Dineshchand Surana Vs UCO Bank (Supreme Court of India)
“Negotiable Instruments Act, 1881 – Sections 138, 141, 143-A, 148; Insolvency and Bankruptcy Code, 2016 – Sections 96, 101, 124, 128, 79(15); Bharatiya Nagarik Suraksha Sanhita, 2023 – Section 395. Issue was whether moratorium under Part III of the IBC bars proceedings under Section 138 NI Act against a person undergoing personal insolvency/bankruptcy and against directors vicariously liable under Section 141. Held that Section 138, though quasi-criminal and arising from a civil transaction, is predominantly criminal in nature; the offence is the dishonour of cheque and not mere non-payment of debt, and the provision is not a mere debt-recovery mechanism. Hence, moratorium under Part III of the IBC cannot apply to the criminal aspect of Section 138 proceedings, particularly in view of the exclusion of liability to pay fine under Section 79(15) IBC. At the same time, compensation awarded in such proceedings under Section 395 BNSS was treated as civil in character, and recovery thereof was viewed as capable of being stayed during moratorium. The same position was stated to apply to directors under Section 141 only qua compensatory liability, not personal criminal liability. In view of the issues arising and the need for authoritative pronouncement, the matter was directed to be placed before the Chief Justice for constitution of an appropriate three-Judge Bench; questions were referred.
