SB Pvt. Ltd. supplied raw materials worth ₹ 15 lakh in January 2018 to a company named MR Ltd. MR Ltd. issued two cheques for ₹ 10 lakh, dated 15th April, 2018 and ₹ 5 lakh, dated 1st June, 2018, in favour of SB Pvt. Ltd

The above case is similar to the facts as was in the case of Shah Brothers Ispat (P.) Ltd. v. P. Mohanraj & Ors , decided by the NCLAT, New Delhi, on July 31, 2018. Decision given by the Adjudicating Authority: The Adjudicating Authority opined that SB Pvt. Ltd. had violated order of moratorium issued by Adjudicating Authority, which was a deliberate attempt on part of the SB Pvt. Ltd. and sheer misuse of process of law. The SB Pvt. Ltd. was directed to withdraw the complaint filed under Negotiable Instruments Act, 1881 and, in case the SB Pvt. Ltd. had not withdrawn, action for violation of moratorium would be taken against it. Reasons on chances of success of aggrieved party on Appeal: Section 14 of the Insolvency and Bankruptcy Code, 2016 was apparently misunderstood by the Adjudicating Authority. The language of Section 14 nowhere prohibits the initiation of criminal action. If there would have been the intention of the law maker to include the prohibition of criminal action against the corporate debtor, it would have been specifically mentioned in section 14 itself. The issue before the Appellate Tribunal is as under: Whether the order of moratorium will cover a criminal proceeding under Section 138 of the Negotiable Instruments Act, 1881, which provides punishment of imprisonment for a term which may extend to three years or with fine which may extend to twice the amount of cheque or with both? The decision to be given in the case with logical reasoning, may be mentioned as under: The company cannot be imprisoned, therefore aforesaid punishment under Section 138 of the Negotiable Instruments Act, 1881 cannot be imposed against the MR Ltd. However, fine can be imposed by a court of competent jurisdiction on MR Ltd, if found guilty. The Directors of the MR Ltd. being parties can be imprisoned and also fine may be imposed on them. The contention given by the MR Ltd. that the proceeding under Section 138 of the Negotiable Instruments Act, 1881 is covered by clause of sub-section (I) (a) of Section 14 of the Code, therefore, proceedings against the MR Ltd. including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority cannot proceed, is not acceptable by the Appellate Tribunal for the reasons being Section 138 of the Negotiable Instruments Act, 1881 is a penal provision, which empowers the court of competent jurisdiction to pass order of imprisonment or fine, which cannot be held to be proceeding or any judgment or decree of money claim. Imposition of fine cannot held to be a money claim or recovery against the MR Ltd. nor order of imprisonment, if passed by the court of competent jurisdiction on the Directors, they cannot claim benefit of moratorium under Section 14 of the Code. In fact no criminal proceeding is covered under Section 14 of the Code, so the question of moratorium on the criminal complaint under section 138 of the Negotiable Instruments Act, 1881 stands nowhere.