M/S SHREYAS PAPERS PRIVATE LIMITED v. M/S SUNARA PAPER AGENCIES

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materials to the respondents/accused and the respondent had issued cheque for making payment of the amount due and it came to be dishonoured with endorsement as funds are insufficient. The petitioner has issued notice and inspite of service of said notice as the amount of the cheque has not been paid, the complaint came to be filed against the respondent for the offence under Section 138 of N.I Act. The learned Magistrate has taken cognizance and registered a criminal case against the petitioners/accused Nos.1 to 4.

3. During the pendency of the said criminal case proceedings, the learned counsel for accused has produced order dated 31.10.2023 passed by the National Company Law Tribunal, Special Bench, Bengaluru in C.P.(I.B.)No.05/BB/2022.

4. The respondents/accused sought for stay of the proceedings in the said criminal case relying on the order passed by the National Company Law Tribunal. The learned Magistrate after hearing the parties has declined

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to stay the proceedings of the criminal case by order dated 21.02.2024 which is challenged in this petition.

5. Heard learned counsel for petitioners and learned counsel for the respondent.

6. Learned counsel for the petitioners would contend that when the proceedings are pending before the National Company Law Tribunal, Special Bench, Bengaluru, wherein there is an order under Section 14 of the Insolvency and Bankruptcy Code, 2016 (for short 'IBC') and therefore, the continuation of the proceedings of the criminal case are required to be stayed. He placed reliance on the decision of Hon'ble Apex Court in the case of P. Mohanraj & Others V/s M/s. Shah Brothers Ispat Pvt. Ltd.¹. Placing reliance on the said decision, learned counsel for the petitioners would contend that the petitioner No.1 is corporate debtor and would be covered by the moratorium provision contained in Section 14 of the IBC, by which continuation of 138/141 proceedings against

(2021) 6 SCC 256

1

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the corporate debtor and initiation of Section 138/141 proceedings against the said debtor during the Corporate insolvency resolution process cannot be continued. With this he prayed to allow the petition and stay the proceedings of the criminal case registered against the petitioners for offence under Section 138 of N.I Act.

7. The learned counsel for the respondent would contend that the pendency of proceedings under provisions of Insolvency and Bankruptcy Code, 2016 and order passed under Section 14 of the said Code will not come in the way of proceeding with the criminal case as what prohibition imposed in terms of Section 14 of the Code is Institution of suits or Continuation of suits or proceedings against the corporate debtor and not the proceedings of the criminal case. On that point, he place reliance on the decision of Hon'ble Apex Court in the case of Ajay Kumar Radheyshyam Goenka Vs Tourism Finance Corporation of India Ltd.². He has also placed

(2023) 10 SCC 545

2

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reliance on the decision of co-ordinate Bench of this Court in the case of M/s Rajesh Exports Ltd. V/s K.V. Kishore in writ petition No.14571/2024 decided on 25.06.2024 wherein the order staying the criminal proceedings for the offence under Section 138 of N.I Act has been quashed.

8. Having heard learned counsels, the Court has perused the impugned order and material placed on record.

9. In P. Mohanraj (supra) the Hon'ble Apex Court has observed as under:

"….......................Since the corporate debtor would be covered by the

moratorium provision contained in Section 14 of the IBC, by which continuation of Section 138/141 proceedings against the corporate debtor and initiation of Section 138/141 proceedings against the said debtor during the corporate insolvency resolution process are interdicted, what is stated in paragraphs 51 and

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59 in Aneeta Hada (supra) would then become applicable. The legal impediment contained in Section 14 of IBC would make it impossible for such proceedings to continue or be instituted against the corporate debtor. Thus, for the period of moratorium, since no Section 138/141 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 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act."

10. In the said case, the Hon'ble Apex Court has held that for the period of moratorium, the proceedings for offence under Section 138/141 of N.I Act initiated against

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the corporate debtor cannot be continued against corporate debtor, in view of provision contended in Section 14 of the IBC and the natural persons mentioned in Section 141 of N.I Act, continued to be statutorily liable under Chapter XVII of the N.I Act. The petitioner No.1 is a corporate debtor. Whether the proceedings for the offence under Section 138 of N.I Act against corporate debtor are required to be stayed has been clarified in Ajay Kumar Radheyshyam Goenka (supra). The Hon'ble Apex Court has held as under:

109.1. After passing of the resolution plan under Section 31 IBC by the adjudicating authority & in the light of the provisions of Section 32-A IBC, the criminal proceedings under Section 138 of the NI Act will stand terminated only in relation to the corporate debtor if the same is taken over by a new

management.

109.2.Section 138 proceedings in relation to the signatories/Directors who are liable/ covered by the two provisos

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to Section 32-A(1) will continue in accordance with law.

11. The Hon'ble Apex Court has observed that after passing of the resolution plan under Section 31 of IBC by the adjudicating authority and in the light of the provisions of Section 32-A of IBC, the criminal proceedings under Section 138 of N.I Act will stand terminated only in relation to the corporate debtor, if the same is taken over by new management, and Section 138 of N.I Act proceedings in relation to signatories/Directors who are liable/covered by the two provisos to Section 32-A(1) of IBC will continue in accordance with law.

12. In the case on hand, the petitioner No.1 is a corporate debtor but there is no taking over of the

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Section 138 of N.I Act shall requires to be continued in accordance with law. Considering all these aspects, the learned Magistrate has rightly declined to stay the proceedings of the criminal case registered against the petitioners for offence under Section 138 of the N.I Act.

13. In view of the above, the petition is dismissed. Sd/-

(SHIVASHANKAR AMARANNAVAR)

JUDGE

RKM

CT:CNB

List No.: 1 Sl No.: 41