IBC & Negotiable Instruments Act – proceedings – Distinction
The IT Department filed Section 138 NI Act complaint for dishonour of cheque of Rs.1 crore issued by the petitioners – Company, Managing Director and the Director as accused for payment of income tax liability. On 11.5.2015 the learned Magistrate passed the summoning order.
Section 96 IBC application was filed for stay of the said proceedings. This was rejected by the order dated 21.8.2023.
Hence, this petition under Section 482 of Cr PC for quashing the said order.
HELD that the proceedings of Section 138 NI Act are not in respect of recovery of “debt” but penal in nature inviting punishment. There is no such provision under the IBC. The nature and scope of proceedings under both the Acts is quite different. Non-obstante clause of Section 238 of the IBC has no application to NI Act. Moratorium of Section 14 of IBC would apply only to the corporate debtor and the natural persons mentioned in Section 141 of NI Act continue to be liable under NI Act.
Section 14 of IBC is clear that the nature of proceedings do not include criminal proceedings in the nature of Section 138 of NI Act. Although Section 138 proceedings arise from default in financial debt, it is criminal proceedings and penal in nature.
The process under IBC for extinguish of the debt would not ipso facto apply to the extinguishment of criminal proceedings.
Judgment dated 13.3.2024 of PH High Court in CRM-M-52874-2023 (O&M) of Jitender Singh Sodhi and another Vs. Deputy Commissioner of Income Tax and another with connected matters
