Karnataka High Court
Sri.Yogesh Jogindernath Mehra vs Dear Constructins, on 6 February, 2020
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 6TH DAY OF FEBRUARY, 2020
BEFORE
THE HON'BLE MR.JUSTICE SURAJ GOVINDARAJ
CRIMINAL PETITION NO.102506 of 2019
Between:
Shri Yogesh Jogindernath Mehra,
(Currently part of the suspended Board
of Management of M/s. Wind World India Limited)
Age 60 years, Occ: Business,
R/o.: 301, Hare Kirshna Presidency Society,
North South Road-8, Vile Parle West,
Mumbai - 400 049.
... Petitioner
(By Shri Shivasai M.Patil, Advocate)
And:
Dear Constructions, Engineers & Contractors,
10/B, Near Maruthi Temple Ashok Nagar,
Hubballi - 580 032,
A partnership firm rep. by its partner
Shri K.Ravindra Tejappa Shetty,
Age 54 years, Occ: Business,
Partner of Complainant Firm,
R/o.: Hubballi - 580 032.
... Respondent
This criminal petition is filed under Section 482 of
Cr.P.C. praying to quash the entire proceedings in
C.C.No.4603 of 2016 initiated by the respondent for the
offences under Section 138 of N.I. Act, on the file of the
JMFC, Ist Court, Hubballi, so far as the petitioner is
concerned.
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This petition coming on for admission, this day, the
Court made the following:
ORDER
The petitioner is before this Court seeking for quashing of the entire proceedings in C.C.No.4603 of 2016 initiated by the respondent for the offence punishable under Section 138 of N.I. Act on the file of the JMFC Ist Court, Hubballi. The petitioner has also filed an application in I.A.No.1 of 2019 for stay of all further proceedings in C.C.No.4603 of 2016.
2. The facts in brief are that the respondent filed a private complaint No.181/2016 before the JMFC, I Hubli under Section 138 of Negotiable Instruments Act, 1881 ('N.I. Act' for short), the Director of M/s Wind World India Limited. The petitioner is accused No.2 in the said complaint. It is stated that the petitioner belongs to the suspended Board of Management of M/s Wind World India Limited and the said company was admitted under the Insolvency and Bankruptcy Code, 2016 (for short "IBC") on 20.02.2018 by the National :3: Company Law Tribunal ('NCLT' for short), Ahmadabad Branch.
3. It is stated in the complaint that there was an outstanding amount of Rs.1,50,95,618/- towards civil construction work and other services carried out and or rendered by the complainant. In this regard, the petitioner on behalf of the company had issued a cheque bearing No.667947 dated 27.05.2006 for a sum of Rs.9,80,000/- drawn on IDBI Bank, Gopi Chamber, Link Road, Opposite to City Mall, Andheri Branch, Mumbai. The said cheque was presented by the complainant for encashment on 30.05.2016 through his Banker i.e. Vijaya Bank, Broadway Branch, Hubballi which came to be dishonoured by the Banker through their Inward Return (CTS) memo dated 31.5.2016 with remarks "Funds Insufficient". The complainant thereafter got issued a legal notice through registered postal acknowledgment due, to the petitioner through his advocate vide notice dated 18.06.2016 calling upon the :4: petitioner to pay the amount covered under the said dishonoured cheque within 15 days of the receipt of the notice. Notice was duly served on 21.06.2016 despite which no payment was made. Hence private complaint bearing No.181/2016 was filed on 28.07.2016. Sworn statement was recorded on 27.10.2016 and converted into Criminal case NO.4603/2016. Summons came to be issued by the Court and served on the petitioner. Petitioner entered appearance through his advocate on 30.08.2017 and prayed for time.
4. During the pendency of the said proceedings, the Interim Resolution Professional (IRP) was appointed by the NCLT on 3.3.2018 under the provisions of the IBC. Hence, on 20.3.2018 the counsel for the petitioner appeared in the complaint before the JMFC-I , Hubli and brought the said fact to the notice of the Court. The NCLT, Ahmedabad admitted the petition filed by the complainant on 20.02.2018.
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5. Sri. Shivasai M.Patil, learned counsel appearing for the petitioner contends that once an IRP is appointed and the petition filed under the IBC is admitted in terms of Section 14 of the IBC, moratorium kicks in and in view of the said moratorium, no proceedings including that under Section 138 of N.I. Act can be filed or continued. Hence, the proceedings initiated against the petitioner are required to be quashed.
6. Having heard Shi. Shivasai M.Patil, learned counsel for the petitioner and having perused the documents on record, the question that would arise for consideration by this Court is:
"Whether moratorium declared under Section 14 of the IBC would apply to criminal proceedings like that under Section 138 of the N.I.Act ?"
7. Section 14 of the IBC reads as under:
"14. Moratorium.- (1) Subject to provisions of sub-Sections (2) and (3), on the insolvency :6: 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;"
8. A perusal of Section 14 of IBC does not in any manner indicate that criminal proceedings are prohibited. In fact, there appears to be an intentional omission of any criminal proceedings and rightly so. The provisions of IBC are civil in nature and are intended to resolve the disputes that any creditor of the Company subject matter of a resolution process has with the said corporate debtor. Any moratorium if at all declared would not, therefore, apply to criminal proceedings under Section 138 of the NI Act, or the like proceedings by criminal offence. Though by virtue of the schedules to IBC, :7: several enactments were amended. There is no amendment to the N.I. Act.
9. The present petition has been filed by Director of the suspended Board and not the Company i.e. Corporate Debtor. Director of the suspended Board cannot also seek to take advantage of any moratorium.
10. Sri.Shivasa M.Patil, learned counsel for the petitioner has submitted that a moratorium was declared on 20.02.2018 and therefore, the proceedings pending before the Magistrate Court are to be quashed.
11. From the sequence of dates and events as stated hereinabove, it is seen that though the moratorium was declared on 20.02.2018, a private complaint under Section 138 of the N.I.Act had been filed in the year 2016 itself vide private complaint No 181/2016 for the dishonour on 31.05.2016 of a cheque signed by the petitioner and issued on 27.05.2016. The dishonour happened within four days of issuance of :8: cheque. A statutory notice had been issued on 18.06.2016 which was served on the petitioner on 21.06.2016. However, the petitioner did not take any steps to comply with the demands made therein within the statutory period of 15 days as prescribed. Thus the event of dishonour of cheque having occurred on 31.05.2016 and the same not having been rectified in terms of the legal notice issued. Subsequent to that date, the petitioner cannot have any defence on account of such dishonour. The complaint having been filed on 28.07.2016 it cannot now be contended by the petitioner that the order dated 20.02.2018 declaring moratorium would apply to the cheque dishonoured on 31.05.2016 towards which the private complaint had been filed on 28.07.2016, which is nearly two years earlier than the date of declaration of moratorium.
12. The petitioner in the present case is a Director of the suspended Board who was in-charge of the day- to-day affairs of the Company, as also the signatory to :9: the dishonoured cheque. The petitioner cannot therefore take advantage of the moratorium to contend that the prosecution against him should be quashed on account of the moratorium declared as regards the corporate debtor. Suffice it to say that the petitioner cannot seek to evade the prosecution and or the criminal justice system which is now seized of the offences committed by him under Section 138 of N.I.Act.
13. It is also pertinent to note here that though moratorium is stated to have been declared on 20.02.2018, no resolution plan has been formulated even as on today i.e. despite passage of nearly two years Resolution Professional has not been able to put a resolution plan in place. Therefore, it is clear that either the Resolution Professional or the corporate debtor are not serious in formulating a resolution plan and are only making use of the declaration of moratorium to try and escape their liabilities.
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14. Sri.Shivasai M.Patil by referring to Annexure-H contends that though the NCLAT in another matter by its order dated 31.07.2018 in Co.A. 306/2018 has held that the order of moratorium under Section 14 would not apply to proceedings initiated for dishonour of cheques, Hon'ble Apex Court in SLP (Cri.) No.17584/2019 and SLR (Cri.) 12023/2019 has stayed the said order and on that basis Sri.Shivasai. M. Patil would contend that Section 14 of the IBC would also apply to dishonour of cheques.
15. The stay in the above SLP in that particular case would not be of any avail to the petitioner herein. The stay of the NCLAT order by the Hon'ble Apex Court is on the facts and circumstances of that matter.
16. On enquiry with Mr.Patil as regards whether the proceedings in SLP (Cri.) No.17584/2019 and SLP (Cri) No.12023/2019, relating to dishonour of cheques and initiation of criminal proceedings in those proceedings had been initiated prior to the declaration of : 11 : moratorium or subsequently, Sri.Patil is unable to answer the same.
17. In view of the above discussion and since I have come to a conclusion that Section 14 of the IBC would not apply to criminal proceedings including proceedings under Section 138 of N.I.Act and in view of the fact that moratorium has been in place for over two years and till date no Resolution plan has been put in place, I am of the considered view that the petitioner cannot take undue advantage to escape from the criminal liability by seeking for quashing of the criminal proceedings. No such prayer for quashing of criminal proceedings on the basis of the declaration of moratorium is maintainable. Section 14 of IBC does not provide for nor is it applicable to criminal proceedings.
18. In view of the above discussion, the petition filed under Section 482 of Cr.P.C. seeking for quashing of the entire proceedings in C.C.No.4603/2016 insofar as the petitioner is concerned is rejected. : 12 :
19. Accordingly, the petition is dismissed.
20. In view of dismissal of the petition, IA-1/2019 is also dismissed.
Sd/-
JUDGE Vnp*/ln