TaxTMI 
TaxTMI 
2025 (7) TMI 278
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....plicant company is also involved in business of manufacturing and processing of Steel and Iron Goods. In the year 2015, accused No. 1 company and the non-applicant company entered into business for purchasing goods from the non-applicant company. As per allegations, the accused company obtained goods on credit and huge amount was due from the accused company. Allegedly, applicant No. 1, being Director of the said company, against the said dues issued 16 cheques drawn on Federal Bank, Nagpur Branch, which came to be "dishonoured". Cheque Nos.003874, 003875, and 003876 drawn in favour of the non-applicant company dated 29.10.2022 of Rs .25.00 lacs each were issued in favour of the non-applicant company. The said cheques were returned with endorsement "account closed" and, therefore, Criminal Complaint No. 691/2023 was registered against accused No. 1 company and applicant Nos. 1 to 4. Cheque Nos. 004340, 004341, and 004342 dated 31.10.2022 of Rs .25.00 lacs drawn on the Federal Bank were also deposited and the same were returned as "dishonoured" and, therefore, Criminal Complaint No. 696/2023 was registered. Cheque Nos. 004554 and 004555 dated 2.11.2022 of Rs.50.00 lacs each were....
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....ution Plan for the accused company. It unanimously resolved to liquidate the accused company. Accordingly, the Resolution Professional filed an application under Section 33 of the Insolvency Bankruptcy Code 2016 (IBC 2016) before the NCLT Mumbai to initiate liquidation of the accused company and appointed Resolution Professional as official liquidator. On 25.10.2022, the non-applicant company issued statutory notice under Section 138 of the NIA to applicants along with the accused company alleging that cheques issued against discharge of liability are "dishonoured". 5. As per contentions of applicants, applicant Nos.2 and 4, resigned long back of issuance of cheques and, therefore, they were not persons incharge of the company and holding any responsibilities towards issuance of said cheques. Applicant Nos. 1 and 3 ceased to be incharge of the business since CIRP was initiated by order of NCLT Mumbai. Cheques were presented on 29.10.2022 despite of the non-applicant company was informed by Resolution Professional as to initiation of the CIRP and the accused company was undergoing liquidation, the criminal complaints were filed. Subsequent to the criminal complaints, on 30.3.2023, ....
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....deposited. He further submitted that from declaration of moratorium on 22.4.2919 the authority for signing the cheques remained with the Resolution Professional and therefore, cheques in question which are subject matter of the complaints were not valid cheques and, therefore, there was no question of dishonour of cheques and consequent proceedings under Section 138 of the NIA. In support of his contentions, he placed reliance on following decisions: 1. Vishnoo Mittal vs. Shakti Trading Company, reported in 2025 SCC OnLine Sc 558; 2. Criminal Writ Petition No. 1134/2023 (Manoj Toshniwal and ors vs. Alucast Engineering Pvt.Ltd. and anr) decided on 5.12.2023; 3. DCM Financial Services Limited vs. J.N. Sareen and anr, reported in (2008)8 SCC 1, and 4. Nikhil P.Gandhi vs. State of Gujarat and anr, reported in 2016 SCC OnLine Gujarat 1856. 9. Per contra, learned counsel for the non-applicant company submitted that cheques were issued against discharge of Legal and Enforceable Debt which came to be dishonoured. By complying necessary requirements, the complaints are filed by the non-applicant company. He submitted that issue is covered under Section 141(1) of the NIA. The appli....
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....., the statutory notice under section 138 of the NIA to that effect has been issued on 25.10.2022. These allegations are to be considered in the light of the following facts: 1. applicant No. 2 was Director for the period 4.3.2014 to 10.6.2017 and on 10.6.2017 she tendered her resignation and DIR Form No. 11 is on record; 2. Applicant No. 4 was Director for the period 3.6.2005 to 21.5.2025 and tendered his resignation on 21.5.2025, the DIR Form No. 11 is on record; 3. In the year 2019, the accused company initiated CIRP by filing CP No.(IB) 350/MB/C-III/2019 before the NCLT Mumbai; 4. Vide order dated 22.4.2019, the NCLT Mumbai admitted the petition of the company and declared moratorium thereby prohibiting initiation or continuation of any suit or proceedings against the accused company; 5. By the said order, Mr. Devendra Singh was appointed as Resolution Professional for the purposes of the said CIRP, thereby suspending applicant Nos. 1 and 3 as Directors of the company in the year 2019; 6. On 3.5.2019, Resolution Professional made public announcement notifying initiation of CIRP in respect of the accused company; 7. On 9.5.2019, the Resolution Professional intimat....
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....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, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Secularization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor." 17. Section 17 of the IBC deals with management of affairs of corporate debtor by interim resolution professional, which is reproduced as under: "17. (1) From the date of appointment of the interim resolution professional,- (a) the management of the affairs of the corporate debtor shall vest in the i....
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....uch a person; or (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled: Provided further that every person who was a designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or an officer who is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall con....
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....tion of liquidation. (1) Where the Adjudicating Authority,-- (a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or (b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein, it shall-- (i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors [approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authorit....
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.... (3) A notice for payment should be served on the accused; (4) The accused has failed to make the payment of the said amount to the payee within 15 days from the date of receipt of notice". 21. Section 141 of the NIA deals with offences by companies, which is reproduced as under: "141. Offences by companies. - (1) If the person committing an offence under section 138 is a company, 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 ....
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....sponsibility in the day to day affairs of the company and, therefore, only persons who can be said to be connected with the commission of crime who are incharge of the said company. 24. Section 141 of the NIA, provides for constructive liability to launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company. 25. In the light of the above legal provisions, there is no dispute that there was business transaction between the accused company and the non-applicant company since 2015. As per allegations, 16 cheques were issued against the outstanding amount of Rs.7,04,10,101/-. The said cheques bear various dates mentioned in the complaints. The cheques were issued, admittedly, on various dates in the year 2022. Undisputedly, prior to issuance of alleged cheques, in the year 2015, i.e. on 21.5.2015, applicant No. 4 tendered his resignation. Thus, he ceased to be Director since 21.5.2015. The resignation letter and Form No.DIR-11 is at....
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....1 having address at ATS Greens Paradiso, Flat No.02054, Tower 2, Plot NO.GH-03, Sector ChI-04, Greater Noida 201308 e-mail [email protected] as interim Resolution Professional to carry the functions as mentioned under the Code. (vii) Accordingly, this petition is admitted. (viii) The Registry is hereby directed to communicate this order to the Corporate Applicant and the IRP immediately. 26. Thus, it reveals that prior to the issuance of cheques in question, the NCLT Mumbai by order dated 22.4.2019 prohibited initiation of proceeding and continuation of the proceeding in view of declaration of moratorium. Annexure-IV shows that various steps were taken by the Resolution Professional from 30.4.2019 till 6.3.2020. It includes the public announcement made by the Resolution Professional dated 3.5.2019 notifying the initiation of the CIRP in respect of the accused company. It also shows that the Resolution Professional intimated the non-applicant company not to deposit the cheques much prior to the dates mentioned by the non-applicant company alleging that these cheques are issued from 27.10.2022 till 2.11.2022. Thus, contention of the non-applicant company that cheques were ....
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....agerial persons, the partners of the Corporate Debtor hereafter ceased to exist. All these powers henceforth vest with the Liquidator. g. That the personnel of the Corporate Debtor are directed to extend all co-operation to the Liquidator as required by him in managing the liquidation process of the Corporate Debtor. h. That on having liquidation process initiated, subject to Section 52 of the Code, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor save and except the liberty to the liquidator to institute suit or other legal proceeding on behalf of the Corporate Debtor with prior approval of this Adjudicating Authority. i. This liquidation order shall be deemed to be a notice of discharge to the officers, employees and workmen of the Corporate Debtor except to the extent of the business of the Corporate Debtor continued during the liquidation process by the Liquidator. With the above directions, this application i.e. I.A.No.88 of 2011 is hereby allowed and disposed of." 28. Thus, it reveals that moratorium was declared vide order dated 22.4.2019 and liquidation process was initiated and liquidator was appointed by the NCLT Mumbai vid....
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....(a). It will be noticed that the expression "or" occurs twice in the first part of Section 14(1)(a) - first, between the expressions "institution of suits" and "continuation of pending suits" and second, between the expressions "continuation of pending suits" and "proceedings against the corporate debtor...". The sweep of the provision is very wide indeed as it includes institution, continuation, judgment and execution of suits and proceedings. It is important to note that an award of an arbitration panel or an order of an authority is also included. This being the case, it would be incongruous to hold that the expression "the institution of suits or continuation of pending suits" must be read disjunctively as otherwise, the institution of arbitral proceedings and proceedings before authorities cannot be subsumed within the expression institution of "suits" which are proceedings in civil courts instituted by a plaint (see Section 26 of the Code of Civil Procedure, 1908). Therefore, it is clear that the expression "institution of suits or continuation of pending suits" is to be read as one category, and the disjunctive "or" before the word "proceedings" would make it clear that proc....
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....e obtained by a corporate debtors and not by natural person such as the present appellant who was the director of the corporate debtor. In para No. 77 of the judgment, in the case of P. Mohanraj vs. M/s. Shah Ispat Private Limited supra, the Hon'ble Apex Court observed that for the period of moratorium, since no Section 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Section 141(1) and (2) of the NIA. This being the case, it is clear that the moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the NIA. 34. In the case of Vishnoo Mittal supra, as relied by learned counsel for applicants, the Hon'ble Apex Court distinguished facts in the case of P. Mohanraj vs. M/s. Shah Ispat Private Limited supra and observed that since the facts of that case were completely different and the present case is thus distinguishable from it. In P. Mohan Raj supra, certain cheques drawn by the appellants therein were dis....
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....he demand raised by the non-applicant by way of notice issued under clause (c) of the proviso to Section 138 of the NIA as issued after the moratorium was declared. When the notice was issued to the applicants, they were not incharge of the corporate debtor as they were ceased to be Directors of the corporate debtor. As soon as the Resolution Professional was appointed by order dated 22.4.2019, the powers vested with the Board of Directors were further ceased by the order of the NCLT Mumbai dated 9.6.2022 I.e. prior to issuance of cheques. Therefore, powers vested with Board of Directors were to be exercised by the Resolution Professional who subsequently were appointed as liquidators in accordance with provisions of the IBC. 42. The Hon'ble Apex Court in the case of Asmita Sarang vs. Yogesh Badoni and anr, reported in 2023 SCC OnLine Bom 528 in paragraph Nos.31 and 32 observed as follows: "31. Admittedly, NCLT, Bench at Mumbai vide its order dated 08/01/2019, passed the prohibitory order (referred hereinabove). As a consequence thereof, the company was prohibited from transferring or alienating or disposing of any of its assets. Meaning thereby, the amount in the bank account o....