{"id":324745,"date":"2024-06-20T12:00:06","date_gmt":"2024-06-20T06:30:06","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=324745"},"modified":"2025-10-11T10:14:11","modified_gmt":"2025-10-11T04:44:11","slug":"ibc-proceedings-dont-bar-liability-under-section-138-of-ni-act-mp-high-court-scc-times","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/06\/20\/ibc-proceedings-dont-bar-liability-under-section-138-of-ni-act-mp-high-court-scc-times\/","title":{"rendered":"IBC proceedings don\u2019t bar liability under Section 138 of NI Act: MP High Court"},"content":{"rendered":"
\n

Madhya Pradesh High Court:<\/span> In an application under Section 482<\/a> of CrPC<\/a> seeking to quash Additional Session Judge’s order which imposed a condition on applicant to deposit Rs.13,73,890\/- for suspension of the execution of sentence (including the order to pay compensation), a single-judge bench of G.S. Ahluwalia, J., affirmed the condition imposed by the Appellate Court for the applicant to deposit Rs.13,73,890\/- as a condition for suspension of sentence and held that the applicant’s liability under Section 138<\/a> of the NI Act<\/a> remained despite the initiation of insolvency proceedings by the borrower company.<\/p>\n

In the instant matter, the applicant was a guarantor for M\/s Shree Geeta Textiles Private Limited, which defaulted on borrowed debts. The borrower, initiated insolvency proceedings under Section 96<\/a> of the Insolvency and Bankruptcy Code, 2016<\/a> (IBC) before the National Company Law Tribunal (NCLT), Indore Bench. An interim moratorium under Section 96 of the IBC began from 14-10-2022, which was effective at the time of the applicant’s conviction and continued during the appeal.<\/p>\n

The applicant was convicted by the Magistrate under Section 138<\/a> of the Negotiable Instruments Act, 1881<\/a> (NI Act) and was sentenced to 6 months of imprisonment with a compensation amount of Rs.68,69,457.24\/-. Aggrieved by the impugned order dated 13-03-2024 and sentence, the applicant filed an appeal along with an application under Section 389<\/a> of CrPC<\/a> seeking suspension of execution of sentence. The Additional Session Judge, vide order dated 16-04-2024, imposed a condition to deposit Rs.13,73,890\/- for suspension of the sentence, citing the effect of interim moratorium under Section 96 of the IBC, as imposed by the NCLT.<\/p>\n

The applicant contended that the imposition of the deposit condition is contrary to Section 96 IBC, which provides for a moratorium on recovery of debts during insolvency proceedings. The applicant cited precedents to support the contention that criminal proceedings under Section 138<\/a> of the NI Act<\/a> should be stayed during such moratorium. However, the respondents opposed the application and contended that the nature of proceedings under Section 138<\/a> of the NI Act<\/a> is penal and distinct from civil debt recovery proceedings under the IBC. It was argued that the applicant’s personal liability cannot be absolved merely because the borrower company is undergoing insolvency proceedings.<\/p>\n

The Court referred to Ajay Kumar Radheyshyam Goenka<\/span> v. Tourism Finance Corpn. of India Ltd.<\/span>, (2023) 10 SCC 545<\/a> and emphasised that criminal proceedings under Section 138<\/a> of the NI Act<\/a> are not affected by the moratorium provisions of the IBC. The Court held that the proceedings under Section 138<\/a> of the NI Act<\/a> are penal in nature and not affected by the interim moratorium under the IBC. The Court held that the initiation of insolvency proceedings by the borrower company did not absolve the applicant of his liability under Section 138<\/a> of the NI Act<\/a>. The Court opined that the conviction and the condition to deposit Rs.13,73,890\/- for suspension of the sentence are valid.<\/p>\n

“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.”<\/p>\n

The Court dismissed the application under Section 482<\/a> of CrPC<\/a> was and affirmed the Appellate Court’s order requiring the deposit of Rs.13,73,890\/- as a condition for suspension of the sentence.<\/p>\n

[Anurodh Mittal<\/span> v. Rehat Trading Co.<\/span>, 2024 SCC OnLine MP 7869<\/a>, order dated 21-05-2024<\/span>]<\/p>\n\n

Advocates who appeared in this case :<\/p>\n

Shri Akshat Agrawal and Shri Himanshu Agrawal, Counsel for the Applicant<\/p>\n

Shri Dilip Parihar, Counsel for the Respondent No. 2\/State<\/p>\n

Buy Code of Criminal Procedure, 1973  HERE<\/a><\/h3>\n

\"Code<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Court held that the proceedings under Section 138 of the Negotiable Instruments Act, 1881 are penal in nature and not akin to civil recovery proceedings.<\/p>\n","protected":false},"author":67514,"featured_media":317738,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[3029,30361,61228,3461,7201,12521,37265,70048],"class_list":["post-324745","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-cheque_bounce","tag-ibc","tag-justice-g-s-ahluwalia","tag-liability","tag-madhya-pradesh-high-court","tag-nclt","tag-section-138-of-ni-act","tag-suspension-of-execution-of-sentence"],"yoast_head":"\nIBC proceedings don\u2019t bar liability under Section 138 of NI Act: MP High Court | SCC Times<\/title>\n<meta name=\"description\" content=\"MP High Court held that the 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HC | Appeal filed against conviction under S. 138 NI Act cannot be dismissed for non-payment of fine without going into merits of appeal","author":"Bhumika Indulia","date":"January 22, 2020","format":false,"excerpt":"Bombay High Court: Vibha Kankanwadi, J., allowed a criminal revision application filed against the order of the Additional Sessions Judge whereby the appeal filed by the applicant against the decision of the trial court convicting him for dishonour of cheque punishable under Section 138 of the Negotiable Instruments Act, 1881,\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=350%2C200&ssl=1 1x, 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Sonawane, J. dismissed a criminal application filed under Section 432 CrPC seeking relief of quashing the order passed by Additional Sessions Judge directing the applicant to deposit Rs 2 lakhs towards part of the compensation awarded by Magistrate (First Class) while convicting him for an offence punishable\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/Bombay-HC.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":287094,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/03\/17\/initiation-ibc-proceedings-does-not-absolve-company-director-signatories-of-criminal-liability-under-section-138-negotiable-instruments-act-supreme-court-legal-research-news-updates\/","url_meta":{"origin":324745,"position":2},"title":"Initiation of IBC proceedings does not absolve Company Directors\/Signatories of criminal liability under Section 138 NI Act: SC","author":"Prachi Bhardwaj","date":"March 17, 2023","format":false,"excerpt":"The Supreme Court observed that the scope of nature of proceedings under the two Acts are quite different and would not intercede each other.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Section 138","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-760kjg.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-760kjg.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-760kjg.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/03\/MicrosoftTeams-image-760kjg.png?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":244869,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/03\/02\/section-138-ni-act-proceeding-a-civil-sheep-in-a-criminal-wolfs-clothing-quasi-criminal-proceedings-against-corporate-debtor-covered-under-section-14\/","url_meta":{"origin":324745,"position":3},"title":"‘Section 138 NI Act proceeding a \u201ccivil sheep\u201d in a \u201ccriminal wolf\u2019s\u201d clothing’; quasi criminal proceedings against corporate debtor covered under Section 14(1)(a) IBC : SC","author":"Prachi Bhardwaj","date":"March 2, 2021","format":false,"excerpt":"\u201cA Section 138 proceeding can be said to be a \u201ccivil sheep\u201d in a \u201ccriminal wolf\u2019s\u201d clothing, as it is the interest of the victim that is sought to be protected, the larger interest of the State being subsumed in the victim alone moving a court in cheque bouncing cases.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/02\/sc-2-7.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/02\/sc-2-7.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/02\/sc-2-7.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/02\/sc-2-7.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/02\/sc-2-7.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":225321,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/02\/07\/ker-hc-court-sets-aside-sentence-of-conviction-and-demands-payment-of-fine-in-matter-of-dishonour-of-cheque-under-s-138-of-negotiable-instruments-act\/","url_meta":{"origin":324745,"position":4},"title":"Ker HC | Court sets aside sentence of conviction and demands payment of fine in matter of dishonour of cheque under S. 138 of Negotiable Instruments Act","author":"Bhumika Indulia","date":"February 7, 2020","format":false,"excerpt":"Kerala High Court: R. Narayana Pisharadi J., allowed a criminal revision petition in part in a matter relating to Section 138 of Negotiable Instruments Act, 1881. In the present case, the accused had obtained an amount of Rs 5, 00,000 from the complainant on the promise that he would arrange\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":243938,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/02\/16\/section-138-ni-act\/","url_meta":{"origin":324745,"position":5},"title":"All HC | Summons sent to Director for dishonour of cheque under S. 138 NI Act, without prosecution against the Company. Is it permissible? Court answers","author":"Bhumika Indulia","date":"February 16, 2021","format":false,"excerpt":"Allahabad High Court: Ravi Nath Tilhari, J., addressed a matter wherein a person being the director of the company signed a cheque on behalf of the company and since the said cheque got dishonoured, he was made liable, without the company being made liable under the offence of Section 138\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/324745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67514"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=324745"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/324745\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/317738"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=324745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=324745"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=324745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}