2025 INSC 3461
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2025
@ SPECIAL LEAVE PETITION (CRL) NO.1104 OF 2022
VISHNOO MITTAL …APPELLANT
VERSUS
M/S SHAKTI TRADING COMPANY …RESPONDENT
JUDGMENT
SUDHANSHU DHULIA, J.
- Leave granted.
- The appellant before this court has challenged the order dated
21.12.2021 of the learned Single Judge of the Punjab and Haryana
High Court by which the appellant’s petition under section 482 of
Criminal Procedure Code, 1973 (‘CrPC’), seeking quashing of
proceedings initiated under Section 138 of Negotiable Instruments
Act, 1881 (‘NI Act’) against the appellant, has been dismissed. - Admittedly, the appellant was the director of M/s Xalta Food and
Beverages Private Limited (hereinafter ‘corporate debtor’). There
was a contract between the corporate debtor and the Respondent-
M/s Shakti Trading Company where the respondent was to2
function as a super stockist of the corporate debtor. As a
consequence of the business relationship between the two
companies, the appellant, in his capacity as director of the
corporate debtor, had drawn eleven cheques in favour of the
respondent of varying amounts, the total amount being
Rs.11,17,326/- (approximately). These cheques were dishonoured
on 07.07.2018. A legal notice under Section 138 of the NI Act was
issued to the appellant by the respondent as the cheque amounts
were not furnished to the respondent by the bank. Consequently,
in September 2018, a complaint was filed before the appropriate
Court by the respondent against the appellant for offences under
Section 138 of NI Act. Meanwhile, on 25.07.2018, insolvency
proceedings against the corporate debtor, of which the appellant
was the director, commenced and a moratorium under Section 14
of the Insolvency and Bankruptcy Code, 2016 (hereafter ‘IBC’) was
imposed. On the same day i.e. 25.07.2018, the interim resolution
professional (hereinafter ‘IRP’) was appointed in regard to the
corporate debtor. - Meanwhile, vide order dated 07.09.2018, the Court had issued
summons to the appellant in the proceedings initiated by the
respondent against the appellant under section 138 of the NI Act.
Aggrieved, the appellant3
482 of CrPC challenging the summoning order and further, prayed
for the quashing of the section 138 NI Act case against him in view
of the moratorium issued under Section 14 of the IBC. By the
impugned order dated 21.12.2021, the High Court, all the same,
dismissed the appellant’s petition and declined to quash the
complaint against him. Now, the appellant is before us. - We have heard both sides and perused the material on record.
- The case of the appellant is that the corporate debtor is presently
facing insolvency proceedings before the National Company Law
Tribunal (NCLT) and a moratorium order was issued on
25.07.2018 under Section 14 of the IBC. The relevant portion of
Section 14 of the IBC reads as under:
“14. Moratorium.
(1) Subject to provisions of sub-sections (2) and (3),
on the insolvency commencement date, the
Adjudicating Authority shall by order declare
moratorium for prohibiting all of the following,
namely:–
(a) the institution of suits or continuation of pending
suits or proceedings against the corporate debtor
including execution of any judgment, decree or
order in any court of law, tribunal, arbitration panel
or other authority;
(b) transferring, encumbering, alienating or
disposing of by the corporate debtor any of its
assets or any legal right or beneficial interest
therein;
(c) any action to foreclose, recover or enforce any
security interest created by the corporate debtor in4
respect of its property including any action under
the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002 (54 of 2002);
(d) the recovery of any property by an owner or
lessor where such property is occupied by or in the
possession of the corporate debtor…” - Relying upon the above provision, the appellant submits that since
the moratorium order was imposed on 25.07.2018 and was in
operation, therefore, the proceedings under section 138 of the NI
Act could not have been initiated against the appellant. He would
further argue that although the cheques were drawn and
dishonoured prior to the above date i.e., 25.07.2018, however, the
notice under Section 138 of the NI Act was given on 06.08.2018
i.e., post 25.07.2018. Hence, the cause of action for the offence
under Section 138 of the NI Act would commence after a period of
15 days calculated from 06.08.2018 and it would be 21.08.2018,
but by this time moratorium had already been imposed on
25.07.2018. The submission of the appellant was, however, not
accepted by the High Court. The High Court, while dismissing the
appellant’s petition, relied upon the judgment of this Court in P.
Mohan Raj v. M/S Shah Brothers Ispat Pvt. Ltd. (2021) 6 SCC
258 where it was held that the immunity granted by the
moratorium order issued under Section 14 of the IBC5
obtained by a Corporate Debtor and not by a natural person such
as the present appellant, who was the Director of the Corporate
Debtor. In para 102 of the said judgement, this Court had noted:
“… for the period of moratorium, since no Sections
138/141 proceeding can continue or be initiated
against the corporate debtor because of a statutory
bar, such proceedings can be initiated or continued
against the persons mentioned in Sections 141(1)
and (2) of the Negotiable Instruments Act. This
being the case, it is clear that the moratorium
provision contained in Section 14 IBC would apply
only to the corporate debtor, the natural persons
mentioned in Section 141 continuing to be
statutorily liable under Chapter XVII of the
Negotiable Instruments Act.”
However, in our opinion, the High Court erred in relying on
P.Mohan Raj since the facts of that case were completely different
and the present case is thus distinguishable from it. - In P.Mohan Raj, certain cheques drawn by the appellants therein
were dishonoured on 03.03.2017 and 28.04.2017. Thereafter,
demand notices dated 31.03.2017 and 05.05.2017 were issued by
the complainant. The moratorium was imposed on 06.06.2017,
which is clearly after the lapse of 15 days from the date of demand
notices. In other words, in that case, the cause of action under
section 138 NI Act arose before the imposition of the moratorium
and on these facts, this Court had held that section 14 of IBC bars
or stays proceedings only against6
proceedings can be continued or initiated against the natural
persons. The case at hand is totally different from P.Mohan Raj as
the cause of action in the present case arose after the
commencement of the insolvency process. - The return of the cheques dishonoured simpliciter does not create
an offence under section 138 NI Act, which reads as under:
“138. Dishonour of cheque for insufficiency,
etc., of funds in the account.—Where any
cheque drawn by a person on an account
maintained by him with a banker for payment of
any amount of money to another person from out of
that account for the discharge, in whole or in part,
of any debt or other liability, is returned by the
bank unpaid, either because of the amount of
money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds
the amount arranged to be paid from that account
by an agreement made with that bank, such person
shall be deemed to have committed an offence and
shall, without prejudice to any other provision of
this Act, be punished with imprisonment for a term
which may be extended to two years, or with fine
which may extend to twice the amount of the
cheque, or with both:
Provided that nothing contained in this section shall
apply unless—
(a) the cheque has been presented to the bank
within a period of six months from the date on
which it is drawn or within the period of its validity,
whichever is earlier;
(b) the payee or the holder in due course of the
cheque, as the case may be, makes a demand for
the payment of the said amount of money by giving
a notice; in writing, to the drawer of the cheque,
within thirty days of the receipt of information by7
him from the bank regarding the return of the
cheque as unpaid; and
(c) the drawer of such cheque fails to make the
payment of the said amount of money to the payee
or, as the case may be, to the holder in due course
of the cheque, within fifteen days of the receipt of
the said notice.
Explanation.—For the purposes of this section,
“debt of other liability” means a legally enforceable
debt or other liability.”
Clause (c) of the proviso to Section 138 of NI Act makes it clear
that cause of action arises only when demand notice is served and
payment is not made pursuant to such demand notice within the
stipulated fifteen-day period. This Court in Jugesh Sehgal v.
Shamsher Singh Gogi (2009) 14 SCC 683 has explained the
ingredients of Section 138 of NI Act offence as follows:
“13. It is manifest that to constitute an offence
under Section 138 of the Act, the following
ingredients are required to be fulfilled:
(i) a person must have drawn a cheque on an
account maintained by him in a bank for payment
of a certain amount of money to another
person from out of that account;
(ii) the cheque should have been issued for the
discharge, in whole or in part, of any debt or other
liability;
(iii) that cheque has been presented to the bank
within a period of six months from the date on
which it is drawn or within the period of its validity
whichever is earlier;
(iv) that cheque is returned by the bank unpaid,
either because of the amount of money standing to
the credit of the account is insufficient to honour the8
cheque or that it exceeds the amount arranged to
be paid from that account by an agreement made
with the bank;
(v) the payee or the holder in due course of the
cheque makes a demand for the payment of the
said amount of money by giving a notice in writing,
to the drawer of the cheque, within 15 days of the
receipt of information by him from the bank
regarding the return of the cheque as unpaid;
(vi) the drawer of such cheque fails to make
payment of the said amount of money to the payee
or the holder in due course of the cheque within 15
days of the receipt of the said notice.
Being cumulative, it is only when all the
aforementioned ingredients are satisfied that the
person who had drawn the cheque can be deemed
to have committed an offence under Section 138 of
the Act.”
In other words, the cause of action arises only when the amount
remains unpaid even after the expiry of fifteen days from the date
of receipt of the demand notice. - There is another aspect to this matter. In the present case, on
25.07.2018, the moratorium was imposed and management of the
corporate debtor was taken over by the interim resolution
professional as per section 17 of the IBC. Here, we would also like
to reproduce extracts from section 17 of the IBC which are as
follows:
“17. Management of affairs of corporate
debtor by interim resolution professional.- (1)
From the date of appointment of the interim
resolution9
(a) the management of the affairs of the corporate
debtor shall vest in the interim resolution
professional;
(b) the powers of the board of directors or the
partners of the corporate debtor, as the case may
be, shall stand suspended and be exercised by the
interim resolution professional;
(c) ……………
(d) the financial institutions maintaining accounts
of the corporate debtor shall act on the instructions
of the interim resolution professional in relation to
such accounts and furnish all information relating
to the corporate debtor available with them to the
interim resolution professional…” - The bare reading of the above provision shows that the appellant
did not have the capacity to fulfil the demand raised by the
respondent by way of the notice issued under clause (c) of the
proviso to Section 138 NI Act. When the notice was issued to the
appellant, he was not in charge of the corporate debtor as he was
suspended from his position as the director of the corporate debtor
as soon as IRP was appointed on 25.07.2018. Therefore, the
powers vested with the board of directors were to be exercised by
the IRP in accordance with the provisions of IBC. All the bank
accounts of the corporate debtor were operating under the
instructions of the IRP, hence, it was not possible for the appellant
to repay the amount in light of section 17 of the IBC. Additionally,
we have been informed on behalf of the appellant that, after the10
imposition of the moratorium, the IRP had made a public
announcement inviting the claims from the creditors of the
Corporate Debtor and the respondent has filed a claim with the
IRP. - Keeping in mind the above observations and distinguishing facts
and circumstances of this case from that of P. Mohan Raj, we are
of the considered view that the High Court ought to have quashed
the case against the appellant by exercising its power under
section 482 of the CrPC. - Therefore, we allow this appeal by setting aside the impugned
order dated 21.12.2021 and quash the summoning order dated
07.09.2018. Further, we hereby quash the complaint case
no.15580/2018, pending before the Chief Judicial Magistrate
Court, Chandigarh, filed by the respondent against the appellant. - Pending application(s), if any, stand(s) disposed of.
……………….………………….J.
[SUDHANSHU DHULIA]
..……..………………………….J.
[AHSANUDDIN AMANULLAH]
New Delhi.
March 17, 2025.
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