| The core question was whether the interim moratorium under section 96 of the IBC applies to the initiation or continuation of a complaint under section 138 read with section 141 of the NI Act against directors and other persons vicariously liable. A Settlement Award dated 30.10.2013 had been passed under section 73 of the Arbitration and Conciliation Act, 1996, under which Rs. 771 crore became payable by the accused company in thirteen instalments. The company paid the first instalment but defaulted on the later ones, and Rs. 124.50 crore was due as of 10.03.2014. A cheque for Rs. 30 crore issued by the company towards the award liability and signed by the applicant and a co-director on its behalf was dishonoured. As the amount remained unpaid despite a demand notice, the spot exchange filed a complaint under sections 138 and 141. During the pendency of the complaint, the applicant filed an application under section 94 of the IBC (which, according to the complainant, related to his liability as a guarantor) before the NCLT, Delhi, and sought a stay of the complaint on the strength of the interim moratorium. The learned Magistrate declined the stay, reasoning that the debt was the company’s and not the director’s. Dismissing the application and the connected matters, the High Court held that sections 94 to 96 must be read together, so the interim moratorium covers only the debts of the person by or against whom the insolvency process is initiated. Where a company draws a cheque towards its own liability, the debt remains the company’s; section 141 makes directors vicariously liable for the offence but does not make that debt theirs. The Court also rejected the argument that the position differs where the process is initiated by a creditor (section 95) rather than by the debtor (section 94). It held that there was no justification to stay the trial of the directors and that, at best, the criminal court may be called upon to examine the moratorium’s effect when directing compensation under section 395 of the Bharatiya Nagarik Suraksha Sanhita, 2023, or when recovering it. The Court also noted that the Supreme Court’s decision in the Dineshchand Surana case, which referred questions to a larger Bench, including whether the Part III moratorium should apply to the entire section 138 proceeding or only to its compensatory aspect, did not assist the applicants and petitioners, as that decision itself reiterated that the criminal aspect cannot be stayed and directors cannot escape personal criminal liability. |
