NEWS & CASE LAW
Vishnoo Mittal v. Shakti Trading Co.
Vishnoo Mittal v. Shakti Trading Co.
Equivalent Citations: 2025 SCC OnLine SC 558
Court: The Supreme Court of India
Relevant key Sections: Section 138 of the Negotiable Instruments Act, 1881 and Section 94 of the Insolvency and Bankruptcy Code, 2016
Facts of the case: Vishnoo Mittal, a director of Xalta Food & Beverages Pvt Ltd, issued eleven cheques totaling ₹11.17 lakh, which were dishonoured on 7 July 2018. A demand notice under Section 138 NI Act was sent on 6 August 2018. Meanwhile, insolvency proceedings had commenced on 25 July 2018, triggering a moratorium under Section 14 IBC and suspending directors’ powers under Section 17 IBC. The High Court refused to quash the complaint under Section 482 CrPC, relying on P. Mohan Raj. The Supreme Court distinguished Mohan Raj, noting the cause of action arose post-moratorium, quashing the Section 138 proceedings against Mittal.
Issues:
1. Whether a cause of action arising after the imposition of a moratorium can sustain a complaint under Section 138 NI Act
2. Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 can be continued against a director of a company once a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 has commenced.
Observation of the court: The Supreme Court held that proceedings under Section 138 of the Negotiable Instruments Act, 1881 cannot be sustained against a company director if the cause of action arose after the initiation of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The Court observed that once CIRP begins, a moratorium under Section 14 IBC bars proceedings against the corporate debtor, and Section 17 removes the board's powers, vesting them in a Resolution Professional. Thus, any cheque issued or dishonoured post-CIRP cannot attract personal criminal liability.
Ratio of the Case: The Supreme Court held that a director of a company cannot be held criminally liable under Section 138 of the Negotiable Instruments Act, 1881, if the dishonour of cheque occurs after the commencement of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. Once CIRP begins, Section 17 IBC suspends the board of directors, vesting management with the Resolution Professional, and Section 14 IBC imposes a moratorium on proceedings against the company. Therefore, any post-CIRP cheque dishonour lacks the legal capacity and intent required under Section 138 NI Act, defeating criminal liability.
