Clarifies that the moratorium under IBC stays criminal proceedings under Section 138 NI Act only against the corporate debtor and not against natural persons such as directors or guarantors; upholds Supreme Court and recent larger bench pronouncements; affirms binding authority for all subordinate courts.
Summary
| Category | Data |
|---|---|
| Case Name | CRMMO/1108/2024 of M/S RAM HARI MOTORS PVT LTD AND OTHERS Vs SBI |
| CNR | HPHC010551912024 |
| 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 |
| Bench | Single-Judge Bench (Justice Rakesh Kainthla) |
| Precedent Value | Binding on subordinate courts within Himachal Pradesh |
| Overrules / Affirms | Affirms prevailing Supreme Court precedents and several High Court judgments |
| Type of Law | Criminal Law, Insolvency Law (Section 138 NI Act, Sections 14, 96, 101 of IBC) |
| Questions of Law |
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| Ratio Decidendi |
The IBC moratorium (Sections 14, 101) is restricted to corporate debtors and does not stay or bar criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 against natural persons (directors, signatories, guarantors). This conclusion is supported by a detailed reference to Supreme Court rulings such as Rakesh Bhanot v. Gurdas Agro (P) Ltd., P. Mohanraj v. Shah Bros. Ispat (P) Ltd., and others. The object of IBC’s moratorium is not to shield individuals from personal criminal liability. Further, High Courts should refuse to entertain petitions under Section 482 CrPC for quashing cognisance orders after inordinate and unexplained delay, especially where efficacious alternate remedies exist. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
Complaint under Section 138 NI Act filed by SBI for dishonour of ₹2,00,00,000 cheque issued by accused company (petitioner) and signed by its director. NCLT ordered liquidation of the company; applications were filed under IBC Sections 14(1) and 101 seeking stay of trial court proceedings. Trial court stayed proceedings only against the company, not the directors/guarantors. Petitioners challenged this, claiming protection under IBC moratorium and lack of necessary averments for cognisance. High Court dismissed the petitions, upholding trial court’s order. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Himachal Pradesh |
| Persuasive For | Other High Courts, and as part of broader national precedent chain on IBC/NI Act interplay |
| Follows |
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What’s New / What Lawyers Should Note
- Reaffirms that criminal proceedings against natural persons (directors/guarantors) under Section 138 NI Act are not stayed by IBC moratorium orders (Sections 14, 101).
- Moratorium protects only the corporate debtor, not personal guarantors, directors or signatories.
- Delay and laches in challenging cognisance/continuation of criminal proceedings will lead to summary dismissal, especially when alternate remedies (such as revision) are not availed in time.
- Courts are discouraged from invoking Section 482 CrPC for quashing criminal proceedings after significant delay unless rare and compelling circumstances exist.
Summary of Legal Reasoning
- The court extensively referred to Supreme Court decisions (including Rakesh Bhanot v. Gurdas Agro (P) Ltd.; P. Mohanraj v. Shah Bros. Ispat (P) Ltd.; Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corpn. Of India Ltd.; and Narinder Garg v. Kotak Mahindra Bank Ltd.) to conclude that the moratorium provisions under IBC (Sections 14 and 101) do not bar criminal prosecution under Section 138 NI Act against directors, signatories, or guarantors of a company.
- The court explained that the object of the IBC moratorium is to provide civil protection during insolvency resolution or liquidation but not to shield individuals from criminal liability for cheque dishonour.
- Section 141 NI Act specifically enables prosecution of “persons in charge” of a company, even if the company is under moratorium or liquidation.
- The High Court also addressed the issue of delay and laches, noting that an inordinate delay in challenging cognisance or trial court orders, without availing of alternate statutory remedies, cannot be condoned under Section 482 CrPC except in rare cases (citing Sanyam Bhushan v. State (NCT of Delhi), Minakshi Bala v. Sudhir Kumar).
- The rationale is that allowing prosecutions to be stalled on such grounds would defeat the deterrent effect and legislative intent behind the NI Act.
Arguments by the Parties
Petitioner
- The trial court erred in dismissing applications for stay of the proceedings in light of NCLT’s liquidation order and IBC moratorium.
- Complaint lacked necessary averments showing petitioners were in charge or responsible for the conduct of company’s business or that they consented/connived, warranting cognisance.
- Allegations were absurd/inherently improbable; proceedings actuated by mala fides.
- Proceedings should be stayed/quashed.
Respondent (Bank)
- Complaint specifically averred that accused No.2 is the authorised signatory and both accused Nos.2 and 3 are active directors/guarantors responsible for management.
- Trial court correctly held that proceedings can only be stayed against the juristic person (company) and not the natural persons.
- No infirmity in the trial court’s order; petitions should be dismissed.
Factual Background
The State Bank of India lodged a complaint under Section 138 of the Negotiable Instruments Act after a cheque of ₹2,00,00,000 issued by the accused company was dishonoured for insufficient funds. The directors and signatories were also named as accused. Following NCLT’s order of liquidation of the company, applications were filed under Sections 14(1) and 101 of the IBC seeking stay of criminal proceedings. The trial court stayed the proceedings only against the company, but not against the directors and guarantors. The petitioners challenged the trial court’s refusal to stay proceedings against natural persons and the cognisance of the case.
Statutory Analysis
- Section 14, IBC: Imposes a moratorium prohibiting certain legal actions against the corporate debtor upon commencement of insolvency.
- Section 101, IBC: Moratorium provisions applicable upon admission of an insolvency application against individuals/partners, but protection for partners only in the case of partnership firms.
- Section 138, Negotiable Instruments Act: Addresses criminal liability for dishonour of cheque.
- Section 141, Negotiable Instruments Act: Provides for liability of persons in charge of and responsible for the company.
- The court, relying on multiple precedents, noted that moratorium excludes criminal proceedings, restricting protection to civil liabilities related to debt recovery, and does not extend to natural persons’ criminal liability.
- Section 482 CrPC: The court clarified its inherent powers must be exercised sparingly and not where alternate remedies and discretion are misused, particularly in cases involving delay.
Alert Indicators
- ✔ Precedent Followed – Existing Supreme Court and High Court law on Section 138 NI Act and IBC moratorium is affirmed.