Vishnoo Mittal Vs Shakti Trading Company (Supreme Court of India)
The Supreme Court ruled in favor of Vishnoo Mittal, a director of Xalta Food and Beverages Pvt. Ltd., quashing a cheque bounce case filed against him under Section 138 of the Negotiable Instruments Act, 1881. Mittal had issued 11 cheques totaling ₹11,17,326 to Shakti Trading Company, which were dishonored in July 2018. After the company entered insolvency proceedings on July 25, 2018, a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) was imposed, preventing legal action against the corporate debtor. However, the complainant issued a legal notice on August 6, 2018, and filed a case against Mittal. When the Punjab and Haryana High Court refused to quash the proceedings, Mittal approached the Supreme Court.
The Supreme Court found that since the moratorium was in place before the cause of action arose (August 21, 2018, when the 15-day payment period ended), Mittal, as a director, was not liable under Section 138. The Court distinguished the case from P. Mohan Raj v. Shah Brothers Ispat Pvt. Ltd., where proceedings were allowed against natural persons despite insolvency. In this case, Mittal had no control over the company’s finances once the Interim Resolution Professional (IRP) took over. The Court ruled that continuing prosecution against him was unjustified and quashed both the High Court’s order and the complaint.
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