TMI Blog2023 (2) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... or disposing of any of its assets. Meaning thereby, the amount in the bank account of the Corporate Debtor/company came to be freezed. Insolvency Resolution Professional was appointed. He took over the charge of management of the Corporate Debtor/company. There is communication on record indicating the Corporate Debtor to have expressed its inability to pay the amount of dishonoured cheques on account of moratorium imposed vide order dated 08/01/2019. The concern bank of Corporate Debtor/company was also informed the operation of bank account was taken over by Insolvency Resolution Professional - As a consequence, the Insolvency Resolution Professional became the authority to operate the bank account. As a further consequence, signature of earlier person, who was authorized to operate the bank account, came to be replaced with that of the Insolvency Resolution Professional. The cheques came to be presented on 11/04/2019 and 02/05/2019 i.e. long after moratorium was imposed. When the cheques were presented for encashment, the respondents were no longer in control and management of day to day affairs of the Corporate Debtor. It is not known as to whether there were sufficient funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 14,56,664/- each and 007563 of Rs. 12,00,000/-, totalling an amount of Rs. 55,69,992/-. 4. It is averred in the complaint that accused nos. 2 to 4 were in charge of affairs of the accused-company. They have active participation in management of the company. They were also responsible for day to day business and operation of the accusedcompany. 5. It is further averred in the complaint that the applicant/complainant was in the business of providing medical services such as medical manning, medical consultancy solutions and topside medical assistance etc. The original accused nos. 2 to 4 approached the applicant/complainant for availing various services like providing qualified doctors, qualified paramedics, topside medical assistance, BLS/ACLS ambulance, medical/nonmedical escort and hospital/OPD treatment etc. The applicant/complainant provided all the services in terms of Purchase Orders issued by the accused. Various invoices were therefore raised. The invoices have been duly acknowledged by the accused without any demur or protest. A sum of Rs. 43,69,900/- + Rs. 12,00,000/- = Rs. 55,69,992/- was due from the accused-company. Since the accused were unable to pay the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The observations of Hon ble Apex Court in paragraphs 101 102 of the judgment in the case of P. Mohanraj (supra) have been specifically relied on. 11. Learned Advocate further relied on the judgments of Hon ble Apex Court in the cases of Nag Leathers Private Limited vs. Dynamic Marketing Partnership represented by its partners and Another reported in (2022)2 Supreme Court Cases 271 and Narinder Garg and Others vs. Kotak Mahindra Bank Limited and Others reported in 2022 SCC OnLine SC 517, to ultimately submit that there is no bar to prosecute natural persons, who could be brought under the dragnet of offence in view of Section 141 of NI Act. He would further submit that what has been submitted by learned Advocate for the respondents if accepted, it would be easy for the company/firm to apply on its own under Section 9 of IBC and get itself and all other natural persons responsible for commission of the offence, absolved of the criminal liability. 12. Since submissions advanced by learned Advocate for the applicant/complainant were based on the observations in the case of P. Mohanraj (supra), this Court do not propose to detain itself with the submissions made by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Rajesh Meena vs. State of Haryana and Others reported in 2019 SCC OnLine P H 6256 , wherein it has been observed that - 20. A careful analysis of Section 138 of NI Act reveals that the first and foremost requirement to maintain the complaint under Section 138 of NI Act is that the cheque issued by the account holder must be from the account maintained by account holder with the drawer-Bank for discharge in whole or in part of any debt or other liability. 21. The expression account maintained by him as appearing in Section 138 of NI Act carries great significance and meaning. The dictionary meaning of Maintain (as contained in Oxford Dictionary) is defined as :- the act of making the state or situation continue. Therefore, the said expression account maintained by him cannot be construed narrowly to mean that if the account belongs to the accused, the necessary ingredient would be complete. This expression account maintained by him must necessarily include that the said account is not only alive and operative, but the account holder is capable of executing command to govern the financial transactions which include the clearance of cheques etc. The authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liability. It had issued four post-dated cheques (subject matter of the complaint) towards repayment of principle sum due + interest on delay in payment. 21. Since the terms of settlement could not be materialized, the cheques were presented for encashment. The cheques returned unpaid for the reason Drawer s Signature Differ . A short question therefore falls for consideration in these applications is as to whether the prosecution under Section 138 read with 141 of NI Act against the respondents shall continue in the peculiar facts and circumstances of the case. 22. For better appreciation, Section 14 of IBC is reproduced hereinafter :- 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 judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate insolvency resolution process: PROVIDED that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. 23. Admittedly, another operational creditor initiated/filed proceeding against accused company under Section 9 of IBC vide Application No. 1414/2018. The said application was allowed on 08/01/2019. NCLT, Mumbai Bench vide order dated 08/01/2019 admitted the said application with the following prohibitory orders :- (I) (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 (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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons, whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind 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. 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the Company is an a express condition precedent to attract th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act. 25. In the case of Nag Leathers Private Limited (supra), it has been observed by the Hon ble Apex Court that since no natural person was arrayed as accused, exception carved out in aforementioned case of P. Mohanraj (supra), does not arise in the instant case. While in the case of Narinder Garg (supra), it has been observed by the Hon ble Apex Court that - A subsidiary issue was also about the liability of natural persons like a Director of the Company. In paragraph 77 of its judgment, this Court observed that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the corporate debtor and that the natural persons mentioned in Section 141 of the Act would continue to be statutorily liable under the provisions of the Act. 26. The dates of happenings are crucial one to decide the issue involved in these applications. Before that the facts in the case of P. Mohanraj (supra), need to be adverted to. Those are as under :- Steal products were supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hereinbelow :- 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 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, make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovan reported in 2022 SCC OnLine SC 1238 , it has been observed by the Hon ble Apex Court that - 24. Evidently, the gist of Section 138 is that the drawer of the cheque shall be deemed to have committed an offence when the cheque drawn by him is returned unpaid on the prescribed grounds. The conditions precedent and the conditions subsequent to constitute the offence are drawing of a cheque on the account maintained by the drawer with a banker, presentation of the cheque within the prescribed period, making of a demand by the payee by giving a notice in writing within the prescribed period and failure of the drawer to pay within the prescribed period. Upon fulfilment of these requirements, the commission of the offence which may be called the offence of dishonour of cheque is complete. If the drawer is a company, the offence is primarily committed by the company. By virtue of the provisions of sub-section (1) of Section 141, the guilt for the offence and the liability to be prosecuted and punished shall be extended to every person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of its business; irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the offence of, what may be loosely called dishonour of cheque can be constituted for the purpose of prosecution and punishment. It is held by the Supreme Court in K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510, that :- 14. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. The following are the acts which are components of the said offence : (1) drawing of the cheque, (2) presentation of the cheque to the bank, (3) returning the cheque unpaid by the drawee bank, (4) giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice. 30. The facts of the case in hand are that the four post-dated cheques were issued in pursuance of the Consent Terms dated 26/02/2018. The details of cheques are as under :- Sr. No. Cheque Date Cheque Number Cheque Amount 1. 28/02/2019 007559 14,56,664/- 2. 30/03/2019 007564 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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