Karnataka High Court
Venugopal Nandlal Dhoot vs Matheson Bosnquet Enterprises Pvt Ltd on 23 August, 2022
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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CRL.P No. 5904 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF AUGUST, 2022
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 5904 OF 2021
BETWEEN:
1. VENUGOPAL NANDLAL DHOOT
AUTHORISED SIGNATORY OF
NIPPON INVESTMENT AND
FINANCE COMPANY P. LTD
AGED 70 YEARS,
S/O LATE NANDLAL MADHAVLAL DHOOT
NO.90, MANAV MANDIR
NAPEAN SEA ROAD
MUMBAI-400006
2. GREGORY HERALD FERNANDES
AGED 58 YEARS,
ADDL. DIRECTOR
NIPPON INVESTMENT AND
FINANCE COMPANY P. LTD.
NO.502, BIL BERRY CHS LTD.
OPP: CORPORATION BANK, IC COLONY
BORIVALI (WEST)
MUMBAI-400103
Digitally signed
by PADMAVATHI 3. LAXMAN DINAKAR GHARGE
BK
Location: HIGH AGED 55 YEARS,
COURT OF
KARNATAKA ADDL. DIRECTOR
NIPPON INVESTMENT AND
FINANCE COMPANY P. LTD.
NO.53/3, SUJAL APARTMENT
DATAR COLONY BHANDUP (EAST)
MUMBAI-400042
...PETITIONERS
(BY SRI. SRIPAL J. SANGHVI, ADVOCATE)
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CRL.P No. 5904 of 2021
AND:
MATHESON BOSNQUET
ENTERPRISES PVT. LTD.
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956
AND HAVING ITS REGD. OFFICE AT
NO.26/1, SUA HOUSE
KASTURBA CROSS ROAD
BENGALURU-560001
REP. BY ITS POWER OF ATTORNEY HOLDER
SRI T S RAJAGOPAL RAO
...RESPONDENT
(BY SRI. NITIN PRASAD, ADVOCATE)
THIS CRL.P IS FILED U/S.482 CR.P.C PRAYING TO QUASH THE
PROCEEDINGS IN C.C.NO.1925/2019 ON THE FILE OF XXXVI
ADDL.C.M.M., BENGALURU, AS FAR AS THE PETITIONERS ARE
CONCERNED.
THIS CRIMINAL PETITION COMING ON FOR ORDERS THIS
DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioners are before this Court calling in question proceedings in C.C.No.1925/2015 pending before the XXXVI Additional Chief Metropolitan Magistrate, Bengaluru registered for offences punishable under Sections 138 and 142 of the Negotiable Instruments Act, 1881 ('the Act' for short).
2. Heard Sri Sripal J.Sanghvi, learned counsel appearing for the petitioners and Sri Nitin Prasad, learned counsel appearing for the respondent.
-3- CRL.P No. 5904 of 20213. The 1st petitioner is the Director and Authorized Signatory on behalf of the Company - Nippon Investment and Finance Company Private Limited ('the Company' for short).
Petitioner Nos.2 and 3 were Directors at the relevant point in time. The genesis of the issue is a transaction between the petitioners and the respondent. The transaction was an Inter Corporate Deposit of Rs.2/- crores through Bank transfer to the account of the Company which was agreed to be repaid within 6 months with interest at 16% per annum and in furtherance of which a cheque was issued by the Company. The transaction took place on 20-02-2018. On 29-10-2018 on account of the petitioners not paying back the amount the cheque was presented by the respondent for its realization. This was returned by the Bank with an endorsement "funds insufficient".
A demand notice was issued on 27-11-2018 which was returned undelivered and thereafter a complaint was registered invoking Section 200 of the Cr.P.C. for offences punishable under Sections 138 and 142 of the Act on 3.01.2019. The proceedings have gone on since then. The allegation in the complaint is that the 1st petitioner is the Director and Authorised Signatory and also signatory to the cheque on -4- CRL.P No. 5904 of 2021 behalf of the Company and petitioner Nos.2 and 3 were Directors at the relevant point in time i.e., when the Inter Corporate Deposit was made. Certain developments emerge after the aforesaid transaction between the parties. One M/s Religare Finvest Limited had filed an application before the National Company Law Tribunal ('the Tribunal' for short) invoking Section 7 of the Insolvency and Bankruptcy Code, 2016 ('the Code' for short). The said application was admitted and a Resolution Professional was appointed and thereafter expression of interest on the Company was invited from interested parties and a resolution plan was submitted by the consortium led by Vyom Tele Infrastructures Private Limited and other participants. The Tribunal approved the resolution plan in terms of Section 31 of the Code. The resolution plan provided that on its approval by the Tribunal necessary steps would be taken to file the same before civil Courts for disposal, dismissal or withdrawal of civil and criminal proceedings and also observed that all adverse inquiries, litigations against the Corporate debtor, the Company shall stand automatically revoked and withdrawn on approval of the resolution by the Tribunal and any claim arising from any dispute would be -5- CRL.P No. 5904 of 2021 deemed to be permanently closed by virtue of the Tribunal approving the resolution plan. The Tribunal in terms of Section 31 of the Code approved the Scheme on 5-12-2019. On approval of the Scheme which was by itself on the strength a resolution plan which recognized that all civil and criminal cases against the Company would be closed, the criminal complaint filed by the respondent has become infructuous. In other words, in view of the resolution plan approved by the Tribunal, the liability of the Company stood extinguished and no proceeding could be continued against the Company. Based upon this subsequent development as quoted hereinabove, the present petition is preferred by the petitioners who are Directors of the Company. The strength on which the present petition is preferred is twofold - one the proceedings before the Tribunal under the Code and the other is judgment rendered by the Apex Court in the case of P.MOHANRAJ AND OTEHRS v.
SHAH BROTHRS ISPAT PRIVATE LIMITED 1.
4. This Court entertained the petition on the aforesaid score and stalled further proceedings in C.C.No.1925 of 2019 1 (2021) 6 SCC 258 -6- CRL.P No. 5904 of 2021 by its order dated 5-08-2021 and the same is subsisting even as on date.
5. The learned counsel appearing for the petitioners would contend with vehemence that the approval of resolution plan by the Tribunal is bound to result in closure of proceedings impugned and would contend that the criminal case in C.C.No.1925 of 2019 be quashed.
5.1. On the other hand, the learned counsel representing the respondent would refute the submissions to contend that the judgment in the case of P.MOHANRAJ (supra) recognizes the fact of the proceedings to be continued or not against the Directors of the Company when the resolution plan submitted by a Resolution Professional is approved by the Tribunal. A three Judge Bench of the Apex Court subsequent to the judgment in the case of P.MOHANRAJ (supra) has further clarified the issue with regard to the proceedings to be continued against the Directors of the Company and not the Company. The Apex Court in the case NARINDER GARG AND OTEHRS v. KOTAKMAHINDRA BANK LIMITED AND OTHERS - [Writ Petition (Civil) No.93 of 2022 decided on 28- -7- CRL.P No. 5904 of 2021 03-2022] has answered the very issue which would be against the petitioners' contention in the subject petition.
6. I have given my anxious consideration to the submissions made by the respective learned counsel and perused the material on record.
7. The afore-narrated facts are not in dispute and therefore, are not reiterated. The issue now is whether proceedings against Directors of the Company could be continued or not in the light of the approval of the resolution plan by the Tribunal as the Company has now undergone a Corporate Insolvency Resolution Process that was instituted under the Code and that having been accepted by the Tribunal resulting in the successful resolution applicant taking over of the Company. With these factors whether the proceedings against the Directors of the Company who were in default could be continued or not need not detain this Court for long or delve deep into the matter. The Apex Court in the case of P.MOHANRAJ (supra) considers inter-play between Sections 14 and 32A of the Code by quoting them in extenso. The Apex Court in the case of P.MOHANRAJ (supra) has held as follows:
-8- CRL.P No. 5904 of 2021" The interplay between Section 14 and Section 32- A IBC
38. Shri Mehta, however, strongly relied upon Section 32-A(1) IBC, which was introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2020, to argue that the first proviso to Section 32-A(1) would make it clear that "prosecutions"
that had been instituted during the corporate insolvency resolution process against a corporate debtor will result in a discharge of the corporate debtor from the prosecution, subject to the other requirements of sub section (1) having been fulfilled. According to him, therefore, a prosecution of the corporate debtor under Sections 138/141 of the Negotiable Instruments Act can be instituted during the corporate insolvency resolution process, making it clear that such prosecutions are, therefore, outside the ken of the moratorium provisions contained in Section 14 IBC. Section 32-A(1) IBC reads as follows:
"32-A. Liability for prior offences, etc.-
(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate -9- CRL.P No. 5904 of 2021 insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the adjudicating authority under Section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not─
(a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or
(b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or court:
Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject
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to requirements of this sub-section having been fulfilled:
Provided further that every person who was a "designated partner" as defined in clause (j) of Section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or an "officer who is in default", as defined in clause (60) of Section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor's liability has ceased under this sub-section."
39. The raison d'être for the enactment of Section 32-A has been stated by the Report of the Insolvency Law Committee of February 2020, which is as follows:
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"17. LIABILITY OF CORPORATE DEBTOR FOR OFFENCES COMMITTED PRIOR TO INITIATION OF CIRP 17.1. Section 17 of the Code provides that on commencement of the CIRP, the powers of management of the corporate debtor vest with the interim resolution professional. Further, the powers of the Board of Directors or partners of the corporate debtor stand suspended, and are to be exercised by the interim resolution professional. Thereafter, Section 29-A, read with Section 35(1)(f), places restrictions on related parties of the corporate debtor from proposing a resolution plan and purchasing the property of the corporate debtor in the CIRP and liquidation process, respectively. Thus, in most cases, the provisions of the Code effectuate a change in control of the corporate debtor that results in a clean break of the corporate debtor from its erstwhile management. However, the legal form of the corporate debtor continues in the CIRP, and may be preserved in the resolution plan. Additionally, while the property of the corporate debtor may also change hands upon resolution or liquidation, such property also continues to exist, either as property of
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the corporate debtor, or in the hands of the purchaser.
17.2. However, even after
commencement of CIRP or after its
successful resolution or liquidation, the
corporate debtor, along with its property, would be susceptible to investigations or proceedings related to criminal offences committed by it prior to the commencement of a CIRP, leading to the imposition of certain liabilities and restrictions on the corporate debtor and its properties even after they were lawfully acquired by a resolution applicant or a successful bidder, respectively.
Liability where a Resolution Plan has been approved 17.3. It was brought to the Committee that this had created apprehension amongst potential resolution applicants, who did not want to take on the liability for any offences committed prior to commencement of CIRP. In one case, JSW Steel had specifically sought certain reliefs and concessions, within an annexure to the resolution plan it had submitted for approval of the adjudicating authority. Without relief from imposition of the such liability, the Committee noted that in
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the long run, potential resolution applicants could be disincentivised from proposing a resolution plan. The Committee was also concerned that resolution plans could be priced lower on an average, even where the corporate debtor did not commit any offence and was not subject to investigation, due to adverse selection by resolution applicants who might be apprehensive that they might be held liable for offences that they have not been able to detect due to information asymmetry. Thus, the threat of liability falling on bona fide persons who acquire the legal entity, could substantially lower the chances of its successful takeover by potential resolution applicants.
17.4. This could have substantially
hampered the Code's goal of value
maximisation, and lowered recoveries to
creditors, including financial institutions who take recourse to the Code for resolution of the NPAS on their balance sheet. At the same time, the Committee was also conscious that authorities are duty-bound to penalise the commission of any offence, especially in cases involving substantial public interest.
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Thus, two competing concerns need to be balanced.
17.6. Given this, the Committee felt that a distinction must be drawn between the corporate debtor which may have committed offences under the control of its previous management, prior to the CIRP, and the corporate debtor that is resolved, and taken over by an unconnected resolution applicant. While the corporate debtor's actions prior to the commencement of the CIRP must be investigated and penalised, the liability must be affixed only upon those who were responsible for the corporate debtor's actions in this period. However, the new management of the corporate debtor, which has nothing to do with such past offences, should not be penalised for the actions of the erstwhile management of the corporate debtor, unless they themselves were involved in the commission of the offence, or were related parties, promoters or other persons in management and control of the corporate debtor at the time of or any time following the commission of the offence, and could acquire the corporate debtor, notwithstanding the prohibition under Section 29-A.
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17.7. Thus, the Committee agreed that a new section should be inserted to provide that where the corporate debtor is successfully resolved, it should not be held liable for any offence committed prior to the commencement of the CIRP, unless the successful resolution applicant was also involved in the commission of the offence, or was a related party, promoter or other person in management and control of the corporate debtor at the time of or any time following the commission of the offence.
17.8. Notwithstanding this, those persons who were responsible to the corporate debtor for the conduct of its business at the time of the commission of such offence, should continue to be liable for such an offence, vicariously or otherwise, regardless of the fact that the corporate debtor's liability has ceased." (emphasis in original and supplied)
40. This Court in Manish Kumar v. Union of India, upheld the constitutional validity of this provision. This Court observed: (SCC pp. 170-71, para 326)
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CRL.P No. 5904 of 2021"326. We are of the clear view that no case whatsoever is made out to seek invalidation of Section 32-A. The boundaries of this Court's jurisdiction are clear. The wisdom of the legislation is not open to judicial review. Having regard to the object of the Code, the experience of the working of the Code, the interests of all stakeholders including most importantly the imperative need to attract resolution applicants who would not shy away from offering reasonable and fair value as part of the resolution plan if the legislature thought that immunity be granted to the corporate debtor as also its property, it hardly furnishes a ground for this Court to interfere. The provision is carefully thought out. It is not as if the wrongdoers are allowed to get away. They remain liable. The extinguishment of the criminal liability of the corporate debtor is apparently important to the new management to make a clean break with the past and start on a clean slate. We must also not overlook the principle that the impugned provision is part of an economic measure. The reverence courts justifiably hold such laws in cannot but be applicable in the instant case as well. The provision deals with reference to offences committed prior to
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the commencement of the CIRP. With the admission of the application the management of the corporate debtor passes into the hands of the interim resolution professional and thereafter into the hands of the resolution professional subject undoubtedly to the control by the Committee of Creditors. As far as protection afforded to the property is concerned there is clearly a rationale behind it. Having regard to the object of the statute we hardly see any manifest arbitrariness in the provision."
41. Section 32-A cannot possibly be said to throw any light on the true interpretation of Section 14(1)(a) as the reason for introducing Section 32-A had nothing whatsoever to do with any moratorium provision. At the heart of the section is the extinguishment of criminal liability of the corporate debtor, from the date the resolution plan has been approved by the adjudicating authority, so that the new management may make a clean break with the past and start on a clean slate. A moratorium provision, on the other hand, does not extinguish any liability, civil or criminal, but only casts a shadow on proceedings already initiated and on proceedings to be initiated, which shadow is lifted when the moratorium period comes to an end. Also, Section 32-A(1) operates only after the
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CRL.P No. 5904 of 2021moratorium comes to an end. At the heart of Section 32-A is the IBC's goal of value maximisation and the need to obviate lower recoveries to creditors as a result of the corporate debtor continuing to be exposed to criminal liability.
42. Unfortunately, Section 32-A is inelegantly drafted. The second proviso to Section 32-A(1) speaks of persons who are in any manner in charge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor and who are, directly or indirectly, involved in the commission of "such offence" i.e. the offence referred to in sub-section (1), "as per the report submitted or complaint filed by the investigating authority ...". The report submitted here refers to a police report under Section 173 CrPC, and complaints filed by investigating authorities under special Acts, as opposed to private complaints. If the language of the second proviso is taken to interpret the language of Section 32-A(1) in that the "offence committed" under Section 32-A(1) would not include offences based upon complaints under Section 2(d) CrPC, the width of the language would be cut down and the object of Section 32- A(1) would not be achieved as all prosecutions emanating from private complaints would be excluded. Obviously, Section 32-A(1) cannot be read in this fashion and clearly incudes the
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CRL.P No. 5904 of 2021liability of the corporate debtor for all offences committed prior to the commencement of the corporate insolvency resolution process. Doubtless, a Section 138 proceeding would be included, and would, after the moratorium period comes to an end with a resolution plan by a new management being approved by the adjudicating authority, cease to be an offence qua the corporate debtor.
43. A section which has been introduced by an amendment into an Act with its focus on cesser of liability for offences committed by the corporate debtor prior to the commencement of the corporate insolvency resolution process cannot be so construed so as to limit, by a sidewind as it were, the moratorium provision contained in Section 14, with which it is not at all concerned. If the first proviso to Section 32-A(1) is read in the manner suggested by Shri Mehta, it will impact Section 14 by taking out of its ken Sections 138/141 proceedings, which is not the object of Section 32- A(1) at all. Assuming, therefore, that there is a clash between Section 14 IBC and the first proviso of Section 32-A(1), this clash is best resolved by applying the doctrine of harmonious construction so that the objects of both the provisions get subserved in the process, without damaging or limiting one provision at the expense of the other.
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CRL.P No. 5904 of 2021If, therefore, the expression "prosecution" in the first proviso of Section 32-A(1) refers to criminal proceedings properly so-called either through the medium of a first information report or complaint filed by an investigating authority or complaint and not to quasi-criminal proceedings that are instituted under Sections 138/141 of the Negotiable Instruments Act against the corporate debtor, the object of Section 14(1) IBC gets subserved, as does the object of Section 32-A, which does away with criminal prosecutions in all cases against the corporate debtor, thus absolving the corporate debtor from the same after a new management comes in.
............................
Whether natural persons are covered by Section 14 IBC
101. As far as the Directors/persons in management or control of the corporate debtor are concerned, a Sections 138/141 proceeding against them cannot be initiated or continued without the corporate debtor-see Aneeta Hada³. This is because Section 141 of the Negotiable Instruments Act speaks of persons in charge of, and responsible to the Company for the conduct of the business of the Company, as well as the Company. The Court, therefore, in Aneeta Hada³
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CRL.P No. 5904 of 2021held as under: (SCC pp. 686-88, paras 51, 56 & 58-59) "51. We have already opined that the decision in Sheoratan Agarwal113 runs counter to the ratio laid down in C. V. Parekh 114 which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hadal15 has to be treated as not laying down the correct law as far as it states that the Director or any other officer can be prosecuted without impleadment of the Company. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted.
56. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons, whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the
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CRL.P No. 5904 of 2021legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the Company. The learned counsel for the respondents have vehemently urged that the use of the term "as well as" in the section is of immense significance and, in its tentacle, it brings in the Company as well as the Director and/or other officers who are responsible for the acts of the Company and, therefore, a prosecution against the Directors or other officers is tenable even if the Company is not arraigned as an accused. The words "as well as" have to be understood in the context.
58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the Company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the Company" appearing in the section make it absolutely unmistakably clear that when the Company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the
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CRL.P No. 5904 of 2021Company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.
59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh 114 which is a three- Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal113 does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada115 is overruled with the qualifier as stated in para 51. The decision in Modi Distillery116 has to be treated to be restricted to its own facts as has been explained by us hereinabove."
102. Since the corporate debtor would be covered by the moratorium provision contained in
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CRL.P No. 5904 of 2021Section 14 IBC, by which continuation of Sections 138/141 proceedings against the corporate debtor and initiation of Sections 138/141 proceedings against the said debtor during the corporate insolvency resolution process are interdicted, what is stated in paras 51 and 59 in Aneeta Hada³ would then become applicable. The legal impediment contained in Section 14 IBC would make it impossible for such proceeding to continue or be instituted against the corporate debtor. Thus, 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.
Conclusion
103. In conclusion, disagreeing with the Bombay High Court and the Calcutta High Court judgments in Tayal Cotton (P) Ltd. v. State of Maharashtra and MBL Infrastructions Ltd. v. Manik Chand Somani118, respectively, we hold that a
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CRL.P No. 5904 of 2021Sections 138/141 proceeding against a corporate debtor is covered by Section 14(1)(a) IBC.
104. Resultantly, the civil appeal is allowed and the judgment under appeal is set aside. However, the Sections 138/141 proceedings in this case will continue both against the Company as well as the appellants for the reason given by us in paras 101 and 102 above as well as the fact that the insolvency resolution process does not involve a new management taking over. We may also note that the moratorium period has come to an end in this case."
8. The contention now is in the light of the judgment in the case of MOHANRAJ (supra) when the Company is now taken over by a successful resolution applicant in the Corporate Insolvency Resolution Process proceedings against its Directors could be continued or not. The said question came up for consideration before the Apex Court in a subsequent judgment in Narinder Garg (supra) wherein the Apex Court clarifies this position concerning interpretation of the resolution plan and the successful resolution applicant taking over the Company.
The Apex Court has held as follows:
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"The case of the petitioners was before the Bench which was considering the matter in P. Mohanraj & other connected matters. However, the case was de-tagged pursuant to order dated 02.02.2021.
In P. Mohanraj & Others v. Shah Brothers Ispat Private Limited, (2021) 6 SCC 258, a Bench of three-Judges of this Court considered the matter whether a corporate entity in respect of which moratorium had become effective could be proceeded against in terms of Sections 138 and 141 of the Negotiable Instruments Act, 1881 ("the Act"
for short).
A subsidiary issue was also about the liability of natural persons like a Director of the Company. In paragraph 77 of its judgment, this Court observed that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the corporate debtor and that the natural persons mentioned in Section 141 of the Act would continue to be statutorily liable under the provisions of the Act.
It is submitted by Mr. Gopal Sankaranarayanan, learned Senior Advocate that the resolution plan having been accepted in which the dues of the original complainant also figure, the effect of such acceptance would be to obliterate any pending trial under Sections 138 and 141 of the Act.
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CRL.P No. 5904 of 2021The decision rendered in P.Mohanraj is quite clear on the point and, as such, no interference in this petition is called for.
The writ petition is, therefore, dismissed".
9. The Apex Court interpreting paragraph 77 of the judgment in the case of P.MOHANRAJ (supra) observes that the moratorium under Section 14 of the Code would apply only to corporate debtor and the natural persons mentioned in Section 141 of the Act would continue to be statutorily liable under the provisions of the Act. The contention of the petitioners therein that once the resolution plan has been accepted in which dues of the original complainant also figured, the effect of such acceptance would be to obliterate any pending trial under Sections 138 and 141 of the Act is not accepted on the ground that the decision in P.MOHANRAJ (supra) was quite clear on this point and no interference was called for. Thus, in the light of the judgment rendered by the Apex Court in the case of P.MOHANRAJ (supra) and the issue being steered clear in the case of NARINDER GARG (supra) notwithstanding the fact that the resolution plan having been approved by the Tribunal and the resolution applicant taking
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CRL.P No. 5904 of 2021over the Company would not mean that the proceedings against the petitioners who are natural persons i.e., the Directors of the Company, the proceedings cannot be obliterated against them. The proceedings will have to be continued as they continue to be statutorily liable under the provisions of the Act. Therefore, the petition so filed for quashment of entire proceedings on the aforesaid ground would not hold any water.
10. In the result, the criminal petition lacking in merit is dismissed.
Sd/-
JUDGE KG