Moratorium Provision U/S 14 IBC Applies Only To Corporate Debtor; Natural Persons Are Liable Under NI Act: Bombay High Court
The Bombay Excessive Courtroom held that the moratorium provision below Part 14 of the Insolvency and Chapter Code, 2016 applies solely to the Company Debtor and the pure individuals are liable below Chapter XVII of the Negotiable Devices Act, 1881 (NI Act).
The Nagpur Bench held thus in a batch of Felony Purposes searching for to quash the prison instances filed below Part 138 learn with 141 of the NI Act.
A Single Bench of Justice Urmila Joshi-Phalke noticed, “In para No.77 of the judgment, within the case of P.Mohanraj vs. M/s.Shah Ispat Personal Restricted supra, the Hon’ble Apex Courtroom noticed that for the interval of moratorium, since no Part 138/141 continuing can proceed or be initiated in opposition to the company debtor due to a statutory bar, such proceedings will be initiated or continued in opposition to the individuals talked about in Part 141(1) and (2) of the NIA. This being the case, it’s clear that the moratorium provision contained in Part 14 of the IBC would apply solely to the company debtor, the pure individuals talked about in Part 141 persevering with to be statutorily liable below Chapter XVII of the NIA.”
Advocate Yash Venkatraman appeared for the Candidates whereas Advocate Darasingh Sindhu appeared for the Non-Applicant.
Factual Background
The Candidates had been Administrators of an organization particularly “Venus Rolling Mills Personal Restricted” which was arraigned as accused No.1 within the prison instances. The Non-Applicant firm was concerned within the enterprise of producing and processing of Metal and Iron Items. In 2015, the accused firm and the Non-Applicant firm entered into enterprise for buying items from the stated firm. As per allegations, the accused firm obtained items on credit score and an enormous quantity was due. Allegedly, the Applicant No. 1 being the Director of the corporate, issued 16 cheques drawn on Federal Financial institution, which had been ‘dishonoured’. The stated cheques had been returned with endorsement “account closed” and, subsequently, a Felony Grievance was registered. Extra cheques had been drawn on the Federal Financial institution had been additionally deposited and the identical had been returned as dishonoured.
Equally, different cheques had been additionally dishonoured. The accused firm in 2019 suffered main losses in enterprise and therefore, utilized for initiation of continuing by submitting a plea earlier than the Nationwide Firm Legislation Tribunal (NCLT). The Decision Skilled (RP) intimated the Non-Applicant firm to not deposit cheques. The Committee of Collectors (COC) constituted by the RP couldn’t attain a profitable Decision Plan for the accused firm. It unanimously resolved to liquidate the accused firm. Accordingly, RP filed an Utility below Part 33 IBC earlier than the NCLT and the CIRP (Company Insolvency Decision Course of) received initiated. Demand notices had been issued by the Non-Applicant firm and as dues weren’t paid, the Candidates being Administrators had been liable to pay the quantity as per the Non-Applicant.
Reasoning
The Excessive Courtroom in view of the info and circumstances of the case, famous, “… the moratorium granted by the order issued below part 14 of the IBC can solely be obtained by a company debtors and never by pure particular person resembling the current appellant who was the director of the company debtor.”
The Courtroom stated that there’s substance within the submission that when the moratorium was imposed and liquidation continuing has been accomplished and powers of the Administrators in view of the Order of the NCLT Mumbai are assigned to the Decision Skilled appointed subsequently as liquidator and Candidates ceased to be Administrators and powers vested with the Board of Administrators had been to be exercised by the liquidator/Decision Skilled in accordance with the provisions of the IBC.
“All transactions of the company debtor to be carried out by the Decision Skilled, therefore applicant Nos.1 and three weren’t the particular person incharge of the corporate and was not having any authority to signal the cheques and, subsequently, cheques in query that are material of the complaints weren’t legitimate cheques. Quite the opposite, paperwork substantiate the contentions of the candidates that cheques had been issued in 2018 as a safety and whereas taking steps after moratorium was declared on 9.5.2019, Decision Skilled intimated the non-applicant to not deposit the cheques”, it added.
Accordingly, the Excessive Courtroom allowed the Purposes and put aside the impugned Orders.
Trigger Title- Jatinder Singh & Ors. v. Ganga Iron and Metal Buying and selling (Impartial Quotation: 2025:BHC-NAG:6249)
Look:
Candidates: Advocate Yash Venkatraman and Pragya Nawandar.
Non-Applicant: Advocate Darasingh Sindhu
