Between The Lines ... May 2023

I. SUPREME COURT: DIRECTORS CANNOT ESCAPE PENAL LIABILITY IN CHEQUE DISHONORING CASES BY CITING COMPANY'S DISSOLUTION.

The Supreme Court of India ("SC"), in the case of Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Limited [Criminal Appeal No. 172 of 2023], while deciding the ongoing proceedings under Negotiable Instruments Act, 1881 ("NI Act") as well as the ongoing Corporate Insolvency Resolution Proceedings ("CIRP") held that the scope of the proceedings under the NI Act and Insolvency and Bankruptcy Code, 2016 ("IBC") are very different and would not conflict with one another.

Facts

Tourism Finance Corporation of India Limited ("Respondent") granted a loan of INR 30 Crores to Rainbow Papers Limited ("Corporate Debtor") and subsequently entered into a loan agreement dated March 27, 2012 ("Loan Agreement"). Mr. Ajay Kumar Radheyshyam Goenka ("Appellant") was the promoter as well as the managing director of the Corporate Debtor.