Summarizing The Interface Between Negotiable Instruments Act And The Insolvency Code In P. Mohanraj v Shah Brothers Ispat

Introduction

The Supreme Court of India recently pronounced the milestone judgment of P. Mohanraj V. Shah Brothers Ispat Pvt. Ltd. One specific question raised in the said judgment related to whether the scope of Section 14 of the Insolvency and Bankruptcy Code, 2016 ("IB Code") would cover the magnitude of the Negotiable Instruments Act of 1881 ("NI Act").

In addition, the question raised is it is permitted to initiate the cheque bounce proceeding under the NI Act or to continue the proceeding against the debtor company and its directors when the debtor company is about to resolve its bankruptcy issue or in an ongoing corporate insolvency resolution process (CIRP).

Brief Facts