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A 'Civil Sheep' in a Criminal Wolf's Clothing is Quasi-Criminal in Nature: SC on Section 138 of the NI Act, 1881 [READ JUDGMENT]

Lawstreet Journal 3 Mar 2021 7:51pm

Image courtesy: Lawstreet Journal Judiciary A 'Civil Sheep' in a Criminal Wolf's Clothing is Quasi-Criminal in Nature: SC on Section 138 of the NI Act, 1881 [READ JUDGMENT]

The Supreme Court has observed that criminal proceedings for the dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881, are "quasi-criminal" in nature. The Court also made an interesting comment that Section 138 proceedings can be be called a "civil sheep" in a "criminal wolf's clothing".

A bench comprising Justices RF Nariman, Navin Sinha and KM Joseph was deciding a issue that whether the moratorium declared under Section 14 of the Insolvency and Bankruptcy Code will bar Section 138 NI Act proceedings against the corporate debtor, wherein they observed that criminal proceedings for the dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881, are "quasi-criminal" in nature.

The court made an interesting comment that Section 138 proceedings can be called a ‘civil sheep’ in a ‘criminal wolf's clothing.

The important question that arises in this appeal is whether the institution or continuation of a “proceeding” under Section 138/141 of the Negotiable Instruments Act,1881 can be said to be covered by the moratorium provision, namely, Section 14 of the IBC.Many High Court had taken the view that since the proceedings under Section 138 NI Act were criminal in nature, they will not be hit by Section 14 IBC.

 

While dealing with the matter, the bench sought to ascertain the true nature of Section 138 NI Act. It was noted that while enacting Section 138, the legislature was cognizant that “what is otherwise a civil liability is now also deemed to be an offence.”

Thus, A debt barred by limitation is… Continue Reading...


Tagged: Supreme Court of India  
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