Supreme Court of India
VISHNOO MITTALversusM/S SHAKTI TRADING COMPANY
- Citation
- 2025 INSC 346
- Decided
- 16 March 2025
- Disposal
- Appeal(s) allowed
- Bench
- SUDHANSHU DHULIA
Holding
The moratorium under Section 14 of the IBC bars the initiation of Section 138 proceedings against the appellant when the cause of action arises after the moratorium, and the High Court’s reliance on P. Mohan Raj was erroneous.
Summary
The appellant, a former director of a corporate debtor, was served a notice under Section 138 of the Negotiable Instruments Act for dishonoured cheques drawn before the commencement of insolvency proceedings. While the insolvency process and a moratorium under Section 14 of the IBC were imposed on 25 July 2018, the demand notice was issued on 6 August 2018, and a complaint was filed thereafter. The appellant sought quashing of the criminal proceedings under Section 482 of the CrPC, arguing that the moratorium barred any action against him as the corporate debtor’s affairs were under the control of the interim resolution professional. The High Court rejected this argument, relying on P. Mohan Raj, which held that the moratorium immunity applies only to the corporate debtor and not to natural persons. The Supreme Court distinguished the present case, noting that the cause of action under Section 138 arose only after the moratorium and that the appellant, being suspended, lacked the capacity to satisfy the demand. Consequently, the Court held that the High Court erred and quashed both the summons and the complaint, allowing the appeal.
Issues considered
- Whether the moratorium order under Section 14 of the IBC bars criminal proceedings under Section 138 of the Negotiable Instruments Act against a natural person who was a director of the corporate debtor.
- Whether the High Court was correct in relying on P. Mohan Raj to deny immunity to the appellant.
Legislation cited
Subjects
Section 138 of Negotiable Instruments ActDishonour of chequeSections 14 and 17 of Insolvency and Bankruptcy CodeMoratorium orderSection 482 of CrPCQuashingNatural PersonInsolvency proceedingsCause of actionP. Mohan RajDirector of Corporate DebtorInterim Resolution Professional
Judgment
[2025] 4 S.C.R. 41 : 2025 INSC 346
Vishnoo Mittal
v.
M/s Shakti Trading Company
(Criminal Appeal No. 1287 of 2025)
17 March 2025
[Sudhanshu Dhulia* and Ahsanuddin Amanullah, JJ.]
Issue for Consideration
Whether the High Court was justified in relying upon P. Mohan Raj
case which held that the immunity granted by the moratorium order
issued under Section 14, IBC can only be obtained by a Corporate
Debtor and not by a natural person such as the present appellant,
while dismissing the s.482 application filed by the appellant for
quashing of proceedings initiated u/s.138 of Negotiable Instruments
Act, 1881.
Headnotes†
Code of Criminal Procedure, 1973 – s.482 – Negotiable
Instruments Act, 1881 – s.138 – Insolvency and Bankruptcy
Code, 2016 – ss.14, 17 – Moratorium order was imposed
on 25.07.2018 – Demand Notice u/s.138, NI act was served
on the appellant (former director of the corporate debtor),
thereafter on 06.08.2018 – High Court relying on P. Mohan Raj
case, dismissed the s.482 application filed by the appellant –
Challenge to:
Held: Impugned order set aside – Under clause (c) of the proviso
to s.138, NI Act cause of action arises only when demand notice
is served and payment is not made pursuant to such demand
notice within the stipulated fifteen-day period – The return of
the cheques dishonoured simpliciter does not create an offence
u/s.138, NI Act – High Court erred in relying on P. Mohan Raj
since the facts of that case were completely different as the cause
of action in the present case arose after the commencement of
the insolvency process whereas in P. Mohan Raj cause of action
u/s.138, NI Act arose before the imposition of the moratorium and
on these facts, this Court had held that s.14, IBC bars or stays
* Author
42 [2025] 4 S.C.R.
Supreme Court Reports
proceedings only against the corporate debtor and proceedings
can be continued or initiated against the natural persons –
Moreover, when the notice was issued to the appellant, he was
not in charge of the corporate debtor as he was suspended from
his position as the director of the corporate debtor as soon as
IRP was appointed on 25.07.2018 – All the bank accounts of the
corporate debtor were operating under the instructions of the IRP,
hence, it was not possible for the appellant to repay the amount
in light of s.17, IBC – Summoning order and the complaint are
quashed. [Paras 7-9, 11, 13]
Case Law Cited
P. Mohan Raj v. M/s Shah Brothers Ispat Pvt. Ltd. [2021] 14 SCR
204 : (2021) 6 SCC 258 – distinguished.
Jugesh Sehgal v. Shamsher Singh Gogi [2009] 10 SCR 857 :
(2009) 14 SCC 683 – relied on.
List of Acts
Code of Criminal Procedure, 1973; Negotiable Instruments Act,
1881; Insolvency and Bankruptcy Code, 2016.
List of Keywords
Section 138 of Negotiable Instrument Act, 1881; Dishonour of
cheque; Sections 14 and 17 of Insolvency and Bankruptcy Code,
2016; Moratorium order; Section 482 of CrPC; Quashing; Natural
Person; Insolvency proceedings; Cause of action; Cause of
action arose after the commencement of the insolvency process;
Demand notice; P. Mohan Raj v. M/s Shah Brothers Ispat Pvt.
Ltd.; Return of the cheques dishonoured simpliciter; Immunity
granted by moratorium order; Director of the Corporate Debtor;
Management of corporate debtor taken over by the interim
resolution professional.
Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1287 of 2025
From the Judgment and Order dated 21.12.2021 of the High Court
of Punjab & Haryana at Chandigarh in CRM-M No. 10624 of 2020
[2025] 4 S.C.R. 43
Vishnoo Mittal v. M/s Shakti Trading Company
Appearances for Parties
Advs. for the Appellant:
Abhishek Anand, Ms. Mithu Jain, Karan Kohli, Krishna Sharma,
Ms. Vanshika Dhoot.
Advs. for the Respondent:
A D S Jattana, Triloki Nath Razdan, Prashant Shukla, Mrs. Anushree
Shukla.
Judgment / Order of the Supreme Court
Judgment
Sudhanshu Dhulia, J.
1. Leave granted.
2. The appellant before this court has challenged the order dated
21.12.2021 of the learned Single Judge of the Punjab and Haryana
High Court by which the appellant’s petition under section 482
of Criminal Procedure Code, 1973 (‘CrPC’), seeking quashing of
proceedings initiated under Section 138 of Negotiable Instruments
Act, 1881 (‘NI Act’) against the appellant, has been dismissed.
3. Admittedly, the appellant was the director of M/s Xalta Food and
Beverages Private Limited (hereinafter ‘corporate debtor’). There was
a contract between the corporate debtor and the Respondent-M/s
Shakti Trading Company where the respondent was to function as
a super stockist of the corporate debtor. As a consequence of the
business relationship between the two companies, the appellant, in
his capacity as director of the corporate debtor, had drawn eleven
cheques in favour of the respondent of varying amounts, the total
amount being Rs.11,17,326/- (approximately). These cheques were
dishonoured on 07.07.2018. A legal notice under Section 138 of
the NI Act was issued to the appellant by the respondent as the
cheque amounts were not furnished to the respondent by the bank.
Consequently, in September 2018, a complaint was filed before
the appropriate Court by the respondent against the appellant for
offences under Section 138 of NI Act. Meanwhile, on 25.07.2018,
insolvency proceedings against the corporate debtor, of which the
appellant was the director, commenced and a moratorium under
Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereafter
44 [2025] 4 S.C.R.
Supreme Court Reports
‘IBC’) was imposed. On the same day i.e. 25.07.2018, the interim
resolution professional (hereinafter ‘IRP’) was appointed in regard
to the corporate debtor.
4. Meanwhile, vide order dated 07.09.2018, the Court had issued
summons to the appellant in the proceedings initiated by the
respondent against the appellant under section 138 of the NI Act.
Aggrieved, the appellant approached the High Court under section
482 of CrPC challenging the summoning order and further, prayed
for the quashing of the section 138 NI Act case against him in view of
the moratorium issued under Section 14 of the IBC. By the impugned
order dated 21.12.2021, the High Court, all the same, dismissed the
appellant’s petition and declined to quash the complaint against him.
Now, the appellant is before us.
5. We have heard both sides and perused the material on record.
6. The case of the appellant is that the corporate debtor is presently
facing insolvency proceedings before the National Company Law
Tribunal (NCLT) and a moratorium order was issued on 25.07.2018
under Section 14 of the IBC. The relevant portion of Section 14 of
the IBC reads as under:
“14. Moratorium.
(1) Subject to provisions of sub-sections (2) and (3), on
the insolvency 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;
(b) transferring, encumbering, alienating or disposing of
by the corporate debtor any of its assets or any legal right
or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security
interest created by the corporate debtor in respect of its
property including any action under the Securitisation and
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (54 of 2002);
[2025] 4 S.C.R. 45
Vishnoo Mittal v. M/s Shakti Trading Company
(d) the recovery of any property by an owner or lessor
where such property is occupied by or in the possession
of the corporate debtor…”
7. Relying upon the above provision, the appellant submits that since the
moratorium order was imposed on 25.07.2018 and was in operation,
therefore, the proceedings under section 138 of the NI Act could not
have been initiated against the appellant. He would further argue
that although the cheques were drawn and dishonoured prior to the
above date i.e., 25.07.2018, however, the notice under Section 138
of the NI Act was given on 06.08.2018 i.e., post 25.07.2018. Hence,
the cause of action for the offence under Section 138 of the NI Act
would commence after a period of 15 days calculated from 06.08.2018
and it would be 21.08.2018, but by this time moratorium had already
been imposed on 25.07.2018. The submission of the appellant was,
however, not accepted by the High Court. The High Court, while
dismissing the appellant’s petition, relied upon the judgment of this
Court in P. Mohan Raj v. M/S Shah Brothers Ispat Pvt. Ltd. (2021)
6 SCC 258 where it was held that the immunity granted by the
moratorium order issued under Section 14 of the IBC can only be
obtained by a Corporate Debtor and not by a natural person such as
the present appellant, who was the Director of the Corporate Debtor.
In para 102 of the said judgement, this Court had noted:
“… 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.”
However, in our opinion, the High Court erred in relying on
P. Mohan Raj since the facts of that case were completely different
and the present case is thus distinguishable from it.
8. In P.Mohan Raj, certain cheques drawn by the appellants therein
were dishonoured on 03.03.2017 and 28.04.2017. Thereafter,
demand notices dated 31.03.2017 and 05.05.2017 were issued by
46 [2025] 4 S.C.R.
Supreme Court Reports
the complainant. The moratorium was imposed on 06.06.2017, which
is clearly after the lapse of 15 days from the date of demand notices.
In other words, in that case, the cause of action under section 138 NI
Act arose before the imposition of the moratorium and on these facts,
this Court had held that section 14 of IBC bars or stays proceedings
only against the corporate debtor and proceedings can be continued
or initiated against the natural persons. The case at hand is totally
different from P. Mohan Raj as the cause of action in the present
case arose after the commencement of the insolvency process.
9. The return of the cheques dishonoured simpliciter does not create
an offence under section 138 NI Act, which reads as under:
“138. Dishonour of cheque for insufficiency, etc., of
funds in the account.—Where any cheque drawn by a
person on an account maintained by him with a banker
for payment of any amount of money to another person
from out of that account for the discharge, in whole or in
part, of any debt or other liability, is returned by the bank
unpaid, either because of the amount of money standing
to the credit of that account is insufficient to honour the
cheque or that it exceeds the amount arranged to be paid
from that account by an agreement made with that bank,
such person shall be deemed to have committed an offence
and shall, without prejudice to any other provision of this
Act, be punished with imprisonment for a term which may
be extended to two years, or with fine which may extend
to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply
unless—
(a) the cheque has been presented to the bank within a
period of six months from the date on which it is drawn or
within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque,
as the case may be, makes a demand for the payment of
the said amount of money by giving a notice; in writing, to
the drawer of the cheque, within thirty days of the receipt
of information by him from the bank regarding the return
of the cheque as unpaid; and
[2025] 4 S.C.R. 47
Vishnoo Mittal v. M/s Shakti Trading Company
(c) the drawer of such cheque fails to make the payment
of the said amount of money to the payee or, as the case
may be, to the holder in due course of the cheque, within
fifteen days of the receipt of the said notice.
Explanation.—For the purposes of this section, “debt of
other liability” means a legally enforceable debt or other
liability.”
Clause (c) of the proviso to Section 138 of NI Act makes it clear
that cause of action arises only when demand notice is served
and payment is not made pursuant to such demand notice within
the stipulated fifteen-day period. This Court in Jugesh Sehgal v.
Shamsher Singh Gogi (2009) 14 SCC 683 has explained the
ingredients of Section 138 of NI Act offence as follows:
“13. It is manifest that to constitute an offence under Section
138 of the Act, the following ingredients are required to
be fulfilled:
(i) a person must have drawn a cheque on an account
maintained by him in a bank for payment of a certain
amount of money to another person from out of that
account;
(ii) the cheque should have been issued for the discharge,
in whole or in part, of any debt or other liability;
(iii) that cheque has been presented to the bank within a
period of six months from the date on which it is drawn or
within the period of its validity whichever is earlier;
(iv) that cheque is returned by the bank unpaid, either
because of the amount of money standing to the credit of
the account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account
by an agreement made with the bank;
(v) the payee or the holder in due course of the cheque
makes a demand for the payment of the said amount of
money by giving a notice in writing, to the drawer of the
cheque, within 15 days of the receipt of information by
him from the bank regarding the return of the cheque as
unpaid;
48 [2025] 4 S.C.R.
Supreme Court Reports
(vi) the drawer of such cheque fails to make payment of
the said amount of money to the payee or the holder in
due course of the cheque within 15 days of the receipt
of the said notice.
Being cumulative, it is only when all the aforementioned
ingredients are satisfied that the person who had drawn
the cheque can be deemed to have committed an offence
under Section 138 of the Act.”
In other words, the cause of action arises only when the amount
remains unpaid even after the expiry of fifteen days from the date
of receipt of the demand notice.
10. There is another aspect to this matter. In the present case, on
25.07.2018, the moratorium was imposed and management of the
corporate debtor was taken over by the interim resolution professional
as per section 17 of the IBC. Here, we would also like to reproduce
extracts from section 17 of the IBC which are as follows:
“17. Management of affairs of corporate debtor by
interim resolution professional.- (1) From the date of
appointment of the interim resolution professional,—
(a) the management of the affairs of the corporate debtor
shall vest in the interim resolution professional;
(b) the powers of the board of directors or the partners
of the corporate debtor, as the case may be, shall stand
suspended and be exercised by the interim resolution
professional;
(c) ……………
(d) the financial institutions maintaining accounts of the
corporate debtor shall act on the instructions of the interim
resolution professional in relation to such accounts and
furnish all information relating to the corporate debtor
available with them to the interim resolution professional…”
11. The bare reading of the above provision shows that the appellant did
not have the capacity to fulfil the demand raised by the respondent
by way of the notice issued under clause (c) of the proviso to Section
138 NI Act. When the notice was issued to the appellant, he was
not in charge of the corporate debtor as he was suspended from
[2025] 4 S.C.R. 49
Vishnoo Mittal v. M/s Shakti Trading Company
his position as the director of the corporate debtor as soon as IRP
was appointed on 25.07.2018. Therefore, the powers vested with the
board of directors were to be exercised by the IRP in accordance
with the provisions of IBC. All the bank accounts of the corporate
debtor were operating under the instructions of the IRP, hence,
it was not possible for the appellant to repay the amount in light
of section 17 of the IBC. Additionally, we have been informed on
behalf of the appellant that, after the imposition of the moratorium,
the IRP had made a public announcement inviting the claims from
the creditors of the Corporate Debtor and the respondent has filed
a claim with the IRP.
12. Keeping in mind the above observations and distinguishing facts and
circumstances of this case from that of P. Mohan Raj, we are of
the considered view that the High Court ought to have quashed the
case against the appellant by exercising its power under section 482
of the CrPC.
13. Therefore, we allow this appeal by setting aside the impugned order
dated 21.12.2021 and quash the summoning order dated 07.09.2018.
Further, we hereby quash the complaint case no.15580/2018, pending
before the Chief Judicial Magistrate Court, Chandigarh, filed by the
respondent against the appellant.
14. Pending application(s), if any, stand(s) disposed of.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Divya Pandey
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