Section 138 NI Act proceedings not covered within the period of moratorium under Section 14 I&B Code: NCLAT

National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial), allowed an appeal filed against the order of the National Company Law Tribunal, Chennai whereby the appellant was directed to withdraw the complaint case filed under Section 138 of the Negotiable Instruments Act, 1881.

The appellant had filed a complaint case under Section 138 against the defendants before the Metropolitan Magistrate after initiation of Corporate Insolvency Resolution Process and the order of moratorium. The respondents-Directors moved the NCLT which directed the appellants to withdraw the case treating it as a proceeding filed after order of moratorium with observations that such action amounts to misuse of power. Aggrieved thus, the appellant approached the Appellate Tribunal. The question that arose for consideration was ‘whether the order of moratorium covers a criminal proceeding under Section 138 of the NI Act which provides punishment of imprisonment or imposition of fine’.

It is pertinent to note that Section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits any proceeding or judgment or decree of money claim against the corporate debtor after the order of moratorium which is passed on the insolvency commencement date. The Appellate Tribunal observed that Section 138 is a penal provision; the imposition of a fine cannot be held to be a money claim or recovery against the Corporate Debtor. As such, the said section is not covered within the purview of Section 14 I&B Code. In fact, no criminal proceeding is covered under the section. It was held that the NCLT failed to appreciate the law, and therefore, the order impugned was set aside. [Shah Brothers Ispat (P) Ltd. v. P. Mohanraj,2018 SCC OnLine NCLAT 415, dated 31-07-2018]

 

One comment

  • Avatar

    What about double the cheque amount

Join the discussion

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.