Criminal action possible despite moratorium under IBC


The National Company Law Appellate Tribunal (NCLAT) recently considered whether a moratorium order covers a criminal proceeding under section 138 of Negotiable Instruments Act, 1881 (NI Act), which provides for punishment in the form of a term of imprisonment which may extend to two years or with a fine which may extend to twice the amount of the dishonoured cheque or with both.

In Shah Brothers Ispat Private Limited v P Mohanraj & Others, the appellant creditors initiated a corporate insolvency resolution process against corporate debtor Diamond Engineering Chennai, and filed a complaint against the corporate debtor and its directors under section 138 of the NI Act. Section 138 pertains to a cheque being dishonoured due to an insufficiency of funds in the account.

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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at or Readers should not act on the basis of this information without seeking professional legal advice.