TMI Blog2021 (3) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... s one category, and the disjunctive or before the word proceedings would make it clear that proceedings against the corporate debtor would be a separate category. What throws light on the width of the expression proceedings is the expression any judgment, decree or order and any court of law, tribunal, arbitration panel or other authority . Since criminal proceedings under the Code of Criminal Procedure, 1973 (CrPC) are conducted before the courts mentioned in Section 6, CrPC, it is clear that a Section 138 proceeding being conducted before a Magistrate would certainly be a proceeding in a court of law in respect of a transaction which relates to a debt owed by the corporate debtor. Application of the Noscitur A Soccis Rule of Interpretation - HELD THAT:- The ejusdem generis and noscitur a sociis, being rules as to the construction of statutes, cannot be exalted to nullify the plain meaning of words used in a statute if they are designedly used in a wide sense. Importantly, where a residuary phrase is used as a catch-all expression to take within its scope what may reasonably be comprehended by a provision, regard being had to its object and setting, noscitur a sociis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the moratorium contained in Section 14 is not subject specific. The only light thrown on the subject is by the exception provision contained in Section 14(3)(a) which is that transactions are the subject matter of Section 14(1) - A legal action or proceeding in respect of any debt would, on its plain language, include a Section 138 proceeding. This is for the reason that a Section 138 proceeding would be a legal proceeding in respect of a debt. In respect of is a phrase which is wide and includes anything done directly or indirectly. Where individuals or firms are concerned, the recovery of any property by an owner or lessor, where such property is occupied by or in possession of the individual or firm can be recovered during the moratorium period, unlike the property of a corporate debtor. For all these reasons, therefore, given the object and context of Section 14, the expression proceedings cannot be cut down by any rule of construction and must be given a fair meaning consonant with the object and context. It is conceded before us that criminal proceedings which are not directly related to transactions evidencing debt or liability of the corporate debtor would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding, described as quasi-criminal by several judgments of this Court, there is nothing wrong with the same appellation quasi-criminal being applied to a Section 138 proceeding for the reasons given by us on an analysis of Chapter XVII of the Negotiable Instruments Act. We, therefore, reject the learned Additional Solicitor General s strenuous argument that the appellation quasi-criminal is a misnomer when it comes to Section 138 proceedings and that therefore some of the cases cited in this judgment should be given a fresh look. Other sections of IBC in relation to Section 14 of IBC - HELD THAT:- Contrasted with Section 25(2)(b) and Section 33(5), an argument could be made that the absence of the expressions prosecution and criminal proceedings in Section 25(2)(b) and Section 33(5) would show that they were designedly eschewed by the legislature. We have seen how inelegant drafting cannot lead to absurd results or results which stultify the object of a provision, given its otherwise wide language. Thus, nothing can be gained by juxtaposing various provisions against each other and arriving at conclusions that are plainly untenable in law. Case Laws under prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Section 14 of the 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. The Section 138/141 proceedings in this case will continue both against the company as well as the appellants for the reason given as well as the fact that the insolvency resolution process does not involve a new management taking over - Appeal allowed - decided in favor of appellant. - CIVIL APPEAL NO. 10355 OF 2018 - - - Dated:- 1-3-2021 - CRIMINAL APPEAL NO._239___ OF 2021 (@ SPECIAL LEAVE PETITION (CRL.) NO._1955__ OF 2021) (Diary No.32585/2019) CRIMINAL APPEAL NO.___240________ OF 2021 (@ SPECIAL LEAVE PETITION (CRL.) NO.10587 OF 2019) CRIMINAL APPEAL NO.__241______ OF 2021 (@ SPECIAL LEAVE PETITION (CRL.) NO.10857 OF 2019) CRIMINAL APPEAL NO.__242_______ OF 2021 (@ SPECIAL LEAVE PETITION (CRL.) NO.10550 OF 2019) CRIMINAL APPEAL NO.__243_______ OF 2021 (@ SPECIAL LEAVE PETITION (CRL.) NO.10858 OF 2019) CRIMINAL APPEAL NO.___244______ OF 2021 (@ SPECIAL LEAVE PETITION (CRL.) NO.10860 OF 2019) CRIMINAL APPEAL NO.____245_____ OF 2021 (@ SPECIAL LEAVE PETITION (CRL.) NO.108 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natha Sethupathy, Adv. Mr. Karuppiah Meyyappan, Adv. Ms. Nishtha Girotra, Adv. Mr. Birendra Kumar Mishra, AOR Mr. Jay Savla, Sr. Adv. Mr. Prabhat Kumar Chaurasia, Adv. Ms. Renuka Sahu, AOR Mr. Shankar Divate, AOR Mr. Siddharth Sangal, AOR Mr. Harneet Singh Oberoi, Adv. Mr. Sumit Teterrwal, AOR Mr. Gagan Gupta, AOR Mr. Mohit D. Ram, AOR Mr. Dinesh Kumar Garg, AOR Ms. Anisha Upadhyay, AOR Mr. Brijender Chahar, Sr. Adv. Mr. Karan Chahar, Adv. Ms. Jyoti Chahar, Adv. Mr. Shashi Bhushan, Adv. Mr. Vinay Garg, AOR Mr. Abhishek Agarwal, AOR Mr. Raveesh Thakral, Adv. Ms. Suruchii Aggarwal, AOR Ms. Shagun Matta, AOR Mr. Aman Rastogi, Adv. Mr. Kunnal Bakshi, Adv. Mr. Raghav Mathur, Adv. Mr. Hemant Gupta, Adv. Mr. Sanjay Rastogi, AOR Mr. Sonal Jain, AOR Mr. Rishabh Raj Jain, Adv. Mr. Ishkaran Singh, Adv. Ms. Kajal Sharma, Adv. Mr. Nagarkatti Kartik Uday, AOR Mr. Arvind Kumar Sharma, AOR Ms. Namita Choudhary, AOR Mr. Sarvesh Singh Baghel, AOR Ms. Shivranjani Ralawata, Adv. Mr. Ajay Pal, AOR Mr. Anil Mittal, Adv. Mr. Vibhuti Sushant Gupta, Adv. Mr. Narender Kumar Verma, AOR Mr. Rajiv Ranjan Dwivedi, AOR Mr. Chirag M. Shroff, AOR Ms. Abhilasha Bharti, Adv. Mr. Sushant Dogra, Adv. Ms. Pragati Neekh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority stayed further proceedings in the two criminal complaints pending before the ACMM. In an appeal filed to the National Company Law Appellate Tribunal [ NCLAT ], the NCLAT set aside this order, holding that Section 138, being a criminal law provision, cannot be held to be a proceeding within the meaning of Section 14 of the IBC. In an appeal filed before this Court, on 26.10.2018, this Court ordered a stay of further proceedings in the two complaints pending before the learned ACMM. On 30.09.2019, since a resolution plan submitted by the promoters of the company had been approved by the committee of creditors, the Adjudicating Authority approved such plan as a result of which, the moratorium order dated 06.06.2017 ceased to have effect. It may only be added that at present, an application for withdrawal of approval of this resolution plan has been filed by the financial creditors of the company before the Adjudicating Authority. Equally, an application to extend time for implementation of this plan has been filed by the resolution applicant sometime in October 2020 before the Adjudicating Authority. Both these applications have yet to be decided by the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to act as an in terrorem proceeding to achieve this result, it is clear that in any event, a hybrid proceeding partaking of this nature would certainly be covered. He cited a number of judgments in order to buttress this proposition as well. 7. Shri Jayant Mehta, learned Advocate appearing on behalf of the respondent, rebutted each of these submissions with erudition and grace. He referred to the Report of the Insolvency Law Committee of February 2020 to drive home his point that the object of Section 14 being a limited one, a criminal proceeding could not possibly be included within it. He further went on to juxtapose the moratorium provisions which would apply in the case of individuals and firms in Sections 85, 96, and 101 of the IBC, emphasising that the language of these provisions being wider would, by way of contrast, include a Section 138 proceeding so far as individuals and firms are concerned, which has been expressly eschewed so far as Section 14 s applicability to corporate debtors is concerned. He relied upon the ejusdem generis/noscitur a sociis rules of construction that had, in fact, been applied to Section 14(1)(a) by the Bombay High Court and the Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease in certain circumstances. This provision would have been wholly unnecessary if Section 14(1)(a) were to cover criminal offences as well, as they would cease for the period of moratorium. Thus, he argued that this Section throws considerable light on the fact that criminal prosecutions are outside the ken of the expression proceedings contained in Section 14(1)(a) of the IBC. 8. Shri Aman Lekhi, learned Additional Solicitor General, appearing on behalf of the Union of India in W.P. (Crl.) No. 297/2020, has comprehensively taken us through Chapter XVII of the Negotiable Instruments Act to argue that a plain reading of the said Chapter would reveal that the offence under Section 138 is a purely criminal offence which results in imposition of a jail sentence or fine or both, being punishments exclusively awardable under Section 53 of the Indian Penal Code, 1860 only in a criminal proceeding, and hence, does not fall within proceedings contemplated by Section 14 of the IBC. He further states that since compounding under criminal law can only take place at the instance of the complainant/injured party, a subordinate criminal court has no inherent power to terminate proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority 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); (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. Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has effect only from the date of the order declaring moratorium till the completion of the corporate insolvency resolution process which is time bound, either culminating in the order of the Adjudicating Authority approving a resolution plan or in liquidation. 11. The two exceptions to Section 14(1) are contained in sub-sections (2) and (3) of Section 14. Under sub-section (2), the supply of essential goods or services to the corporate debtor during this period cannot be terminated or suspended or even interrupted, as otherwise the corporate debtor would be brought to its knees and would not able to function as a going concern during this period. The exception created in sub-section (3) (a) is important as it refers to transactions as may be notified by the Central Government in consultation with experts in finance. The expression financial sector regulator is defined by Section 3(18) as follows: 3. Definitions.-In this Code, unless the context otherwise requires,- xxx xxx xxx (18) financial sector regulator means an authority or body constituted under any law for the time being in force to regulate services or transactions of financial sector and include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incongruous to hold that the expression the institution of suits or continuation of pending suits must be read disjunctively as otherwise, the institution of arbitral proceedings and proceedings before authorities cannot be subsumed within the expression institution of suits which are proceedings in civil courts instituted by a plaint (see Section 26 of the Code of Civil Procedure, 1908). Therefore, it is clear that the expression institution of suits or continuation of pending suits is to be read as one category, and the disjunctive or before the word proceedings would make it clear that proceedings against the corporate debtor would be a separate category. What throws light on the width of the expression proceedings is the expression any judgment, decree or order and any court of law, tribunal, arbitration panel or other authority . Since criminal proceedings under the Code of Criminal Procedure, 1973 [ CrPC ] are conducted before the courts mentioned in Section 6, CrPC, it is clear that a Section 138 proceeding being conducted before a Magistrate would certainly be a proceeding in a court of law in respect of a transaction which relates to a debt owed by the corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not necessary that this rule must always apply. The nature of the special words and the general words must be considered before the rule is applied. In Allen v. Emersons [(1944) IKB 362] Asquith, J., gave interesting examples of particular words followed by general words where the principle of ejusdem generis might or might not apply. We think that the following illustration will clear any difficulty. In the expression books, pamphlets, newspapers and other documents private letters may not be held included if other documents be interpreted ejusdem generis with what goes before. But in a provision which reads newspapers or other document likely to convey secrets to the enemy , the words other document would include document of any kind and would not take their colour from newspapers . It follows, therefore, that interpretation ejusdem generis or noscitur a sociis need not always be made when words showing particular classes are followed by general words. Before the general words can be so interpreted there must be a genus constituted or a category disclosed with reference to which the general words can and are intended to be restricted. Here the expression claim of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression other authorities in Article 12 of the Constitution, as they overlooked the basic principle of interpretation that, to invoke the application of ejusdem generis rule, there must be a distinct genus or category running through the bodies already named. Craies on, Statute Law summarises the principle as follows: The ejusdem generis rule is one to be applied with caution and not pushed too far . To invoke the application of the ejusdem generis rule there must be a distinct genus or category. The specific words must apply not to different objects of a widely differing character but to something which can be called a class or kind of objects. Where this is lacking, the rule cannot apply, but the mention of a single species does not constitute a genus [Craies on Statute Law, 6th Edn, p 181]. Maxwell in his book on Interpretation of Statutes explained the principle by saying: But the general word which follows particular and specific words of the same nature as itself takes its meaning from them, and is presumed to be restricted to the same genus as those words . Unless there is a genus or category, there is no room for the application of the ejusde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been resorted to with advantage by this Court in a number of cases vide Bangalore Water Supply Sewerage Board v. A. Rajappa [(1978) 2 SCC 213 : 1978 SCC (L S) 215], Rohit Pulp and Paper Mills Ltd. v. CCE [(1990) 3 SCC 447], Oswal Agro Mills Ltd. v. CCE [1993 Supp (3) SCC 716], K. Bhagirathi G. Shenoy v. K.P. Ballakuraya [(1999) 4 SCC 135] and Lokmat Newspapers (P) Ltd. v. Shankarprasad [(1999) 6 SCC 275 : 1999 SCC (L S) 1090]. 27. If so, we have to gauge the implication of the words proceeding relating exclusively to the territory from the surrounding context. Section 89 of the Act says that proceeding pending prior to the appointed day before a court (other than the High Court), tribunal, authority or officer shall stand transferred to the corresponding court, tribunal, authority or officer of Jharkhand State. A very useful index is provided in the Section by defining the words corresponding court, tribunal, authority or officer in the State of Jharkhand as this: [Section 89(3)(b)(i)] The court, tribunal, authority or officer in which, or before whom, the proceeding would have laid if it had been instituted after the appointed day; 28. Look at the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10] . In the latter case this Court was required to construe Section 2(j) of the Industrial Disputes Act which read: 2(j) industry means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen. 78. It was found that the words in the definition were of very wide and definite import. It was suggested that these words should be read in a restricted sense having regard to the included items on the principle of noscitur a sociis . The suggestion was rejected in the following language: (Hospital Mazdoor Sabha case [(1960) 2 SCR 866 : AIR 1960 SC 610] , SCR p. 874) It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the present rule of construction can be usefully applied. It can also be applied where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory are followed by general words. The first stage of any forensic application of the rule, therefore, has to be to find out whether the preceding words constitute a genus class or category so that the general words that follow them can be given the same colour as the words preceding. In cases where it is not possible to find the genus in the use of the words preceding the general words, the rule of ejusdem generis will have no application. 27. In Siddeshwari Cotton Mills (P) Ltd. v. Union of India [(1989) 2 SCC 458 : 1989 SCC (Tax) 297] M.N. Venkatachaliah, J., as His Lordship then was, examined the rationale underlying ejusdem generis as a rule of construction and observed: (SCC p. 463, para 14) 14. The principle underlying this approach to statutory construction is that the subsequent general words were only intended to guard against some accidental omission in the objects of the kind mentioned earlier and were not intended to extend to objects of a wholly different kind. This is a presumption and operates unless there is some contrary indication. But the preceding words or expressions of restricted meaning must be susceptible of the import that they represent a cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ething which can be called a class or kind of objects. Where this is lacking, the rule cannot apply (Hood-Barrs v. IRC [(1946) 2 All ER 768 (CA)]), but the mention of a single species does not constitute a genus. (Per Lord Thankerton in United Towns Electric Co. Ltd. v. Attorney General for Newfoundland [(1939) 1 All ER 423 (PC)].) Unless you can find a category , said Farwell L.J. (Tillmanns and Co. v. S.S. Knutsford Ltd. [(1908) 2 KB 385 (CA)] ), there is no room for the application of the ejusdem generis doctrine , and where the words are clearly wide in their meaning they ought not to be qualified on the ground of their association with other words. For instance, where a local Act required that theatres and other places of public entertainment should be licensed, the question arose whether a fun-fair for which no fee was charged for admission was within the Act. It was held to be so, and that the ejusdem generis rule did not apply to confine the words other places to places of the same kind as theatres. So the insertion of such words as or things of whatever description would exclude the rule. (Attorney General v. Leicester Corpn. [(1910) 2 Ch 359 : (1908-10) All ER R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikamlal [CED v. Kantilal Trikamlal, (1976) 4 SCC 643 : 1977 SCC (Tax) 90] , this Court has held that when an expression is a residuary one, ejusdem generis will not apply. It was thus held: (SCC p. 655, para 21) 21. We have also to stress the expression other right in the explanation which is of the widest import and cannot be constricted by reading it ejusdem generis with debt . Other right , in the context, is expressly meant considerably to widen the concept and therefore suggests a somewhat contrary intention to the application of the ejusdem generis rule. We may derive instruction from Green's construction of the identical expression in the English Act. [Section 45(2)]. The learned author writes: A disclaimer is an extinguishment of a right for this purpose. Although in the event the person disclaiming never has any right in the property, he has the right to obtain it, this inchoate right is a right for the purposes of Section 45(2). The ejusdem generis rule does not apply to the words a debt or other right and the word right is a word of the widest import. Moreover, the expression at the expense of the deceased is used in an ordinary and natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the said rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service. 72. In Bank of India v. Vijay Transport [Bank of India v. Vijay Transport, 1988 Supp SCC 47] , the Court was dealing with the contention that a literal interpretation is not always the only interpretation of a provision in a statute and the court has to look at the setting in which the words are used and the circumstances in which the law came to be passed to decide whether there is something implicit behind the words actually used which would control the literal meaning of the words used. For the said purpose, reliance was placed on R.L. Arora v. State of U.P. [R.L. Arora v. State of U.P., (1964) 6 SCR 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may refer to a passage from Justice G.P. Singh, Principles of Statutory Interpretation [(13th Edn., 2012) 509.] where the learned author has referred to the lucid explanation given by Gajendragadkar, J. We think it appropriate to reproduce the passage: It is a rule wider than the rule of ejusdem generis; rather the latter rule is only an application of the former. The rule has been lucidly explained by Gajendragadkar, J. in the following words: This rule, according to Maxwell [Maxwell, Interpretation of Statutes (11th Edn., 1962) 321.] , means that when two or more words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The learned author on further discussion has expressed the view that meaning of a word is to be judged from the company it keeps i.e. reference to words found in immediate connection with them. It applies when two or more words are susceptible of analogous meanings are coupled together, to be read and understood in their cognate sense. [G.P. Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding liquidation and reorganization proceedings. The UNCITRAL Guide notes that a moratorium is critical during reorganization proceedings since it facilitates the continued operation of the business and allows the debtor a breathing space to organize its affairs, time for preparation and approval of a reorganization plan and for other steps such as shedding unprofitable activities and onerous contracts, where appropriate. xxx xxx xxx 8.11. Further, the purpose of the moratorium is to keep the assets of the debtor together for successful insolvency resolution, and it does not bar all actions, especially where countervailing public policy concerns are involved. For instance, criminal proceedings are not considered to be barred by the moratorium, since they do not constitute money claims or recovery proceedings. In this regard, the Committee also noted that in some jurisdictions, laws allow regulatory claims, such as those which are not designed to collect money for the estate but to protect vital and urgent public interests, restraining activities causing environmental damage or activities that are detrimental to public health and safety to be continued during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -criminal proceeding which would result in the assets of the corporate debtor being depleted as a result of having to pay compensation which can amount to twice the amount of the cheque that has bounced would directly impact the corporate insolvency resolution process in the same manner as the institution, continuation, or execution of a decree in such suit in a civil court for the amount of debt or other liability. Judged from the point of view of this objective, it is impossible to discern any difference between the impact of a suit and a Section 138 proceeding, insofar as the corporate debtor is concerned, on its getting the necessary breathing space to get back on its feet during the corporate insolvency resolution process. Given this fact, it is difficult to accept that noscitur a sociis or ejusdem generis should be used to cut down the width of the expression proceedings so as to make such proceedings analogous to civil suits. 25. Viewed from another point of view, clause (b) of Section 14(1) also makes it clear that during the moratorium period, any transfer, encumbrance, alienation, or disposal by the corporate debtor of any of its assets or any legal right or benefici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f security held in respect of any of the debts; (d) the financial information of the debtor and his immediate family up to two years prior to the date of the application; (e) the particulars of the debtor's personal details, as may be prescribed; (f) the reasons for making the application; (g) the particulars of any legal proceedings which, to the debtor's knowledge has been commenced against him; (h) the confirmation that no previous fresh start order under this Chapter has been made in respect of the qualifying debts of the debtor in the preceding twelve months of the date of the application. Similarly, in Section 85, which also occurs in Chapter II in Part III of the IBC, a moratorium is imposed thus: 85. Effect of admission of application.-(1) On the date of admission of the application, the moratorium period shall commence in respect of all the debts. (2) During the moratorium period- `(a) any pending legal action or legal proceeding in respect of any debt shall be deemed to have been stayed; and (b) subject to the provisions of Section 86, the creditors shall not initiate any legal action or proceedings in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and (ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt. (2) Where the application has been made in relation to a firm, the interim-moratorium under sub-section (1) shall operate against all the partners of the firm as on the date of the application. (3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. 101. Moratorium.-(1) When the application is admitted under Section 100, a moratorium shall commence in relation to all the debts and shall cease to have effect at the end of the period of one hundred and eighty days beginning with the date of admission of the application or on the date the Adjudicating Authority passes an order on the repayment plan under Section 114, whichever is earlier. (2) During the moratorium period- (a) any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed; (b) the creditors shall not initiate any legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside the scope of this expression. 29. V. Ramakrishnan (supra) looked at and contrasted Section 14 with Sections 96 and 101 from the point of view of a guarantor to a debt, and in this context, held: 26. We are also of the opinion that Sections 96 and 101, when contrasted with Section 14, would show that Section 14 cannot possibly apply to a personal guarantor. When an application is filed under Part III, an interim-moratorium or a moratorium is applicable in respect of any debt due. First and foremost, this is a separate moratorium, applicable separately in the case of personal guarantors against whom insolvency resolution processes may be initiated under Part III. Secondly, the protection of the moratorium under these Sections is far greater than that of Section 14 in that pending legal proceedings in respect of the debt and not the debtor are stayed. The difference in language between Sections 14 and 101 is for a reason. 26.1. Section 14 refers only to debts due by corporate debtors, who are limited liability companies, and it is clear that in the vast majority of cases, personal guarantees are given by Directors who are in management of the companies. The object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor to a person who was not- (a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled: Provided further that every person who was a designated partner as defined in clause (j) of Section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or an officer who is in default , as defined in clause (60) of Section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicants, who did not want to take on the liability for any offences committed prior to commencement of CIRP. In one case, JSW Steel had specifically sought certain reliefs and concessions, within an annexure to the resolution plan it had submitted for approval of the Adjudicating Authority. Without relief from imposition of the such liability, the Committee noted that in the long run, potential resolution applicants could be disincentivised from proposing a resolution plan. The Committee was also concerned that resolution plans could be priced lower on an average, even where the corporate debtor did not commit any offence and was not subject to investigation, due to adverse selection by resolution applicants who might be apprehensive that they might be held liable for offences that they have not been able to detect due to information asymmetry. Thus, the threat of liability falling on bona fide persons who acquire the legal entity, could substantially lower the chances of its successful takeover by potential resolution applicants. 17.4. This could have substantially hampered the Code s goal of value maximisation, and lowered recoveries to creditors, including financial insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed: 280. We are of the clear view that no case whatsoever is made out to seek invalidation of Section 32A. The boundaries of this Court's jurisdiction are clear. The wisdom of the legislation is not open to judicial review. Having regard to the object of the Code, the experience of the working of the code, the interests of all stakeholders including most importantly the imperative need to attract resolution applicants who would not shy away from offering reasonable and fair value as part of the resolution plan if the legislature thought that immunity be granted to the corporate debtor as also its property, it hardly furnishes a ground for this this Court to interfere. The provision is carefully thought out. It is not as if the wrongdoers are allowed to get away. They remain liable. The extinguishment of the criminal liability of the corporate debtor is apparently important to the new management to make a clean break with the past and start on a clean slate. We must also not overlook the principle that the impugned provision is part of an economic measure. The reverence courts justifiably hold such laws in cannot but be applicable in the instant case as well. The provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon complaints under Section 2(d) of the CrPC, the width of the language would be cut down and the object of Section 32A(1) would not be achieved as all prosecutions emanating from private complaints would be excluded. Obviously, Section 32A(1) cannot be read in this fashion and clearly incudes the liability of the corporate debtor for all offences committed prior to the commencement of the corporate insolvency resolution process. Doubtless, a Section 138 proceeding would be included, and would, after the moratorium period comes to an end with a resolution plan by a new management being approved by the Adjudicating Authority, cease to be an offence qua the corporate debtor. 34. A section which has been introduced by an amendment into an Act with its focus on cesser of liability for offences committed by the corporate debtor prior to the commencement of the corporate insolvency resolution process cannot be so construed so as to limit, by a sidewind as it were, the moratorium provision contained in Section 14, with which it is not at all concerned. If the first proviso to Section 32A(1) is read in the manner suggested by Shri Mehta, it will impact Section 14 by taking out of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 (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 or other liability means a legally enforceable debt or other liability. 36. Section 138 contains within it the ingredients of the offence made out. The deeming provision is important in that the legislature is cognizant of the fact that what is otherwise a civil liability is now also deemed to be an offence, since this liability is made punishable by law. It is important to note that the transaction spoken of is a commercial transaction between two parties which involves payment of money for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, namely, Section 141, two different results would ensue so far as bodies corporate, which include limited liability partnerships, are concerned, the moratorium provision contained in Section 14 of the IBC would not apply, but so far as a partnership firm is concerned, being covered by Sections 96 and 101 of the IBC, a Section 138/141 proceeding would be stopped in its tracks by virtue of the moratorium imposed by these Sections. Thus, under Section 141(1), whereas a Section 138 proceeding against a corporate body would continue after initiation of the corporate insolvency resolution process, yet, the same proceeding against a firm, being interdicted by Sections 96 and 101, would not so continue. This startling result is one of the consequences of accepting the argument of Shri Mehta, which again leads to the position that inelegant drafting alone cannot lead to such startling results, the object of Sections 14 and 96 and 101 being the same, namely, to see that during the insolvency resolution process for corporate persons/individuals and firms, the corporate body/firm/individual should be given breathing space to recuperate for a successful resolution of its debts in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payee or the holder in due course of the cheque the victim. Further, the language of Section 142(1) (b) would again show the hybrid nature of these provisions inasmuch as a complaint must be made within one month of the date on which the cause of action under clause (c) of the proviso to Section 138 arises. The expression cause of action is a foreigner to criminal jurisprudence, and would apply only in civil cases to recover money. Chapter XIII of the CrPC, consisting of Sections 177 to 189, is a chapter dealing with the jurisdiction of the criminal courts in inquiries and trials. When the jurisdiction of a criminal court is spoken of by these Sections, the expression cause of action is conspicuous by its absence. 41. By an Amendment Act of 2002, various other sections were added to this Chapter. Thus, under Section 143, it is lawful for a Magistrate to pass a sentence of imprisonment for a term not exceeding one year and a fine exceeding INR 5,000/- summarily. This provision is again an important pointer to the fact that the payment of compensation is at the heart of the provision in that a fine exceeding INR 5000/-, the sky being the limit, can be imposed by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation awarded under Section 357 of the Code of Criminal Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or recovered as interim compensation under this Section. 148. Power of Appellate Court to order payment pending appeal against conviction.-(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court: Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under Section 143-A. (2) The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant. (3) The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal: Provided that if the appellant is ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, or which is not imposed in accordance with the law which permits imposition of the tax, or in the levy, assessment and collection of which rights of the tax-payer are infringed in a manner not warranted by the statute, a proceeding to obtain relief whether it is from the tribunal set up by the taxing statute, or from the civil court would be regarded as a civil proceeding. The character of the proceeding, in our judgment, depends not upon the nature of the tribunal which is invested with authority to grant relief, but upon the nature of the right violated and the appropriate relief which may be claimed. A civil proceeding is, therefore, one in which a person seeks to enforce by appropriate relief the alleged infringement of his civil rights against another person or the State, and which if the claim is proved would result in the declaration express or implied of the right claimed and relief such as payment of debt, damages, compensation, delivery of specific property, enforcement of personal rights, determination of status etc. (at pages 196-197) A large number of cases have arisen before the High Courts in India in which conflicting views about the meaning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear that a Section 138 proceeding can be said to be a civil sheep in a criminal wolf s clothing, as it is the interest of the victim that is sought to be protected, the larger interest of the State being subsumed in the victim alone moving a court in cheque bouncing cases, as has been seen by us in the analysis made hereinabove of Chapter XVII of the Negotiable Instruments Act. 44. In Goaplast (P) Ltd. v. Chico Ursula D Souza, (2003) 3 SCC 232, the object sought to be achieved by Section 138 is succinctly set out in paragraph 3 thereof: 3. The learned counsel for the appellant has submitted that mere writing of letter to the bank stopping payment of the post-dated cheques does not take the case out of the purview of the Act. He has invited our attention to the object behind the provision contained in Chapter XVII of the Act. For appreciating the issue involved in the present case, it is necessary to refer to the object behind introduction of Chapter XVII containing Sections 138 to 142. This chapter was introduced in the Act by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (Act 66 of 1988) with the object of inculcat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawer of the cheque should not be allowed to abuse the accommodation given to him by a creditor by way of acceptance of a post-dated cheque. If stoppage of payment of a post-dated cheque is permitted to take the case out of the purview of Section 138 of the Act, it will amount to allowing the party to take advantage of his own wrong. 45. In Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Ltd., (2008) 2 SCC 305, a Division Bench of this Court referred to the object of Section 138 thus: 16. Section 138 of the Act was inserted by the Banking, Public Financial Institutions and Negotiable Instruments Law (Amendment) Act, 1988 (Act 66 of 1988) to regulate financial promises in growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters. The incorporation of the provision is designed to safeguard the faith of the creditor in the drawer of the cheque, which is essential to the economic life of a developing country like India. The provision has been introduced with a view to curb cases of issuing cheques indiscriminately by making stringent provisions and safeguarding interest of creditors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of the court. Sub-section (1) of Section 320 enumerates the offences which are compoundable without the leave of the court, while sub-section (2) of the said Section specifies the offences which are compoundable with the leave of the court. 12. Section 147 of the Negotiable Instruments Act, 1881 is in the nature of an enabling provision which provides for the compounding of offences prescribed under the same Act, thereby serving as an exception to the general rule incorporated in sub-section (9) of Section 320 CrPC which states that No offence shall be compounded except as provided by this Section . A bare reading of this provision would lead us to the inference that offences punishable under laws other than the Penal Code also cannot be compounded. However, since Section 147 was inserted by way of an amendment to a special law, the same will override the effect of Section 320(9) CrPC, especially keeping in mind that Section 147 carries a non obstante clause. xxx xxx xxx 15. The compounding of the offence at later stages of litigation in cheque bouncing cases has also been held to be permissible in a recent decision of this Court, reported as K.M. Ibrahim v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies primarily in recovering the money rather than seeing the drawer of the cheque in jail. The threat of jail is only a mode to ensure recovery. As against the accused who is willing to undergo a jail term, there is little available as remedy for the holder of the cheque. If we were to examine the number of complaints filed which were compromised or settled before the final judgment on one side and the cases which proceeded to judgment and conviction on the other, we will find that the bulk was settled and only a miniscule number continued. 18. It is quite obvious that with respect to the offence of dishonour of cheques, it is the compensatory aspect of the remedy which should be given priority over the punitive aspect. (emphasis supplied) This judgment was followed by a Division Bench of this Court in JIK Industries Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255, stating: 68. It is clear from a perusal of the aforesaid Statement of Objects and Reasons that offence under the NI Act, which was previously non-compoundable in view of Section 320 subsection (9) of the Code has now become compoundable. That does not mean that the effect of Section 147 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed about compounding in Section 188 by providing the mode of compounding. However, it did not contain any provision declaring what offences were compoundable. The decision as to what offences were compoundable was governed by reference to the exception to Section 214 of the Penal Code. The subsequent Code of 1898 provided Section 345 indicating the offences which were compoundable but the said section was only made applicable to compounding of offences defined and permissible under the Penal code. The present Code, which repealed the 1898 Code, contains Section 320 containing comprehensive provisions for compounding. 82. A perusal of Section 320 makes it clear that the provisions contained in Section 320 and the various sub-sections is a code by itself relating to compounding of offence. It provides for the various parameters and procedures and guidelines in the matter of compounding. If this Court upholds the contention of the appellant that as a result of incorporation of Section 147 in the NI Act, the entire gamut of procedure of Section 320 of the Code are made inapplicable to compounding of an offence under the NI Act, in that case the compounding of offence under the NI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d single proceeding, for enforcement of criminal liability (for dishonouring the cheque) and for enforcement of the civil liability (for realisation of the cheque amount) thereby obviating the need for the creditor to move two different fora for relief. This is evident from the following provisions of Chapter XVII of the Act: (i) The provision for levy of fine which is linked to the cheque amount and may extend to twice the amount of the cheque (Section 138) thereby rendering Section 357(3) virtually infructuous insofar as cheque dishonour cases are concerned. (ii) The provision enabling a First Class Magistrate to levy fine exceeding ₹ 5000 (Section 143) notwithstanding the ceiling to the fine, as ₹ 5000 imposed by Section 29(2) of the Code. (iii) The provision relating to mode of service of summons (Section 144) as contrasted from the mode prescribed for criminal cases in Section 62 of the Code. (iv) The provision for taking evidence of the complainant by affidavit (Section 145) which is more prevalent in civil proceedings, as contrasted from the procedure for recording evidence in the Code. (v) The provision making all offences punishabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: 15.2. We have undertaken this succinct study mindful of the fact that Parliamentary debates have a limited part to play in interpretation of statutes, the presumption being that legislators have the experience, expertise and language skills to draft laws which unambiguously convey their intentions and expectations for the enactments. What is palpably clear is that Parliament was aware that they were converting civil liability into criminal content inter alia by the deeming fiction of culpability in terms of the pandect comprising Section 138 and the succeeding sections, which severely curtail defences to prosecution. Parliament was also aware that the offence of cheating, etc. already envisaged in IPC, continued to be available. xxx xxx xxx 17. The marginal note of Section 138 of the NI Act explicitly defines the offence as being the dishonour of cheques for insufficiency, etc. of funds in the account. Of course, the headings, captions or opening words of a piece of legislation are normally not strictly or comprehensively determinative of the sweep of the actual Section itself, but it does presage its intendment. See Frick India Ltd. v. Union of India [( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the counsel for the appellant also relied on Rajneesh Aggarwal v. Amit J. Bhalla [(2001) 1 SCC 631 : 2001 SCC (Cri) 229]. - The judgment in Rajneesh Aggarwal v. Amit J. Bhalla, (2001) 1 SCC 631 was delivered prior to the 2002 and 2018 Amendment Acts to the Negotiable Instruments Act. The perceptible shift in the provisions by introducing Sections 143 to 148 has been noticed by this Court hereinabove, as a result of which the observations contained in this judgment would no longer be valid. 7. However, we do not feel persuaded to accept this submission as the appellant has to apprise himself that the primary object and reason of the Negotiable Instruments Act, 1881, is not merely penal in nature but is to maintain the efficiency and value of a negotiable instrument by making the accused honour the negotiable instrument and paying the amount for which the instrument had been executed. 8. The object of bringing Sections 138 to 142 of the Negotiable Instruments Act on statute appears to be to inculcate faith in the efficacy of banking operations and credibility in transacting business of negotiable instruments. Despite several remedies, Section 138 of the Act is intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of the statute was to facilitate smooth functioning of business transactions. The provision is necessary as in many transactions cheques were issued merely as a device to defraud the creditors. Dishonour of cheque causes incalculable loss, injury and inconvenience to the payee and credibility of business transactions suffers a setback. [Goaplast (P) Ltd. v. Chico Ursula D'Souza, (2004) 2 SCC 235, p. 248, para 26 : 2004 SCC (Cri) 499] At the same time, it was also noted that nature of offence under Section 138 primarily related to a civil wrong and the 2002 Amendment specifically made it compoundable. [Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Ltd., (2008) 2 SCC 305 : (2008) 1 SCC (Civ) 542 : (2008) 1 SCC (Cri) 351] The offence was also described as regulatory offence . The burden of proof was on the accused in view of presumption under Section 139 and the standard of proof was of preponderance of probabilities . [Rangappa v. Sri Mohan, (2010) 11 SCC 441, p. 454, para 28 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184] The object of the provision was described as both punitive as well as compensatory. The intention of the provision was to ensure that the complain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge the accused. 18.4. Procedure for trial of cases under Chapter XVII of the Act has normally to be summary. The discretion of the Magistrate under second proviso to Section 143, to hold that it was undesirable to try the case summarily as sentence of more than one year may have to be passed, is to be exercised after considering the further fact that apart from the sentence of imprisonment, the court has jurisdiction under Section 357(3) CrPC to award suitable compensation with default sentence under Section 64 IPC and with further powers of recovery under Section 431 CrPC. With this approach, prison sentence of more than one year may not be required in all cases. 18.5. Since evidence of the complaint can be given on affidavit, subject to the court summoning the person giving affidavit and examining him and the bank's slip being prima facie evidence of the dishonour of cheque, it is unnecessary for the Magistrate to record any further preliminary evidence. Such affidavit evidence can be read as evidence at all stages of trial or other proceedings. The manner of examination of the person giving affidavit can be as per Section 264 CrPC. The scheme is to follow summary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereupon. Given our analysis of Chapter XVII of the Negotiable Instruments Act together with the amendments made thereto and the case law cited hereinabove, it is clear that a quasi-criminal proceeding that is contained in Chapter XVII of the Negotiable Instruments Act would, given the object and context of Section 14 of the IBC, amount to a proceeding within the meaning of Section 14(1)(a), the moratorium therefore attaching to such proceeding. QUASI-CRIMINAL PROCEEDINGS 54. Shri Lekhi, learned Additional Solicitor General, took strong objection to the use of the expression quasi-criminal to describe proceedings under Section 138 of the Negotiable Instruments Act, which, according to him, can only be described as criminal proceedings. This is for the reason that these proceedings result in imprisonment or fine or both, which are punishments that can be imposed only in criminal proceedings as stated by Section 53 of the Indian Penal Code. It is difficult to agree with Shri Lekhi. There are many instances of acts which are punishable by imprisonment or fine or both which have been described as quasi-criminal. One instance is the infraction of Section 630 of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith fine which may extend to one thousand rupees . The fine under this subsection is to be understood in the nature of compensation for wrongful withholding of the property of the company. Under sub-section (2) what is made punishable is the disobedience of the order of the Court, directing the person, continuing in occupation, after the right of the employee or the officer to occupation has extinguished, to deliver up or refund within a time to be fixed by the court, the property of the company obtained or wrongfully withheld or knowingly misapplied. Thus, it is in the event of the disobedience of the order of the court, that imprisonment for a term which may extend to two years has been prescribed. The provision makes the defaulter, whether an employee or a past employee or the legal heir of the employee, who disobeys the order of the court to hand back the property to the company within the prescribed time liable for punishment. (emphasis supplied) Having so held, the Court did not construe the provision strictly, which it would have been bound to do had it been a purely criminal one, but instead gave it a broad, liberal, and purposeful construction as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the object and purpose of the legislation and construe it in a wider sense to effectuate the intendment of the provision. The heirs and legal representatives of the deceased employee have no independent capacity or status to continue in occupation and possession of the property, which stood allotted to the employee or the officer concerned or resist the return of the property to the employer in the absence of any express agreement to the contrary entered with them by the employer. The court, when approached by the employer for taking action under Section 630 of the Act, can examine the basis on which the petition/complaint is filed and if it is found that the company's right to retrieve its property is quite explicit and the stand of the employee, or anyone claiming through him, to continue in possession is baseless, it shall proceed to act under Section 630 of the Act and pass appropriate orders. Only an independent valid right, not only to occupation but also to possession of the property belonging to the company, unconnected with the employment of the deceased employee can defeat an action under Section 630 of the Act if it can be established that the deceased employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a broad distinction between civil and criminal contempts, a large number of cases have shown that the dividing line between the two is almost imperceptible. For instance, in Dulal Chandra v. Sukumar, A.I.R. 1958 Cal. 474 at 476, 477, the following observations occur: The line between civil and criminal contempt can be broad as well as thin. Where the contempt consists in mere failure to comply with or carry out an order of a court made for the benefit of a private party, it is plainly civil contempt and it has been said that when the party, in whose interest the order was made, moves the court for action to be taken in contempt against the contemner with a view to an enforcement of his right, the proceeding is only a form of execution. In such a case, there is no criminality in the disobedience, and the contempt, such as it is, is not criminal. If, however, the contemner adds defiance of the court to disobedience of the order and conducts himself in a manner which amounts to obstruction or interference with the course of justice, the contempt committed by him is of a mixed character, partaking as between him and his opponent of the nature of a civil contempt and as betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judicial Commissioners. The Bill seeks to give effect to the accepted recommendations of the Sanyal Committee. 57. The Contempt of Courts Act, 1971 defines civil contempt and criminal contempt as follows: 2. Definitions.-In this Act, unless the context otherwise requires,- xxx xxx xxx (b) civil contempt means wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court; (c) criminal contempt means the publication (whether by words, spoken or written, or by signs, or by visible representations, or otherwise) of any matter or the doing of any other act whatsoever which- (i) scandalises or tends to scandalise, or lowers or tends to lower the authority of any court; or (ii) prejudices, or interferes or tends to interfere with, the due course of any judicial proceeding; or (iii) interferes or tends to interfere with, or obstructs or tends to obstruct, the administration of justice in any other manner; xxx xxx xxx 58. Whether the contempt committed is civil or criminal, the High Court is empowered to try such offences whether the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained in this sub-section shall render any such person liable to such punishment if he proves that the contempt was committed without his knowledge or that he exercised all due diligence to prevent its commission. (5) Notwithstanding anything contained in sub-section (4), where the contempt of court referred to therein has been committed by a company and it is proved that the contempt has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contempt and the punishment may be enforced, with the leave of the court, by the detention in civil prison of such director, manager, secretary or other officer. Explanation.-For the purpose of sub-sections (4) and (5),- (a) company means any body corporate and includes a firm or other association of individuals; and (b) director , in relation to a firm, means a partner in the firm. 59. In criminal contempt cases, cognizance in contempts other than those referred to in Section 14 of the Act is taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld clearly not be appropriate to fine or sequester the assets of the Crown or a government department or an officer of the Crown acting in his official capacity), this does not mean that a finding of contempt against a government department or Minister would be pointless. The very fact of making such a finding would vindicate the requirements of justice. In addition, an order for costs could be made to underline the significance of a contempt. A purpose of the court s powers to make findings of contempt is to ensure that the orders of the court are obeyed. This jurisdiction is required to be coextensive with the court's jurisdiction to make orders which need the protection which the jurisdiction to make findings of contempt provides. In civil proceedings the court can now make orders (other than injunctions or for specific performance) against authorised government departments or the Attorney General. On applications for judicial review orders can be made against Ministers. In consequence such orders must be taken not to offend the theory that the Crown can supposedly do no wrong. Equally, if such orders are made and not obeyed, the body against whom the orders were made can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ityunjoy Das v. Sayed Hasibur Rahaman [(2001) 3 SCC 739 : (2006) 1 SCC (Cri) 296 : AIR 2001 SC 1293] this Court placing reliance upon a large number of its earlier judgments, including V.G. Nigam v. Kedar Nath Gupta [(1992) 4 SCC 697 : 1993 SCC (L S) 202 : (1993) 23 ATC 400 : AIR 1992 SC 2153] and Murray Co. v. Ashok Kumar Newatia [(2000) 2 SCC 367 : 2000 SCC (Cri) 473 : AIR 2000 SC 833], held that jurisdiction of contempt has been conferred on the Court to punish an offender for his contemptuous conduct or obstruction to the majesty of law, but in the case of quasi-criminal in nature, charges have to be proved beyond reasonable doubt and the alleged contemnor becomes entitled to the benefit of doubt. It would be very hazardous to impose sentence in contempt proceedings on some probabilities. xxx xxx xxx 27. In view of the above, the law can be summarised that the High Court has a power to initiate the contempt proceedings suo motu for ensuring the compliance with the orders passed by the Court. However, contempt proceedings being quasicriminal in nature, the same standard of proof is required in the same manner as in other criminal cases. The alleged contemnor is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a court simpliciter would be civil contempt but when it is coupled with conduct of the parties which is contemptuous, prejudicial and is in flagrant violation of the law of the land, it may be treated as a criminal contempt. Even under the English law, the courts have the power to enforce its judgment and orders against the recalcitrant parties. That contempt proceedings are quasi-criminal is also stated in Kanwar Singh Saini v. High Court of Delhi, (2012) 4 SCC 307 (at paragraph 38) and in T.C. Gupta v. Bimal Kumar Dutta, (2014) 14 SCC 446 (at paragraph 10). 63. What is clear from the aforesaid is that though there may not be any watertight distinction between civil and criminal contempt, yet, an analysis of the aforesaid authorities would make it clear that civil contempt is essentially an action which is moved by the party in whose interest an order was made with a view to enforce its personal right, where contumacious disregard for such order results in punishment of the offender in public interest, whereas a criminal contempt is, in essence, a proceeding which relates to the public interest in seeing that the administration of justice remains unpolluted. What is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bvious that whatever the company could do pre-liquidation is now vested in the liquidator, and in order to realise monies that are due to the company, there is no reason why the liquidator cannot institute a Section 138/141 proceeding against a defaulting debtor of the company. Obviously, this language needs to be construed in the widest possible form as there cannot be any residuary category of other legal proceedings which can be instituted against some person other than the liquidator or by the liquidator who now alone represents the company. Given the object of this provision also, what has been said earlier with regard to the nonapplication of the doctrines of ejusdem generis and noscitur a sociis would apply with all force to this provision as well. 66. In fact, several other provisions of the IBC may also be looked at in this context. Thus, when it comes to the duties of a resolution professional who takes over the management of the company during the corporate insolvency resolution process, Section 25(2)(b) states as follows: 25. Duties of resolution professional.- xxx xxx xxx (2) For the purposes of sub-section (1), the resolution professional shall u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UNDER PROVISIONS OF OTHER STATUTES 67. Shri Mehta then relied strongly upon judgments under Section 22(1) of the SICA and under Section 446(2) of the Companies Act, 1956. He relied upon BSI Ltd. v. Gift Holdings (P) Ltd., (2000) 2 SCC 737, which judgment held that the expression suit in Section 22(1) of the SICA would not include a Section 138 proceeding. The Court was directly concerned with only this expression and, therefore, held: 19. The said contention is also devoid of merits. The word suit envisaged in Section 22(1) cannot be stretched to criminal prosecutions. The suit mentioned therein is restricted to recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company . As the suit is clearly delineated in the provision itself, the context would not admit of any other stretching process. 20. A criminal prosecution is neither for recovery of money nor for enforcement of any security etc. Section 138 of the NI Act is a penal provision the commission of which offence entails a conviction and sentence on proof of the guilt in duly conducted criminal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Ingots Alloys Ltd. v. Pennar Peterson Securities Ltd., (2000) 2 SCC 745, which merely followed this judgment (see paragraphs 15-18). 69. Likewise, all the judgments cited under Section 446(2) of the Companies Act, 1956 are distinguishable. Section 446(2) states as follows: 446. Suits stayed on winding up order.- xxx xxx xxx (2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under Section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the decisions of the High Court to the Supreme Court and then there are provisions for revision by the Commissioner of Income Tax. It would lead to anomalous consequences if the winding up court were to be held empowered to transfer the assessment proceedings to itself and assess the company to income tax. The argument on behalf of the appellant by Shri Desai is that the winding up court is empowered in its discretion to decline to transfer the assessment proceedings in a given case but the power on the plain language of Section 446 of the Act must be held to vest in that court to be exercised only if considered expedient. We are not impressed by this argument. The language of Section 446 must be so construed as to eliminate such startling consequences as investing the winding up court with the powers of an Income Tax Officer conferred on him by the Income Tax Act, because in our view the legislature could not have intended such a result. 18. The argument that the proceedings for assessment or reassessment of a company which is being wound up can only be started or continued with the leave of the liquidation court is also, on the scheme both of the Act and of the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company. Thus, the Delhi High Court held: 12. Mere look at the aforesaid provisions would show that on the one hand, in Section 457 of the Act, the legislature has empowered the liquidator to institute or defend any suit or prosecution or other legal proceedings civil or criminal in the name and on behalf of company after permission from the court; and by Section 454 (5A) of the Act the legislature has empowered the Company Court itself to take cognizance of the offence under sub-section (5) of Section 454 of the Act and to try such offenders as per the procedure provided for trial of summons cases under the Code of Criminal Procedure, 1974; but on the other hand in Sections 442 and 446 of the Act the legislature has used only the expression suit or other legal proceedings . The words prosecution or criminal case are conspicuously missing in these Sections. It appears quite logical as purpose and object of Sections 442 and 446 of the Act is to enable the Company Court to oversee the affairs of the company and to avoid wasteful expenditure. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets of the companies in winding-up or have some relation with the issue in winding-up. It does not mean each and every civil proceedings, which has no bearing on the winding-up proceedings, or criminal offences where the Director of the Company is presently liable for penal action. 73. As the language, object, and context of Section 22(1) of the SICA and Section 446(2) of the Companies Act are far removed from Section 14(1) of the IBC, none of the aforesaid judgments have any application to Section 14 of the IBC and are therefore distinguishable. 74. Shri Mehta then relied upon Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd., 2017 SCC OnLine Del 12189 : (2018) 246 DLT 485, in which the Delhi High Court held that a Section 34 application to set aside an award under the Arbitration and Conciliation Act, 1996 would not be covered by Section 14 of the IBC. This judgment does not state the law correctly as it is clear that a Section 34 proceeding is certainly a proceeding against the corporate debtor which may result in an arbitral award against the corporate debtor being upheld, as a result of which, monies would then be payable by the corporate debtor. A Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have incurred such obligations or liabilities, as distinct from the obligations or liabilities of the undertaking, they are liable to be proceeded against for their personal acts of commission and omission. The remedy in that behalf cannot be suspended nor can a proceeding already commenced against them in their individual capacity be stayed. Indeed, it would be strange if any such thing was within the contemplation of law. Normally, the occasion for declaring an industry as a relief undertaking would arise out of causes connected with defaults on the part of its directors and other officers. To declare a moratorium on legal actions against persons whose activities have necessitated the issuance of a notification in the interest of unemployment relief is to give to such persons the benefit of their own wrong. Section 4(1)(a)(iv) therefore advisedly limits the power of the State Government to direct suspension of remedies and stay of proceedings involving the obligations and liabilities in relation to a relief undertaking and which were incurred before the undertaking was declared a relief undertaking. 8. Para 38(1) of the Employees Provident Funds Scheme, 1952 imposes an obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent field. There is no overlap. While RDBA has been enacted to provide for speedier remedy for banks and financial institutions to recover their dues, SARFAESI Act (with added chapter on registration of secured creditor) aims at facilitating the secured creditors to expeditiously and effectively enforce their security interest. In each case, the amount to be recovered is due to the claimant i.e. the banks or the financial institutions or the secured creditor, as the case may be, the claim being against the debtor (or his guarantor). The Insolvency Code, in contrast, seeks to primarily protect the interest of creditors by entrusting them with the responsibility to seek resolution through a professional (RP), failure on his part leading eventually to the liquidation process. xxx xxx xxx 141. This court finds it difficult to accept the proposition that the jurisdiction conferred on the State by PMLA to confiscate the proceeds of crime concerns a property the value whereof is debt due or payable to the Government (Central or State) or local authority. The Government, when it exercises its power under PMLA to seek attachment leading to confiscation of proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term as well as in the Section is of immense significance and, in its tentacle, it brings in the company as well as the Director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the Directors or other officers is tenable even if the company is not arraigned as an accused. The words as well as have to be understood in the context. xxx xxx xxx 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78. In conclusion, disagreeing with the Bombay High Court and the Calcutta High Court judgments in Tayal Cotton Pvt. Ltd. v. State of Maharashtra, 2018 SCC OnLine Bom 2069 : (2019) 1 Mah LJ 312 and M/s MBL Infrastructure Ltd. v. Manik Chand Somani, CRR 3456/2018 (Calcutta High Court; decided on 16.04.2019), respectively, we hold that a Section 138/141 proceeding against a corporate debtor is covered by Section 14(1)(a) of the IBC. 79. Resultantly, the civil appeal is allowed and the judgment under appeal is set aside. However, the Section 138/141 proceedings in this case will continue both against the company as well as the appellants for the reason given by us in paragraph 77 above as well as the fact that the insolvency resolution process does not involve a new management taking over. We may also note that the moratorium period has come to an end in this case. Criminal Appeal arising out of SLP ( Crimina l) Diary No.32585 of 2019 1. Delay condoned. Leave granted. 2. Shri S. Nagamuthu, learned Senior Advocate appearing on behalf of the appellant, has made various submissions before us. Suffice it to state that his first submission is that as a moratorium is im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Appeal arising out of SLP (Criminal) Nos.2246-2247 of 2020 1. Leave granted. 2. In this case, the two complaints dated 12.03. 2018 and 14.03.2018 under Section 138 read with Section 141 of the Negotiable Instruments Act were filed by the respondent against the corporate debtor along with persons in charge of and responsible for the conduct of business of the corporate debtor. On 14.02.2020, the Adjudicating Authority admitted a petition under Section 9 of the IBC against the corporate debtor and imposed a moratorium. The impugned interim order dated 20.02.2020 is for the issuance of non-bailable warrants against two of the accused individuals. 3. Given our judgment in Civil Appeal No.10355 of 2018, the moratorium provision not extending to persons other than the corporate debtor, this appeal also stands dismissed. Criminal Appeal arising out of SLP (Criminal) No.2496 of 2020 1. Leave granted. 2. In the present case, a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act was filed by Respondent No.1 against the corporate debtor together with its Managing Director and Director on 15.05.2018. It is only thereafter that a petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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