Applicability Of Moratorium In Cheque Bounce Cases: Conundrum Continues

Quite recently, Hon'ble National Company Law Appellate Tribunal ("NCLAT/ Appellate Authority") while deciding the issue, "whether the order of moratorium will cover a criminal proceeding under Section 138 of NI Act...?", in Shah Brothers Ispat Pvt. Ltd. v. P. Mohanraj & Ors., Company Appeal (AT) (Insolvency) No. 306/2018 (dated 31.07.2018), has held that the proceedings under Section 138 of the Negotiable Instruments Act, 1881 ("NI Act") would not fall within the purview of Section 14 of the Insolvency and Bankruptcy Code, 2016 ("IBC/ Code"). The reasoning of the Appellate Authority for reaching such a finding was that the proceedings under Section 138 NI Act are penal in nature, empowering a Court of competent jurisdiction to pass order of imprisonment or fine, which were held not to fall under the category of a proceeding, judgment or decree of money claim. According to the Hon'ble NCLAT, imposition of fine cannot be held to be a money claim or recovery against the