Delhi District Court
Fashion Dezire vs Vijay Kumar Ghai on 21 August, 2023
Fashion Dezire vs. Vijay Kumar Ghai & Mohit Kumar Ghai
CNR No.: DLCT01-008810-2022
Crl. Revision No. 323/2023
21.08.2023
Present : Mr. Sanjiv Khanna, parter of the petitioner.
None for the respondents.
ORDER
1. The petitioner, a partnership firm, through its partner, namely, Mr. Naresh Chandra Khanna, challenged order dated 03.03.2022 and order dated 25.04.2022 in CC No. 514741/2016, 514744/2016, 516789/2016 and 519350/2016 titled as 'Fashion Dezire vs. Priknit Retails Ltd. and Others' whereby the trial Court stayed the proceedings against the respondents during continuance of interim moratorium under Section 96 of 'Insolvency and Bankruptcy Code, 2016' (Hereinafter 'IBC').
2. Facts preceding to filing of the said criminal revision petition are that the petitioner filed the aforesaid four complaints under Section 138 NI Act against 'M/s. Priknit Retails Ltd.' (the accused No.
1), the respondents (the accused No. 2 and 3) and Mr. Shashwat Aggarwal (the accused No. 4). The respondent No. 1 was impleaded as 'Managing Director' and the respondent No. 2 as 'Director'.
3. The case of the petitioner is that it had supplied readymade garments to 'M/s. Priknit Retails Ltd.' and an amount of Rs. 38,14,741/- was due as on 01.04.2010. In discharge of the said liability, the respondent No. 1 issued the cheques in question which were dishonoured on presentation.
4. After issuance of demand notice, the petitioner filed the said complaints.
5. In due course, the trial of the said complaints progressed to the stage of defence evidence on 17.12.2019.
6. On 27.03.2021, the respondents filed an application under Section 94 IBC seeking stay of the proceedings.
7. The trial Court, vide order dated 03.03.2022, stayed the proceedings of the said cases, as under:
"13. The upshot of the above is that when an applicant pleads and reasonably satisfies a Court in respect of the filing of the application u/s 94(1) or 95(1), Interim-moratorium is taken to be in force and no discretion has been given to any Court or Tribunal to go into the aspect of whether the imposition of the Interim- moratorium is valid and justified or not.
14. Further, as already held in P. Mohanraj vs. Shah Brothers Ispat, s. 96 (1) would undoubtedly include a proceeding u/s 138 of the Negotiable Instruments Act, 1881, i.e., the instant proceedings. Needless to say that, by extension, the stay during the Interim- moratorium shall also endure at the stage of post-admission Moratorium u/s 101 of the Code upon admission of the application by the Adjudicating Authority. In the instant case, the Accused has annexed relevant record coupled with certificate u/s 65B of the Indian Evidence Act, 1872 and has also supported the application by an affidavit attesting to the facts averred therein.
15. Even from online verification on the Hon'ble NCLT website, the record is found to be concordant with an application u/s 94(1) of the Code filed by the Accused herein.
Even certain order-sheets of the said Tribunal have been uploaded online which attest to the factum of filing by the Accused persons. Resultantly, this court is satisfied on the point of pendency of the application u/s 94(1) of the Code and for this reason, the instant application deserves to be allowed in favour of the Accused."
8. The petitioner filed an application seeking vacation of stay, vide application dated 25.04.2022.
9. The trial Court dismissed the said application, vide order dated 25.04.2022, while observing that the petitioner could not make out any ground for review of order dated 03.03.2022.
10. Feeling aggrieved and dissatisfied, the petitioner challenged order dated 03.03.2022 and order dated 25.04.2022.
11. Ld. Counsel for the petitioner contended that the respondents were impleaded in the said complaints in the capacity of 'Managing Director' and 'Director' of 'M/s. Priknit Retails Ltd.'. He contended that the trial Court did not differentiate between 'debt' and 'offence'. He contended that Hon'ble Supreme Court of India in P. Mohanraj vs. Shah Brothers, (2021) 6 SCC 258 held that proceedings under Section 138 NI Act can continue against natural persons who were in-charge of and responsible to the day-to-day conduct of the business of the company. He contended that moratorium would only apply to the corporate debtor i.e. the company and not to its 'Managing Director' and 'Director'. He contended that the impugned order deserves to be set-aside.
12. Ld. Counsel for the respondents filed written arguments.
13. Ld. Counsel for the respondents contended that the respondents filed an application under Section 94 IBC before NCLT, Chandigarh on 14.12.2020 and 10.02.2021. He contended that Section 96 IBC provides that when an application is filed under Section 94 IBC, interim moratorium shall commence from the date of filing of the application. He contended that proceedings under Section 138 NI Act are legal proceedings in respect of a 'debt'. He relied on judgment in Vijay Kumar Ghai vs. Preet Pal Singh Babbar delivered by Hon'ble Punjab and Haryana High Court on 04.07.2022.
14. The issue raised in this criminal revision petition is no longer res integra.
15. At the outset, it is clarified that the respondents were not impleaded in the said complaints as 'personal guarantors' of 'M/s. Priknit Retails Ltd.'. They were impleaded as 'Managing Director' and 'Director' of 'M/s. Priknit Retails Ltd.'. Moreover, the respondent No. 1 is the signatory of the cheques in question.
16. In P. Mohanraj & Ors. vs. Shah Brothers Ispat Pvt. Ltd., Hon'ble Apex Court held, as under:
"102. 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."
17. In Ajay Kumar Radheyshyam Goenka vs. Tourism Finance Corporation of India Ltd., 2023 SCC OnLine SC 266, Hon'ble Supreme Court of India held, as under:
"107. I may draw my final conclusions as under:
(a) After passing of the resolution plan under Section 31 of the IBC by the adjudicating authority & in the light of the provisions of Section 32A of the IBC, the criminal proceedings under Section 138 of the NI Act will stand terminated only in relation to the corporate debtor if the same is taken over by a new management.
(b) Section 138 proceedings in relation to the signatories / directors who are liable / covered by the two provisos to Section 32A(1) will continue in accordance with law."
18. In a similar fact situation, in Sandeep Gupta vs. Ram Steel Traders and Others, 2023 SCC OnLine Del 2786, the petitioner was managing director of the corporate debtor. He was signatory of the cheque. He filed an application under Section 94 IBC before NCLT, Chandigarh for personal insolvency resolution process. He contended that interim moratorium immediately came into effect under Section 96 IBC. He filed an application before the Jurisdictional Magistrate for stay of the proceedings under Section 138 NI Act. The Jurisdictional Magistrate refused to stay the complaint and dismissed the said application. He approached Hon'ble High Court of Delhi. He contended that interim moratorium came into existence immediately on filing of application under Section 94 IBC, in terms of Section 96 IBC.
19. Hon'ble High Court of Delhi, after taking note of provisions under Section 94 and 96 IBC, observed that the petitioner was facing trial in complaint under Section 138 NI Act as a 'natural person' in the capacity of Managing Director. The petitioner was not impleaded in respect of his personal liability. The petitioner was summoned as an accused in his capacity as a managing director. Hon'ble High Court of Delhi held, as under:
"23. Thus, I am of the view that the judgment of P. Mohanraj (supra) is clear in this regard. Admittedly, in the present case, the petitioner had signed the cheque as the Managing Director of Respondent No. 2. The judgment of P. Mohanraj (supra) categorically states that the moratorium provisions u/s 14 IBC would apply only to the corporate debtor and the natural persons would continue to be liable. The petitioner is the natural person and merely because he has filed personal insolvency proceedings, the same would not bring him under the ambit of Section 96 IBC vis-a-vis the pending complaint under section 138 NI Act.
25. In the present case as well, the petitioner is seemingly trying to escape his liability by trying to urge that his application u/s 94 of the IBC in his individual capacity would stay the complaint under section 138 NI Act against him. It is clear that the petitioner is facing criminal proceedings for being signatory to the cheque which has been dishonoured. He is covered under natural person under section 141 NI Act.
26. The debt in the present case is not of the petitioner but that of Respondent No. 2. Section 141 of the NI Act fastens liability on every officer of the company who was in management and control of the affairs of the company.
27. Hence, in my considered view, the provisions of Section 96 of the IBC would not be applicable in the facts of the present case as the petitioner is arrayed as an accused in the complaint u/s 138 NI Act in his capacity of the Managing Director of Respondent No.
2.
28. It is also clear that Section 138 NI Act prescribes a punishment and compensation for the offence that is bouncing of cheque and is not recovery proceeding. Hence under Section 138 NI Act the court cannot direct payment of the cheque amount to the complainant but can only award punishment and compensation by way of fine. Thus, what could be dissolved, is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act i.e., only the corporate debtor (i.e., the company) is protected by the moratorium while the signatories / directors cannot escape from their penal liability under Section 138 of the NI Act by filing personal insolvency proceedings."
20. To reiterate, the respondent No. 1 is Managing Director and signatory of the said cheques forming subject matter of the complaint cases. The respondent No. 2 is Director of 'M/s. Priknit Retails Ltd.'.
21. The respondents are not personal guarantors of 'M/s. Priknit Retails Ltd.'.
22. The respondents are natural persons under Section 141 NI Act. They would continue to remain liable for the offence under Section 138 NI Act pertaining to dishonour of the cheques issued towards discharge of the liability of 'M/s. Priknit Retails Ltd.'.
23. Mere filing of personal insolvency proceedings under Section 94 IBC would not trigger interim moratorium qua the respondents.
24. This Court is of the considered opinion that the trial Court misinterpreted scope of Section 94 read with Section 96 IBC and judgment of Hon'ble Supreme Court of India in P. Mohanraj (supra).
25. The impugned order dated 03.03.2022 and order dated 25.04.2022 are patently illegal and they would occasion injustice, if they are not set-aside.
26. Accordingly, the criminal revision petition filed by the petitioner is allowed and the impugned order dated 03.03.2022 and order dated 25.04.2022 are set-aside and consequent, stay of the proceedings in the said four complaints is vacated. The trial Court is directed to proceed with the said four complaints in accordance with law.
27. A copy of order alongwith trial Court record be sent to the trial Court. The criminal revision file Digitally signed be consigned to record room. by SANJAY SANJAY SHARMA Date:
SHARMA 2023.08.22 15:15:08 +0530 Sanjay Sharma-II ASJ-03, Central District Tis Hazari Courts, Delhi NK 21.08.2023