Skip to main content

Acceptance Of Corporate Insolvency Resolution Not A Ground To Quash Case Under Sec 138 NI Act

In Crl OP(MD)No.34996 of 2019, Mr.Ajay Kumar Bishnoi, Former Managing Director M/s.Tecpro Systems Ltd., vs M/s.Tap Engineering, application was filed before the Madras High Court to quash the application under Section 138 of the Negotiable Instruments Act, 1881 pending before the Fast Track Court -IV Magistrate as illegal, invalid and non est in the eyes of law and consequently direct the respondent/complainant to pursue their remedies as per the provision of Insolvency and Bankruptcy Code, 2016.

In this matter, eight cheques were issued by the applicant which bounced and on issued with a demand notice by the defendant, only partial payment was made. The defendant then filed complaint under under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 was taken and summons were issued naming Tecpro Systems Limited was shown as the first accused and petitioner herein was shown as the second accused.

During the pendency of these complaints, Tecpro Systems Limited came under Corporate Insolvency Resolution Process following which resolution plan was accepted which planned for a change of management. The defendant was recognised as one of the operational creditor.

The petitioner's contention is that in view of the acceptance of the resolution plan by the Tribunal and the change in management, the impugned prosecution against the petitioner under Section 138 of the Negotiable Instruments Act, 1881 is liable to be quashed since according to the petitioner the resolution plan clearly states that all the outstanding negotiable instruments issued by the company or by any persons/entities on behalf of the company prior to the insolvency commencement date including demand promissory notes, cheques and letters of credit, shall stand terminated and the liability of the company and its current employees under such instruments shall stand extinguished and all the legal proceedings relating thereto shall stand irrevocably and unconditionally abated. The petitioner claimed that he cannot defend himself or conduct the case before the trial Court as he does not have access to any of the company records. Further, the cheques in question were not issued in the personal individual capacity of the petitioner. In fact, the cheques were issued by the authorized signatory. Therefore, no penal liability can be fastened on the petitioner herein. He also contended that the Insolvency and Bankruptcy Code, 2016 is a self contained enactment which has an overriding effect over other laws. Therefore, continuation of the impugned prosecution would only amount to an abuse of legal process. He, therefore, called upon this Court to quash the impugned proceedings.

The Madras High Court, referring to various judgments held that Section 233 of Insolvency and Bankruptcy Code, 2016 which protects action taken in good faith under the Code or the Rules or Regulations made thereunder employs the expression “no suit, prosecution or other legal proceeding”. But, in Section 14 the expression “suits or proceedings” alone is found. The expression “prosecution” is conspicuously absent in Section 14. When the legislature consciously included the expression “prosecution” elsewhere in the Code and omits it in Section 14 of the Code, the court decided that the omission is deliberate and intentional. The legislature did not intend to bar criminal prosecution even though moratorium has been declared.

Comments

Post a Comment

Most viewed this month

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more

No Rebate For Stamp Duty Paid In Another State - Bombay HC

A three judge bench of the Hon'ble Bombay High Court (Bombay HC) in a recent judgment in the matter of Chief Controlling Revenue Authority, Maharashtra State, Pune and Superintendent of Stamp (Headquarters), Mumbai v Reliance Industries Limited, Mumbai and Reliance Petroleum Limited, Gujarat1 has held that orders in case of a scheme of arrangement under Section 391 to 394 of the Companies Act, 1956 (Act) involving different High Courts in multiple states, are separate instruments in themselves. Accordingly, stamp duty would be payable on all the orders (and consequently, all the states) without the benefit of remission, rebate or set-off.
Post a Comment
Read more

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more