TMI Blog2020 (1) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... all. According to him, that would be the resultant position since he has been totally deprived of any access to any of the company records. These petitions have been filed under Section 482 of Cr.PC. The inherent powers of this Court are meant to be exercised only to prevent the abuse of process of law or to secure the ends of justice. The facts appearing on record and the contentions put forth by the learned counsel for the petitioner do not persuade me to come to the conclusion that continuation of the impugned prosecution would constitute an abuse of legal process. Petition dismissed. - CRL. OP NOS. 34996, 35007, 35011 OF 2019 & OTHS. - - - Dated:- 9-1-2020 - G.R. Swaminathan, J. Nithyaesh and Vaibhav for the Petitioner. ORDER 1. These petitions have been filled under Section 482 of the Criminal Procedure Code by the former Managing Director of M/s.Tecpro Systems Limited. The prayer in these criminal original petitions is for quashing the complaints instituted by M/s.Tap Engineering under Section 138 r/w.141 of the Negotiable Instruments Act, 1881. The complainant is a proprietary concern. It is engaged in the business of manufacturing and sale of pumps ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor was to vest with the resolution applicant-KIPL. 4. The petitioner's contention is that in view of the acceptance of the resolution plan by the Tribunal and the change in management, the impugned prosecution against the petitioner under Section 138 of the Negotiable Instruments Act, 1881 is liable to be quashed. The petitioner's counsel points out that the resolution plan clearly states that all the outstanding negotiable instruments issued by the company or by any persons/entities on behalf of the company prior to the insolvency commencement date including demand promissory notes, cheques and letters of credit, shall stand terminated and the liability of the company and its current employees under such instruments shall stand extinguished and all the legal proceedings relating thereto shall stand irrevocably and unconditionally abated. His pointed contention is that on 07.03.2019, the resolution applicant Kridhan Infrastructure Private Limited had submitted its resolution plan before the Interim Resolution Professional and the same has been approved and vide order dated 15.05.2019, KIPL has taken over the entire management of Tecpro Systems Limited c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial transactions and to prevent bouncing of cheques by providing a personal criminal liability against the drawer of the cheque in public interest. 7. A learned Judge of this Court (Mr.Justice G.K.Ilanthiraiyan) vide order dated 02.04.2019 in Crl OP No.8869 of 2018 (M/S.Nag Leathers Pvt Ltd v. J.L.Sobhana), held that Section 138 of Negotiable Instruments Act is not a civil proceeding and that even fine imposed by the criminal court cannot be held to be a money claim or recovery against corporate debtor and that it is not covered under the prohibition set out in Section 14 of the Insolvency and Bankruptcy Code, 2016. 8. The National Company Law Tribunal vide order dated 31.07.2018 in (AT) (Insolvency) No.306 of 2018 (Shah Brothers Ispat Pvt. Ltd. v. P.Mohanraj Ors.), also held that Section 14 of the Insolvency and Bankruptcy Code, 2016 relating to moratorium will not cover criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881. 9. While respectfully concurring with the ratio laid down in the aforesaid decisions, I may also reinforce the reasoning. Section 233 of Insolvency and Bankruptcy Code, 2016 which protects action taken in good faith under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany did not pay its debts in time. It was classified as a non performing asset. The creditor bank issued notice under SARFAESI Act. Thereafter, the debtor filed a petition under Section 10 of the Code to initiate Corporate Insolvency Resolution process against itself. The petition was admitted followed by a moratorium that is imposed statutorily by Section 14 of the Code. During its pendency, an interim application was filed by the erstwhile managing director as personal guarantor of the corporate debtor claiming that the moratorium would apply to him also and prayed for stay of the proceedings against him and his property. 13. The National Company Law Tribunal held that since under Section 31 of the Code, a Resolution Plan made thereunder would bind the personal guarantor as well, and since, after the debtor is proceeded against, the guarantor stands in the shoes of the creditor, Section 14 would apply in favour of the personal guarantor as well. The interim application filed by the first respondent was allowed and the creditor bank was restrained from moving against him. The Tribunal's order was confirmed by the appellate Tribunal also. The creditor bank challenged the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The expression as well is occurring in Section 141 of the Act. This expression means on par . Therefore, the liability of such persons in charge of and responsible to the company for the conduct of its business is thus co-extensive. 15 .The offence under Section 138 of the Negotiable Instruments Act, 1881 is committed, after the conditions set out therein are fulfilled. Thereafter, the payee of the cheque has the option of prosecuting the drawer of the cheque by instituting a complaint under Section 200 of Cr.PC before the jurisdictional criminal court. After cognizance of the offence is taken, the criminal court is seized of the matter. The case will have to be disposed of in terms of the provisions set out in Cr.PC. If the complainant fails to turn up on any hearing date, the Magistrate can invoke Section 256 of Cr.Pc and acquit the accused. Under Section 257 of Cr.Pc, the compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceedings are over, either the corporate entity may be dissolved or it can be taken over by a new management in which event the company will continue to exist. When a new management takes over, it will have to make arrangements for representing the company. If the company is dissolved as a result of the resolution process, obviously proceedings against it will have to be terminated. But even then, its erstwhile directors may not be able to take advantage of the situation. This is because, the Hon'ble Supreme Court in Aneeta Hada v. Godfather Travels Tours (P) Ltd., [2012] 5 SCC 661, even while overruling the decision in Anil Hada v. Indian Acrylic Ltd [2000] 1 SCC 1, as not laying down the correct law in so far as it states that the director or any other officer can be prosecuted without impleadment of the company, proceeded to hold that the matter would stand on a different footing where there is some legal impediment as the doctrine of lex non cogit ad impossibilia gets attracted. It was specifically observed that the decision in Anil Hada is overruled with the qualifier as stated in para 51. 19. Thus, where the proceedings under Section 138 of the Act had already c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied that it is necessary for the ends of justice. (3) The Magistrate may, before summoning any witness on an application under sub-section (2), require that the reasonable expenses incurred by the witness in attending for the purposes of the trial be deposited in Court. 22.Therefore, it is always open to the petitioner to file an application for causing production of any document or examination of any witness. Merely because a new management has taken over the company which he earlier headed, the petitioner cannot be deprived of access to any relevant document that may bolster or reinforce his defence. Section 243 r/w. 247 of Cr.Pc completely redress the apprehension expressed by the petitioner. 23. The resolution plan approved by the super majority in this case provides for payment of 5.79% of the amount claimed by the secured financial creditors. The operational creditors will get 0.22%. We know that the creditors in any Corporate Insolvency Resolution Process must be ready for a hair cut . But, in the case on hand, it appears to be a clean shave and complete tonsure. 24. Section 138 of the Negotiable Instruments Act, provides not only for punishment but also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arrest or detention in prison of the offender. Now, the question is whether Section 421 of Cr.Pc can prevail over the provisions of the Insolvency and Bankruptcy Code, 2016. Obviously, they cannot, in view of Section 238 of the Insolvency and Bankruptcy Code, 2016 which reads as under : 238.The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Insolvency and Bankruptcy Code, 2016 is both a parliamentary as well as a subsequent enactment. The Hon'ble Supreme Court in Principal Commissioner of Income Tax v. Monnet Ispat and Energy Limited (2018) 18 SCC 786 held as follows : 2.Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income Tax Act. We may also refer in this connection to Dena Bank v. Bhikhabhai Prabhudas Parekh and Co. and its progeny, making it clear that income tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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