According to the Madras High Court, proceedings under Sections 138/141 of the Negotiable Instruments Act cannot be started against the Corporate Debtor while a moratorium under Section 14 of the Insolvency and Bankruptcy Code is in place. However, as stated in Section 141, these actions may be taken against natural persons. The matter was between M/s. Nag Leather Pvt. Ltd. v. M/s. Muzain Hides (Crl. O.P. Nos.17954, 17976, 24110, 25561 & 25573 of 2018 and Crl.M.P.Nos.9357, 9358, 9381, 9382, 13607, 13610, 14587, 14589, 14607 & 14608 of 2018) and was presided over by Hon’ble Mr. Justice N. Sathish Kumar.
FACTS OF THE CASE:
Under Section 482 of the Code of Criminal Procedure, a petition was filed to dismiss accusations made against the petitioners for violating Sections 138, 141, and 142 of the Negotiable Instruments Act over money owed to the respondent.
Accepting the contention of the Petitioners and relying on the case of P. Mohanraj, the Court quoted from the judgment-
“Thus, for the period of moratorium, since no Section 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Section 141(1) and (2) of the Negotiable Instrument Act. This being the case, it is clear that the moratorium provision contained 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.”
Further, the Court held that proceedings under Sections 138/141 of the Negotiable Instruments Act cannot be started against the Corporate Debtor while a moratorium under Section 14 of the Insolvency and Bankruptcy Code is in place. However, as stated in Section 141, these actions may be taken against natural persons.
The Court granted the Respondent permission to pursue legal action against Petitioners Nos. 2 and 3, who are both natural persons, noting that the moratorium would only apply in regard to the Corporate Debtor and not in regard to the directors or management.
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JUDGMENT REVIEWED BY ADITI PRIYADARSHI