IBC - Moratorium Applies Only To Corporate Debtor ; Natural Persons Like Its Director Would Continue To Be Liable U/s 138 NI Act : Supreme Court

The Supreme Court reiterated that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the corporate debtor 

The natural persons mentioned in Section 141 of the Negotiable Instruments Act would continue to be statutorily liable under the provisions of the Act, the bench comprising Justices UU Lalit, S. Ravindra Bhat and PS Narasimha observed.

The court was considering a writ petition which sought for quashing the Criminal Complaints against Company/Corporate Debtors and its Directors under Section 138 of the Negotiable Instruments Act, 1881 on the ground that the Resolution Plan was approved by the CoC under Section 30(4) of the Code and the Complainants has accepted the approved Resolution Plan. The petitioner contended 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.

The court noted that in P. Mohanraj & Others v. Shah Brothers Ispat Private Limited, (2021) 6 SCC 258, the issue 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, was considered

"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....The decision rendered in P. Mohanraj is quite clear on the point and, as such, no interference in this petition is called for.", the bench observed while dismissing the writ petition. 

Case details

Narinder Garg vs Kotak Mahindra Bank | 2022 LiveLaw (SC) 428 | WP(C) 93 OF 2022 | 28 March 2022

Coram: Justices UU Lalit, S. Ravindra Bhat and PS Narasimha

Counsel: Sr.Adv Gopal Sankaranarayanan

Headnotes

Insolvency and Bankruptcy Code, 2016 ; Section 14 - Negotiable Instruments Act, 1881 ; Section 138 and 141 -  Moratorium - Liability of natural persons like a Director of the Company - 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. 

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