The Supreme Court on Monday held that the declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code(IBC) covers criminal proceedings for dishonour of cheque under Section 138 of the Negotiable Instruments Act against the corporate debtor. “We have held that proceedings under Section 138/141 NI Act are covered by moratorium under Section 14 of IBC”, Justice RF Nariman said reading out the operative portion of the judgment. The judgment also observed that moratorium was applicable only to the corporate debtor. The top court also held that it was disagreeing with the views taken by Bombay and other High Courts. A bench comprising Justices RF Nariman, Navin Sinha and KM Joseph delivered the judgment on a batch of petitions 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). Last year, a division bench comprising Justices UU Lalit and Aniruddha Bose had issued notice to the Attorney General to determine the issue whether NCLT’s moratorium during corporate insolvency resolution proceess will bar complaint under Section 138 NI Act. The notice to AG was issued while considering an appeal against a Madras High Court judgment which held that NCLT’s moratorium will not affect complaint under Section 138 NI Act. The Madras High Court had held that since Section 138 NI Act was a criminal proceeding, the moratorium under Section 14 IBC will not affect it. “The Section 138 of Negotiable Instruments Act is a penal provision which empowers the court of competent jurisdiction to pass the order of imprisonment or fine. It is not the civil proceedings and even fine imposed by the criminal court cannot held to be a money claim or recovery against Corporate Debtor. It is seen from the above provision, the criminal proceedings is not covered under the prohibition and as such the petitioner cannot have a shelter under Section 14 of Insolvency and Bankruptcy Code”, a single bench of Justice G K Ilanthiraiyan of Madras HC had held.

The Supreme Court on  Monday held that the declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code(IBC) covers criminal proceedings for dishonour of cheque under Section 138 of the Negotiable Instruments Act against the corporate debtor.

“We have held that proceedings under Section 138/141 NI Act are covered by moratorium under Section 14 of IBC”, Justice RF Nariman said reading out the operative portion of the judgment.

The judgment also observed that moratorium was applicable only to the corporate debtor.

The top court also held that it was disagreeing with the views taken by Bombay and other High Courts.

A bench comprising Justices RF Nariman, Navin Sinha and KM Joseph delivered the judgment on a batch of petitions 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).

Last year, a division bench comprising Justices UU Lalit and Aniruddha Bose had issued notice to the Attorney General to determine the issue whether NCLT’s moratorium during corporate insolvency resolution proceess will bar complaint under Section 138 NI Act.

The notice to AG was issued while considering an appeal against a Madras High Court judgment which held that NCLT’s moratorium will not affect complaint under Section 138 NI Act.

The Madras High Court had held that since Section 138 NI Act was a criminal proceeding, the moratorium under Section 14 IBC will not affect it.

“The Section 138 of Negotiable Instruments Act is a penal provision which empowers the court of competent jurisdiction to pass the order of imprisonment or fine. It is not the civil proceedings and even fine imposed by the criminal court cannot held to be a money claim or recovery against Corporate Debtor. It is seen from the above provision, the criminal proceedings is not covered under the prohibition and as such the petitioner cannot have a shelter under Section 14 of Insolvency and Bankruptcy Code”, a single bench of Justice G K Ilanthiraiyan of Madras HC had held.

Last year, a division bench comprising Justices UU Lalit and Aniruddha Bose had issued notice to the Attorney General to determine the issue whether NCLT’s moratorium during corporate insolvency resolution proceess will bar complaint under Section 138 NI Act.

The notice to AG was issued while considering an appeal against a Madras High Court judgment which held that NCLT’s moratorium will not affect complaint under Section 138 NI Act.

The Madras High Court had held that since Section 138 NI Act was a criminal proceeding, the moratorium under Section 14 IBC will not affect it.

“The Section 138 of Negotiable Instruments Act is a penal provision which empowers the court of competent jurisdiction to pass the order of imprisonment or fine. It is not the civil proceedings and even fine imposed by the criminal court cannot held to be a money claim or recovery against Corporate Debtor. It is seen from the above provision, the criminal proceedings is not covered under the prohibition and as such the petitioner cannot have a shelter under Section 14 of Insolvency and Bankruptcy Code”, a single bench of Justice G K Ilanthiraiyan of Madras HC had held.