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Supreme Court of India
M/S Nag Leathers Pvt. Ltd. vs M/S Dynamic Marketing … on 18 November, 2021Author: Uday Umesh Lalit
Bench: Uday Umesh Lalit, S. Ravindra Bhat
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IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1424 OF 2021
(Arising out of SLP (Crl.) No.9077 of 2019)
M/s. NAG LEATHERS PVT. LTD. Appellant
VERSUS
M/s. DYNAMIC MARKETING PARTNERSHIP,
REP. BY ITS PARTNERS & ANOTHER Respondents
O R D E R
Leave granted.
This appeal challenges the judgment and order dated
02.04.2019 passed by the High Court of Judicature at Madras in
Crl. O.P. No.8869 of 2018.
The appellant preferred aforestated Criminal Original
Petition under Section 482 of the Code of Criminal Procedure,
1973 (“the Code” for short) seeking quashing of pending
proceedings initiated by the respondents herein under Section
138 of the Negotiable Instruments Act, 1881 (“the Act” for
short) on the ground that the debt in question was not
enforceable and was only in the nature of a security. The
challenge having been negated, the instant appeal has been
Signature Not Verified
filed in this Court.
Digitally signed by Dr.
Mukesh Nasa
Date: 2021.11.25
19:48:42 IST
Reason:
On 25.10.2019, following submission advanced on behalf of
the appellant was noted by this Court whereafter notice was
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issued in the matter:
“Mr. Nagamuthu, learned senior advocate appearing for
the petitioner submits that a moratorium was issued
by NCLT, Division Bench, Chennai while dealing with
TCP/73/(IB)/CB/2017 vide order dated 10.7.2017 which
inter alia prohibited institution of any suit or
continuation of pending suit against the corporate
debtor and transferring, encumbering, alienating or
disposing of by the corporate debtor of any of its
assets or any legal rights or beneficial interest
therein.
He further submits that the statutory notice under
Section 138 of the Negotiable Instruments Act was
issued on 21.12.2017 and reply dated 2.1.2018
disclosed the factum about the moratorium.
Learned counsel, therefore, submits that the
proceedings under Section 138 of the Negotiable
Instruments Act against the Corporate-debtor could
not have been instituted.”
Considering the issues involved in the matter, by
subsequent order dated 17.02.2020, this Court issued notice to
the Learned Attorney General for India so that any Law Officer
could assist this Court. Pursuant to said order, Mr. Tushar
Mehta, learned Solicitor General has appeared and assisted
this Court.
During the pendency of the instant matter, the question
as to the nature of the liability of a corporate debtor in
respect of proceedings initiated under Section 138 of the Act,
after the issuance of the moratorium, was considered by a
three Judge Bench of this Court in P. Mohanraj
& Others v. Shah Brothers Ispat Private Ltd., (2021) 6 SCC
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258, and the conclusions drawn by this Court were as under:
“103. In conclusion, disagreeing with the Bombay High
Court and the Calcutta High Court judgments in Tayal
Cotton (P) Ltd. v. State of Maharashtra, 2018 SCC
OnLine Bom 2069 : (2019) 1 Mah LJ 312 and MBL
Infrastructions Ltd. v. Manik Chand Somani, 2019 SCC
OnLine Cal 9097 respectively, we hold that a Sections
138/141 proceeding against a corporate debtor is
covered by Section 14(1)(a) IBC.
104. Resultantly, the civil appeal is allowed and the
judgment under appeal is set aside. However, the
Sections 138/141 proceedings in this case will
continue both against the Company as well as the
appellants for the reason given by us in paras 101
and 102 above as well as the fact that the insolvency
resolution process does not involve a new management
taking over. We may also note that the moratorium
period has come to an end in this case.”
In that case, apart from the corporate debtor, certain
natural persons who were stated to be in-charge of and
responsible for the affairs of the corporate debtor were also
arrayed as accused and, as such, the proceedings under Section
138/141 of the Act were allowed to be continued as against
such natural persons.
However, in the instant case, the complaint was filed
only against the corporate entity and none of the natural
persons who were stated to be the in-charge of and responsible
for the affairs of the corporate entity were arrayed as
accused.
The decision rendered by this Court in P. Mohanraj
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(supra) has since then been followed by another three-Judge
Bench of this Court in Gimpex Private Ltd. v. Manoj Goel, 2021
SCC Online SC 925 : 2021 (12) SCALE 269.
It must therefore be held that the corporate debtor,
namely, the appellant herein cannot now be proceeded against
under Section 138 of the Act. Consequently, the proceedings
initiated against the appellant deserve to be quashed.
Since no natural person was arrayed as accused, the
exception carved out in the decision of this Court in
P. Mohanraj (supra) does not arise in the instant case.
The appeal is thus allowed. The decision under challenge
is set-aside; the Criminal Original Petition preferred by the
appellant under Section 482 of the Code is allowed and the
proceedings against the appellant are quashed.
In the end, we must express our sincere appreciation and
gratitude for the assistance rendered by Mr. Tushar Mehta,
learned Solicitor General.
With these observations, the appeal is allowed.
……………………J.
(UDAY UMESH LALIT)
……………………J.
(S. RAVINDRA BHAT)
New Delhi,
November 18, 2021
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