Madras High Court
Ashok B.Jeswani vs / on 7 December, 2023
Author: G.Jayachandran
Bench: G. Jayachandran
Crl.O.P.No.24506 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on :29.11.2023
Pronounced on :07.12.2023
Coram:
THE HONOURABLE DR.JUSTICE G. JAYACHANDRAN
Crl.O.P.No.24506 of 2023
and
Crl.M.P.No.17044 of 2023
1.Ashok B.Jeswani,
Director,
M/s Pacific Infotech Private Limited,
10/B, ABBAS Building, 1st Floor,
Jalbhai Street, Near Dreamland Cinema,
Grand Road (East), Mumbai 400 004.
Residence:
301/C, Teak Wood Apts,
Vasant Gardens, Mulund (W),
Mumbai 400 080.
2.Kishore B.Jeswani,
Director,
M/s Pacific Infotech Private Limited,
10/B, ABBAS Building, 1st Floor,
Jalbhai Street, Near Dreamland Cinema,
Grand Road (East), Mumbai 400 004.
Residence:
A-603, 6th Floor, Golden Willows,
Vasant Gardens, Swepna Nagari,
Mumbai 400 080. ..Petitioners
/versus/
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1/14
Crl.O.P.No.24506 of 2023
M/s Redington India Limited,
Rep.by its Power of Attorney,
Mr.M.Sundarrajan,SPL Guindy House,
95, Mount Road,Guindy,
Chennai-600 032. .. Respondent
Criminal Original Petition has been filed under Section 482 of
Cr.P.C., praying to set aside the docket order passed on 22.09.2023 in
C.A.No.405 of 2023 pending before XXI Additional City Civil Court
at Allikulam, Chennai.
For Petitioners :Mr.S.Suresh
For Respondent :Mr.V.T.Narenderan
-----
ORDER
The petitioners herein are the second and third accused,
convicted in a private complaint initiated under Section 138 of the
Negotiable Instruments Act, 1881. Aggrieved by the judgement of
conviction and sentence, they along with the first accused company
had preferred appeal and the same is pending on the file of the Session
Court at Chennai. The petitions filed for suspension of sentence was
allowed on conditions to deposit 20% of the compensation amount.
The petitioners not complied the said conditions, instead citing
pendency of their applications under Section 94(a) of IBC before the
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NCLT, Mumbai, had filed a memo to stay further proceedings in the
Appeal in view of Sections 94, 96 and 101 of Insolvency and
Bankruptcy Code, 2016, which provides for an interim moratorium of
legal action or proceedings pending in respect of any debt. Those
memos were rejected by the learned Sessions Judge by a docket order.
Against the rejection order dated 22/09/2023 the present petition
under Section 482 of Cr.P.C is filed.
2. The docket order which is impugned in this petition read
as below:-
“Perused representation conditional order passed by
the Hon’ble Principal Judge. It appears none of the ground
rises here (in the memo) have been agitated before the
Hon’ble Principal Judge. Till date, no extension of time was
also sought for by the petitioners before the Hon’ble
Principal Judge. In such circumstances, this Court is not
inclined to accept the memo. Hence, memo rejected.”
Sd/
XXI Additioonal Judge at Allikulam ”
3. The learned counsel appearing for the petitioners
submitted that C.C.No:1425/2016 taken cognizance by the
Metropolitan Magistrate, Fast Track Court at Magistrate Level-V,
Saidapet, Chennai, is a private complaint presented by M/s Redington
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India Limited through its Power of Attorney against M/s Pacific
Infotech Private Limited represented by its Directors. The two
Directors of the first accused Company are the petitioners herein. The
trial Court vide, its judgement dated 19/06/2023 held that the first
accused company and its two Directors are guilty of offence under
Section 138 of the Negotiable Instruments Act, 1881 for issuing
cheques for Rs.1,34,23,970/- without sufficient fund, but instructing
the bank to stop payment. The trial Court sentenced these two
petitioners to undergo simple imprisonment for a period of Nine
months and all the accused to pay jointly the cheque amount as
compensation to the complainant.
4. Against the judgement of conviction and sentence, these
petitioners preferred Crl A.No.405/2023 along with application to
suspend the sentence, pending appeal. The Learned Principal Session
Judge at Chennai allowed the application for suspension of sentence
on condition to deposit 20% of the compensation amount. The Appeal
was then made over to XXI Additional City Civil Court, Allikullam at
Chennai. Before the XXI Additional City Civil Court, Allikullam at
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Chennai, a memo was filed reporting pendency of insolvency
proceedings and the moratorium provided under the Insolvency and
Bankruptcy Code, 2016 (in short “IBC”) for the insolvent. The Court
instead of recording the pendency of insolvency proceedings and stay
further proceedings in the criminal appeal had rejected the memo with
an endorsement that the conditional order imposed by the Principal
Session Judge not complied and therefore, the memo rejected.
5. According to the learned counsel for the petitioners, they
have preferred an application before the National Company Law
Tribunal, Mumbai to initiate insolvency resolution process and the
same is now taken up for consideration by the National Company Law
Tribunal, Mumbai and the matter is pending for adjudication. So, the
petitioners are entitled for interim moratorium provided under Section
96 of the IBC.
6. According to the learned counsel appearing for the
petitioners, in P.Mohanraj and others -vs- Shah Brothers Ispat Pvt.
Ltd reported in [(2021) 6 SCC 258], the Hon’ble Supreme Court has
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held that, the proceedings under Section 138/141 of the Negotiable
Instruments Act, 1881(in short NI Act) falls within the ambit of the
expression “proceedings” in Section 14 of IBC. Hence, moratorium
under Section 14 would apply in respect of Section 138/141 of the NI
Act. Though the proceedings under Section 138 of NI Act, is couched
in language making the act complained of an offence, is really in order
to get back through a summary proceedings, the amount contained in
the dishonoured cheque together with interest and costs, expeditiously
and cheaply. The proceedings under Section 138 of NI Act is a quasi-
criminal proceedings. It is hybrid provision to enforce payment under
a bounced cheque, if it is otherwise enforceable in civil law.
7. The learned counsel appearing for the
complainant/respondent submitted that the cheque was issued by the
first accused Company drawn by the authorised signatories. These two
petitioners as Directors responsible for the day-to-day affairs of the
company and hence, they are also liable for dishonouring the cheques.
On 19/06/2023, they were convicted and sentenced. Thereafter, these
two petitioners have moved individual applications to declare them as
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insolvent and for appointment of resolution professional. The
Judgement of Mohanraj case is not applicable to the petitioners
herein, since that case is in respect of corporate debtor, wherein the
moratorium mentioned under Section 14(1) of the IBC discussed and
explained. In that judgment, it is made clear that the moratorium is
only for the corporate debtor and not to the sureties in a contract of
guarantee to a corporate debtor, in the light of Section 14 (3) (b) of the
Code.
8. In a proceedings under Section 138/141 of NI Act,
already initiated and culminated in conviction, the application under
Section 94 of the Code, after the judgement of conviction by the
petitioners before NLCT will not provide them any moratorium. The
application by debtor under Section 94 of IBC will not provide them
the protection of interim moratorium under Section 96 of the IBC for
the proceedings initiated against the petitioners as representatives of
the accused Company being vicariously liable on behalf of the
company.
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9. Further, in the application for suspension of sentence, the
Court of appeal passed a conditional order against these petitioners
being the Directors of the first accused company to deposit 20% of the
compensation amount jointly along with the first accused company.
These petitioners have neither complied the condition nor disclosed to
the Court of appeal about the pendency of their applications before
NCLT. The docket order, which is impugned in these petition are in
respect of non-compliance of condition imposed for suspension of
sentence and it is not in respect of any debt. Hence, the petitions to be
dismissed.
10. Heard both sides and perused the records.
11. The IBC is a comprehensive and consolidated legislation
for effective implementation of Insolvency and Bankruptcy. Chapter II
of the Code deals with corporate insolvency resolution process. Under
this Chapter, Sections 7 to 10 list out persons, who can initiate/apply
for corporate insolvency resolution process and Section 11 list out
persons who shall not be entitled to make an application to initiate
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corporate resolution process. In this Chapter, particularly, Section 9
of the Code deals with the application for initiation of corporate
insolvency process by operational creditor. Section 14 of the Code
deals with moratorium for the corporate debtor during the resolution
process. Under Section 92 of the code, atleast 7 days before the end of
moratorium period, the discharge order shall be passed by the
Adjudicating Authority, based on the resolution professional's final
list of qualifying debts. Whereas Chapter III of the Code, is in respect
of insolvency resolution process (other than corporate debtor). Section
94 is in respect of application by debtor to initiate insolvency
resolution process. Section 96 speaks about interim moratorium till the
date of admission of the application made under Section 94 (debtor’s
application) or under Section 95 (creditor's application). Section 101 is
about moratorium, after admission of the application.
12. The fundamental facts in this petition is that the
application by the petitioners herein are debtors application under
Section 94 of the Code. It was filed, after they were found guilty for
offence under Section 138//141 of NI Act. The Hon’ble Supreme
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Court in Mohanraj case had unequivocally held that the proceedings
under Section 138/141 of NI Act will fall under the scope of
moratorium referred in IBC subject to the exceptions mentioned in the
Code.
13. The judgement of Mohanraj case cited by the learned
Counsel for the petitioners is in respect of corporate debtor, which
filed application under Section 9 of the IBC. In the said judgment, the
Hon’ble Supreme Court has held that the proceedings initiated under
Section 138 of NI Act falls within the scope of Section 14(1)(a) of the
Code. In that judgment, at paragraph 102, the Hon’ble Supreme Court
has made it clear that interim moratorium in a corporate debtor’s
application will not extend to the natural persons, who are prosecuted
under Section 138/141 of NI Act. Section 14 of IBC will apply only to
the corporate debtor, the natural persons mentioned in Section 141 of
NI Act continue to be statutorily liable
14. Later, on considering the judgement rendered in
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Mohanraj case (cited supra), the Hon’ble Supreme Court in Ajay
Kumar Radheyshyam Goenka -vs- Tourism Finance Corporation
of India Ltd reported in [2023 (1)MadWN (cri) 145] has reiterated
that, if the guarantors does not get the benefit of extinguishment of
debt, the Signatory or Director cannot get any benefit. If the argument
that the Signatories or Directors are not liable to be proceeded under
Section 138/141 of NI Act, once the resolution plan is approved, it
may lead to absurd situations.
15. In the light of the above observations made by the
Hon'ble Supreme Court, if one looks at the facts of the case in hand, it
makes clear that the Directors as Signatory or Guarantor or Person
responsible for the affairs of the company, which has issued cheque to
discharge its liability, can not have the advantage of their application
to declare them as insolvent as an individual to seek moratorium. If
such plea is entertained, then as observed by the Hon’ble Supreme
Court, it will lead to absurdity. To demonstrate, for instance, in this
case, if the interim moratorium under Section 96 is extended to these
petitioners, who are the representatives of the company, which is not a
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corporate debtor facing resolution process under the Code, then the
first accused company will stand without a natural person to
represent. Being a proceedings with penal action, there can be no
substitution for the petitioners as the Directors of the first accused
company. As a result, for the insolvency of the Directors, the company
a legal entity by itself liable for the penal action will be saved from the
prosecution. Ultimately, any discharge order passed in the application
of the two petitioners will also cover the debt their company owe to the
respondent herein.
16. As the Hon'ble Supreme Court held that the moratorium
given to the corporate debtor under Chapter II will not cover the
individuals, who are the Guarantors of Directors. Similarly, the
moratorium given to an individual under Chapter III will not cover the
proceedings initiated against them as Directors or Guarantors of any
company, which is not a corporate debtor under this Code.
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17. As a result, this Criminal Original Petition is dismissed.
Consequently, connected Miscellaneous Petition is closed.
07.12.2023
Index:yes/no
Neutral Citation:yes/no
ari
To
The XXI Additional City Civil Court at Allikulam, Chennai.
DR.G.JAYACHANDRAN,J.
https://www.mhc.tn.gov.in/judis
ari
delivery Order made in
and
07.12.2023
https://www.mhc.tn.gov.in/judis
