The High Court of Himachal Pradesh has reaffirmed that the moratorium under Sections 14(1) and 101 of the Insolvency and Bankruptcy Code, 2016 (IBC), applies only to the corporate debtor (company) and not to its directors or natural persons. Criminal proceedings under Section 138 and 141 of the Negotiable Instruments Act, 1881, can continue against directors despite the company being under liquidation or moratorium. This judgment upholds Supreme Court and recent High Court precedent, serving as binding authority within Himachal Pradesh and strong persuasive value elsewhere, particularly for banking and insolvency litigation.
Summary
| Category | Data |
|---|---|
| Case Name | CRMMO/1107/2024 of M/S HARI RAM MOTORS PVT LTD AND OTHERS Vs SBI |
| CNR | HPHC010551902024 |
| Date of Registration | 12-11-2024 |
| Decision Date | 30-10-2025 |
| Disposal Nature | Dismissed |
| Judgment Author | Hon’ble Mr. Justice Rakesh Kainthla |
| Court | High Court of Himachal Pradesh, Shimla |
| Bench | Hon’ble Mr Justice Rakesh Kainthla, Single Judge |
| Precedent Value | Binding within Himachal Pradesh, persuasive elsewhere |
| Overrules / Affirms | Affirms existing Supreme Court and High Court precedents (see infra) |
| Type of Law | Criminal Procedure, Insolvency & Bankruptcy, Negotiable Instruments Act |
| Questions of Law |
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| Ratio Decidendi |
The IBC moratorium prohibits proceedings only against the corporate debtor and not against natural persons such as company directors or personal guarantors. Proceedings under Section 138 (cheque dishonour) and Section 141 NI Act against natural persons/statutorily responsible directors are distinct and continue unaffected by IBC moratorium or liquidation orders. Inordinate delay and non-exhaustion of statutory remedies (such as revision) are valid grounds to refuse quashing under Section 482 CrPC except in rare, compelling cases. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
IBC moratorium’s statutory intent is to shield only the company (corporate debtor) from legal actions for recovery of debt, not from criminal prosecution; directors’ liability under Section 138/141 NI Act is personal and persists beyond corporate insolvency. Lex non cogit ad impossibilia considered (one cannot be expected to do the impossible). Law prohibits dismissal of criminal proceedings due to inherent jurisdiction except in rare/compelling circumstances, and delay/laches is a sufficient ground to refuse such prayers. |
| Facts as Summarised by the Court |
Complainant (a bank) filed a case for dishonour of ₹2 crore cheque by the accused company and its directors. The company was ordered into liquidation by NCLT, and a moratorium under the IBC was imposed. Trial court stayed proceedings against the company but not directors. Directors moved for quashing, citing IBC moratorium and alleged mala fides, but had delayed challenging cognizance and not used available revision remedies. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Himachal Pradesh |
| Persuasive For | Other High Courts, Supreme Court, especially in insolvency and banking disputes |
| Follows |
|
What’s New / What Lawyers Should Note
- Reaffirms that IBC moratorium bars proceedings only against corporate debtors; directors and guarantors remain liable under Section 138/141 NI Act.
- Criminal liability of directors in cheque dishonour cases cannot be nullified by company liquidation or IBC moratorium.
- Delay or laches in invoking inherent powers under Section 482 CrPC, and non-exhaustion of statutory remedies (revision), can be fatal to a quashing petition.
- Petitions for quashing after significant procedural delay, especially when statutory remedies were available, are likely to be dismissed.
- Multiple recent Supreme Court authorities have clarified that personal criminal liability cannot be evaded through insolvency proceedings.
Summary of Legal Reasoning
- The court surveyed Supreme Court decisions (Bhajan Lal, B.N. John, Ajay Malik) on the limited grounds for quashing criminal complaints using inherent powers under Section 482 CrPC; highlighted that quashing is permissible where proceedings are manifestly malicious, barred, or fail to make out a prima facie offence.
- Relying on Rakesh Bhanot v. Gurdas Agro (P) Ltd. and P. Mohanraj v. Shah Bros. Ispat (P) Ltd., the judgment emphasized: the IBC moratorium applies only to the company and not to its directors/guarantors; penal actions such as Section 138 NI Act prosecutions are not “civil recovery” proceedings and thus not stayed by IBC moratorium.
- Noted recent judgments (Ajay Kumar Radheyshyam Goenka; Narinder Garg) stress the continued criminal liability of natural persons even after the company’s insolvency resolution or liquidation.
- The court further cited Delhi High Court in Sanyam Bhushan and Supreme Court in Minakshi Bala to hold that procedural delay and failure to use available statutory remedies (revision) are sufficient grounds to refuse late-stage quashing; inherent powers under Section 482 CrPC are discretionary and not a substitute for the proper appellate or revisional process.
- Found that there were no exceptional or rare circumstances justifying invocation of inherent powers to quash cognizance.
Arguments by the Parties
Petitioner
- Trial court erred in taking cognizance and refusing to stay proceedings under IBC Section 101.
- IBC moratorium/liquidation should shield directors and not just the company from prosecution.
- Complaint lacks mandatory averments regarding directors’ responsibility/consent/connivance; allegations are inherently improbable.
- Proceedings are mala fide and constitute abuse of process.
Respondent Bank
- Complaint clearly alleges directors’ authorisation and management responsibility.
- IBC moratorium applies only to company (juridical person), not natural persons like directors or guarantors.
- Trial court’s order correct and consistent with law; proceedings against directors should continue.
Factual Background
The complainant bank filed a case against the company (dealer) and its directors after a cheque for ₹2,00,00,000 issued by the company was dishonoured for insufficient funds. The company later entered liquidation under an NCLT order, and the complainant’s claim was submitted to the insolvency process. The trial court stayed proceedings against the company but allowed them to continue against the directors. The directors sought quashing, invoking both the supposed protection of IBC moratorium and procedural grounds, but filed their challenge after significant delay and without first seeking revision.
Statutory Analysis
- IBC Sections 14(1), 101: Provide moratorium against recovery proceedings for corporate debtors only, not for natural persons.
- NI Act Sections 138, 141: Liability for dishonoured cheques attaches to both company and directors/managers responsible for conduct of business.
- CrPC Section 482: Inherent power to quash is discretionary, operates only in rare circumstances of abuse or manifest illegality.
- CrPC Section 313: Stage for recording statement of accused.
- The judgment shows a strict, not expansive, interpretation of the IBC moratorium, limiting its scope to civil (recovery) proceedings and the corporate debtor.
Dissenting / Concurring Opinion Summary
No dissenting or concurring opinions are recorded in the judgment.
Procedural Innovations
No new procedural innovations or guidelines were issued in the judgment.
Alert Indicators
- Precedent Followed – Existing Supreme Court and High Court law on the non-applicability of IBC moratorium to directors in cheque bounce criminal proceedings is firmly followed and reaffirmed.