there is a subtle difference in the protection available to the Directors and the Partners. In case of a partnership firm, the interim moratorium protects not only the firm, but also the partners. But in case of a company, such protection is available only to the company and not to its directors. That apart, the object of interim moratorium can be no different from that of the moratorium specified Under Section 14. It is also clear from Section 14 that the protection from legal action during the period of moratorium is not available to the surety or in other words, to a personal guar....
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.... every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this Sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in Sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any direct....
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....ssion, the moratorium Under Section 101 comes into operation. The interim moratorium Under Section 96 and the moratorium Under Section 101 IBC are designed to offer a breathing space to the corporate debtor, allowing them to reorganize their financial affairs without the immediate threat of creditor actions. However, this moratorium is not intended to shield individuals from personal criminal liabilities arising from their actions outside the scope of corporate debt restructuring. The respective Appellants/Petitioners, having filed insolvency applications as personal guarantors Under Section 94 IBC, cannot extend this protection to avoid prosecution Under Section 138 of the N.I. Act, 1881. Upon filing of the application Under Section 94 Indian Penal Code, a moratorium comes into effect, designed to protect the debtors from any legal actions concerning their debts. Specifically, Section 96 IBC provides that any legal proceedings pending against the debtor concerning any debt shall be deemed to have been stayed. The term "any legal action or proceedings" does not mean "every legal action or proceedings". In sub-clauses 96 (b) (i) and (ii), the term "legal action or proceedings" are f....
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....se of dishonour, within 15 days from the date of receipt of notice demanding payment. It is pertinent to mention here that the prosecution can be only with respect to the amount unpaid by dishonour of the cheque irrespective of the actual debt. The distinction between the right to sue based on a dishonoured cheque by initiating a civil suit and launching a prosecution Under Section 138 of the Negotiable Instruments Act is significant. In case of former, the interim moratorium can operate, but not in case of later. 14. In Mohanraj case, the dishonoured cheques were issued by the company and hence, the complainant initiated the Section 138 proceedings against the company and its directors. The question that arose for consideration was, whether the institution or continuation of a proceeding Under Section 138/141 of the N.I. Act, 1881, can be said to be covered by the moratorium provision, namely, Section 14 IBC. The Petitioners in the connected writ petitions therein, were the erstwhile Directors/persons in charge of and responsible for the conduct of the business of the corporate debtor and they were all premised upon the fact that Section 138 proceedings are covered by Section 1....
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....t, this Court observed that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the corporate debtor and that the natural persons mentioned in Section 141 of the Act would continue to be statutorily liable under the provisions of the Act." 16. Even recently, a larger bench of this Court in Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corpn. of India Ltd (2023) 10 SCC 545 : (2024) 1 SCC (Cri) 128 : 2023 SCC OnLine SC 266, of which one of us (J.B. Pardiwala, J) is a member, after considering the scope and object of the IBC and the interplay with the N.I. Act, 1881 in detail, has held as follows: "72. It is true that by virtue of Section 238 IBC, the provisions of Cr.P.C (to be read as Code) shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. But, no provision of IBC bars the continuation of the criminal prosecution initiated against the Directors and officials. 73. It is equally true that once the corporate debtor comes under the resolution process, its erstwhile Managing ....
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....osecution. How can one allow the natural persons to escape liability on such specious plea? In such a situation the Latin maxim lex non cogit ad impossibilia is attracted which means law does not compel a man to do which he cannot possibly perform. Broom's Legal Maxims contains several illustrative cases in support of the maxim. This maxim has been referred to with approval by this Court in State of Rajasthan v. Shamsher Singh [State of Rajasthan v. Shamsher Singh, 1985 Supp SCC 416 : 1985 SCC (Cri) 421] . 75. Thus, where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the Directors and the other accused cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. They will have to continue to face the prosecution in view of the law laid down in Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] . Where the company continues to remain even at the end of the resolutio....