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2023 (6) TMI 534 - HC - Indian LawsDishonour of Cheque - in view of the moratorium, the cheques were incapable of encashment - prior to presentation of cheques, not only the mortarium kicked in but the IRP had also sent the effective letter - petitioners can be liable for prosecution under Section 138 of the NI Act or not - HELD THAT - In the present case, admittedly, CIRP proceedings were admitted against M/s Ajanta on 04.02.2020. In my opinion in view of the CIRP proceeding, the moratorium under Section 14 kicks in on the same day. The IRP vide email dated 07.02.2020 had, in accordance with the provisions of the IBC, directed all the financial institutions not to permit any debit transactions from the account of M/s Ajanta without written approval - once the CIRP proceedings have been admitted, the proceedings against the corporate debtor cannot continue. Whether the petitioners can continue to be prosecuted under Section 138 of the NI Act in view of them being natural persons? - HELD THAT - The observation of the Bombay High Court in ASMITA SARANG VERSUS YOGESH BADONI, SENTHIL KUMAR KARMEGAM ANR. 2023 (2) TMI 1149 - BOMBAY HIGH COURT agreed upon, wherein the High Court has held When the cheques were presented for encashment, the respondents were no longer in control and management of day to day affairs of the Corporate Debtor. It is not known as to whether there were sufficient funds in the bank account of Corporate Debtor to honour the cheques. Since from the date of the admission of the CIRP proceedings, it was the IRP who was In-Charge of and responsible for the conducting the business of the company at the time when the cheques were presented for encashment, it is thus clear that the role of the natural persons had ceased - The instrument, namely, the cheque on the basis of which the complaint was filed could not have been encashed by the financial institutions in view of the mandate of Section 14 IBC read with Section 17 and 18 IBC - On the basis of the combined reading, it is the IRP who had the authority to operate the bank accounts and on the date of presentation, the petitioners cannot be stated to be in control and management of the affairs of M/s Ajanta. In the judgment of P. MOHANRAJ ORS. VERSUS M/S. SHAH BROTHERS ISPAT PVT. LTD. 2021 (3) TMI 94 - SUPREME COURT the facts are distinguishable from that of the present case. In P. Mohanraj, 51 cheques were issued by the company in favour of the respondent towards amounts payable from 21.09.2015 to 11.11.2016. On 31.03.2017, the respondent issued a statutory demand notice under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The order admitting the application was passed on 06.06.2017 by the Adjudicating Authority directing commencement of the corporate insolvency resolution process with respect to the company and putting a moratorium in terms of Section 14 of the IBC. Hence in judgment of P. Mohanraj, the moratorium commenced from 06.06.2017. Prior to that not only the cheques had bounced but demand notices were also issued - In the present case, prior to presentation of cheques, not only the mortarium kicked in but the IRP had also sent the effective letter. As a result, the cheques became incapable of encashment. The petition needs to be allowed.
Issues Involved:
1. Quashing of the summoning order dated 24.11.2020. 2. Applicability of moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC). 3. Liability of petitioners under Section 138 of the Negotiable Instruments Act (NI Act) during the moratorium period. Summary: Quashing of the Summoning Order: The petition sought quashing of the summoning order dated 24.11.2020 passed by the learned MM, Patiala House Courts, New Delhi in CC No. 7554/2020 titled 'M/s KTC Trading (P) Ltd. vs. M/s Ajanta Offset & Packaging Ltd.'. Applicability of Moratorium under Section 14 of the IBC: Admittedly, CIRP proceedings were admitted against M/s Ajanta on 04.02.2020, initiating the moratorium under Section 14 of the IBC. The IRP, Mr. Satyanarayana Guddeti, directed all banks on 07.02.2020 not to allow any debit transactions from M/s Ajanta's accounts without written approval. The cheques in question were presented for encashment on 12.02.2020 and dishonored on 13.02.2020 with the remarks 'payment stopped by drawer'. The court emphasized that Section 14 prohibits the continuation of proceedings against the corporate debtor once CIRP is admitted. Liability of Petitioners under Section 138 of the NI Act During Moratorium: The petitioners argued that due to the moratorium, the cheques were incapable of encashment, and thus they cannot be prosecuted under Section 138 of the NI Act. The court agreed, noting that from the date of CIRP admission, the IRP was responsible for the company's affairs, and the petitioners' role had ceased. The court referenced the Bombay High Court's judgment in 'Asmita Sarang vs. Yogesh Badoni and Another' and distinguished the present case from the Supreme Court's judgment in 'P. Mohanraj & Others v. Shah Brothers Ispat Private Ltd.', where the moratorium commenced after the cheques had bounced and demand notices were issued. In contrast, in the present case, the moratorium and IRP's directives were in effect before the cheques were presented, rendering them incapable of encashment. Conclusion: For the aforementioned reasons, the petition was allowed, and the summoning order dated 24.11.2020 was quashed. The petition was disposed of accordingly.
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