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Section 138 of the Negotiable Instruments Act, 1881 covered under Section 14 of the Insolvency Bankruptcy Code, 2016 : Supreme Court

Lawstreet Journal 2 Mar 2021 8:52pm

Image courtesy: Lawstreet Journal Judiciary Section 138 of the Negotiable Instruments Act, 1881 covered under Section 14 of the Insolvency Bankruptcy Code, 2016 : Supreme Court

On Monday( March 1, 2021), the Supreme Court held that criminal proceedings for dishonour of a cheque under Section 138 of the Negotiable Instruments Act, 1881 against the corporate debtor is covered under section 14 of the Insolvency Bankruptcy Code (IBC), 2016.

Justice RF Nariman says, “We hold that a Section 138/141 NI Act proceeding against a corporate debtor is covered by Section 14(1)(a) of the IBC” 

The Three-judge bench of the Supreme Court comprising of Justices RF Nariman, Navin Sinha and KM Joseph delivered on a few petitions, P Mohanraj and others v M/s Shah Brothers Ispat Ltd and connected cases, which “challenged the continuation of criminal trial under Section 138 NI Act during the pendency of liquidation proceedings in the National Company Law Tribunal(NCLT).”

The Court observed, “...for the period of moratorium, since no Section138/141 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 Negotiable Instruments Act. 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 141continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act” 

The Moratorium was to be applicable only to the corporate debtor and the case with regard to the cheques, the proceedings were to be continued against natural persons in-charge of the corporate debtor.

The court considered the issue, saying,… Continue Reading...


Tagged: Insolvency and Bankruptcy Board of India   Insolvency and Bankruptcy Code  
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