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Sandeep Gupta vs. Ram Steel Traders and Ors. - (High Court of Delhi) (15 May 2023)

Provisions of Section 96 of the IBC are not applicable on a complaint filed under Section 138 of NI Act



The facts of the present case are that, the complaint was filed by Respondent No. 1 against the Petitioner and Respondent Nos. 2, under Section 138 read with Section 141 and 142 of the Negotiable Instrument Act, 1881 (NI Act) before the Metropolitan Magistrate. In the present case the primary question which arises for the consideration is whether the Section 96 of the IBC is applicable to the Petitioner?

In the present case, the Petitioner is seemingly trying to escape his liability by trying to urge that his application under Section 94 of the Insolvency and Bankruptcy Code, 2016 (IBC) in his individual capacity would stay the complaint under section 138 of NI Act against him. It is clear that, the Petitioner is facing criminal proceedings for being signatory to the cheque which has been dishonoured. He is covered under natural person under Section 141 of NI Act.

The debt in the present case is not of the Petitioner but that of Respondent No. 2. Section 141 of the NI Act fastens liability on every officer of the company who was in management and control of the affairs of the company.

Hence, the provisions of Section 96 of the IBC would not be applicable in the facts of the present case as the Petitioner is arrayed as an accused in the complaint under Section 138 of NI Act in his capacity of the Managing Director of Respondent No. 2.

It is also clear that Section 138 of NI Act prescribes a punishment and compensation for the offence that is bouncing of cheque and is not recovery proceeding. Hence, under Section 138 of NI Act, the court cannot direct payment of the cheque amount to the complainant but can only award punishment and compensation by way of fine. Thus, what could be dissolved, is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act i.e., only the corporate debtor (i.e., the company) is protected by the moratorium while the signatories/directors cannot escape from their penal liability under Section 138 of the NI Act by filing personal insolvency proceedings. There is no illegality in the impugned order passed by the trial Court. Petition dismissed.


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