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2024 (6) TMI 749 - HC - Indian LawsDishonour of cheque - recovery of debt when the borrower has initiated the proceedings for insolvency under the Code, 2016 - HELD THAT - The Supreme Court after taking note of judgment passed in the case of P. MOHANRAJ ORS. VERSUS M/S. SHAH BROTHERS ISPAT PVT. LTD. 2021 (3) TMI 94 - SUPREME COURT has held in the case of AJAY KUMAR RADHEYSHYAM GOENKA VERSUS TOURISM FINANCE CORPORATION OF INDIA LTD. 2023 (3) TMI 686 - SUPREME COURT has held that proceedings under the Insolvency and Bankruptcy Code do not automatically extinguish criminal proceedings under the Negotiable Instruments Act. Considering the totality of facts and circumstances of the case and in view of the fact that merely because of initiation of proceedings under the Code, 2016 the signatory of the cheque cannot escape from his liability, it is held that conviction recorded by Trial Court was not bad on account of initiation of proceedings under the Code, 2016. The Appellate Court did not commit any mistake by directing the applicant to deposit an amount of Rs. 13,73,890/- as a condition precedent for suspension of sentence - application dismissed.
Issues:
1. Challenge to the condition of deposit for suspension of sentence based on Insolvency and Bankruptcy Code, 2016. Detailed Analysis: The applicant filed an application under Section 482 of Cr.P.C. seeking to challenge the condition to deposit a specific amount imposed in an order against the petitioner. The applicant argued that the initiation of insolvency proceedings by the borrower under the Insolvency and Bankruptcy Code, 2016 (Code, 2016) should prevent the recovery of the debt. The applicant contended that the interim moratorium under Section 96 of the Code, 2016 was in effect at the time of the judgment of conviction and during the appeal filing, making the condition to pay compensation contradictory to the Code, 2016. The applicant cited relevant judgments to support the argument, including the Supreme Court's decision in the case of P. Mohanraj and others v. Shah Brothers Ispat Private Limited and a judgment from the Punjab and Haryana High Court. The Court considered the applicant's submissions and reviewed the legal provisions and precedents cited. The Court emphasized that the nature of proceedings under the Insolvency and Bankruptcy Code, 2016 and the Negotiable Instruments Act are distinct, with different objectives and consequences. The Court referred to the Supreme Court's decision in Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Limited, which clarified that the proceedings under the two Acts do not overlap. The Court highlighted that the Insolvency and Bankruptcy Code does not automatically extinguish criminal liabilities under the Negotiable Instruments Act. The Court rejected the argument that the initiation of insolvency proceedings absolves individuals from criminal liability under the Negotiable Instruments Act. In conclusion, the Court held that the conviction and the condition to deposit the specified amount for suspension of sentence were valid. The Court ruled that the applicant could not escape liability under the Negotiable Instruments Act due to the initiation of insolvency proceedings by the borrower. The Court found no grounds to interfere with the lower court's decisions and dismissed the applicant's application filed under Section 482 of Cr.P.C.
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