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2020 (1) TMI 1113 - HC - Insolvency and BankruptcyDishonor of Cheque - insufficient funds - section 138 of NI Act - doctrine of lex non cogit ad impossibilia - HELD THAT - Where the proceedings under Section 138 of the Act had already commenced and during the pendency, the company gets dissolved, the directors and the other accused cannot escape by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the Negotiable Instruments Act, 1881 - Where the company continues to remain even at the end of the resolution process, the only consequence is that the erstwhile directors can no longer represent it. In the case on hand, the accused company had not been dissolved. Its management has been taken over. Therefore, there is absolutely no difficulty in coming to the conclusion that the impugned prosecution against Tecpro Systems can also continue. The petitioner contends that his right to fair trial has been seriously infringed. He claims that the principles of natural justice stand violated as at the stage of evidence, he cannot lead any documentary evidence at all. According to him, that would be the resultant position since he has been totally deprived of any access to any of the company records. These petitions have been filed under Section 482 of Cr.PC. The inherent powers of this Court are meant to be exercised only to prevent the abuse of process of law or to secure the ends of justice. The facts appearing on record and the contentions put forth by the learned counsel for the petitioner do not persuade me to come to the conclusion that continuation of the impugned prosecution would constitute an abuse of legal process. Petition dismissed.
Issues Involved:
1. Quashing of complaints under Section 138 r/w 141 of the Negotiable Instruments Act, 1881. 2. Impact of Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 on criminal proceedings. 3. Interpretation of Section 14 and Section 31 of the Insolvency and Bankruptcy Code, 2016. 4. Personal liability of the petitioner as the former Managing Director. Detailed Analysis: 1. Quashing of Complaints under Section 138 r/w 141 of the Negotiable Instruments Act, 1881: The petitioner sought to quash complaints filed by M/s. Tap Engineering under Section 138 r/w 141 of the Negotiable Instruments Act, 1881, due to dishonoured cheques issued by M/s. Tecpro Systems Limited. The court noted that the cheques were issued by the authorized signatory of Tecpro Systems Limited and that the petitioner was not personally liable. 2. Impact of Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 on Criminal Proceedings: The petitioner argued that the acceptance of the resolution plan by the National Company Law Tribunal (NCLT) and the subsequent change in management should lead to the quashing of the criminal prosecution. However, the court held that Section 14 of the Insolvency and Bankruptcy Code, 2016, which declares a moratorium, does not bar criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881. The court referred to judgments from the High Court of Calcutta and the National Company Law Tribunal to support this interpretation. 3. Interpretation of Section 14 and Section 31 of the Insolvency and Bankruptcy Code, 2016: The court observed that Section 14 of the Code does not include the term "prosecution," implying that criminal proceedings are not barred during the moratorium. Section 31 of the Code, which makes the resolution plan binding on the corporate debtor and its stakeholders, does not lead to the extinguishment of criminal prosecution. The court cited the Supreme Court's judgment in State Bank of India v. V. Ramakrishnan and Ors., which clarified that personal guarantors and directors cannot escape liability due to the resolution plan. 4. Personal Liability of the Petitioner as the Former Managing Director: The court emphasized that the petitioner, as the former Managing Director, cannot avoid prosecution under Section 138 r/w 141 of the Negotiable Instruments Act, 1881. The court referred to the Supreme Court's judgment in Aneeta Hada v. Godfather Travels & Tours (P) Ltd., which held that personal liability of directors continues even if the company is dissolved. Conclusion: The court concluded that the Insolvency and Bankruptcy Code, 2016, does not bar the continuation of criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881. The petitioner's argument that the resolution plan extinguished his liability was rejected. The court dismissed the petitions, stating that the continuation of the prosecution does not constitute an abuse of legal process. The inherent powers of the court under Section 482 of Cr.PC were not invoked in favor of the petitioner.
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