AJAY KUMAR RADHEYSHYAM GOENKA versus TOURISM FINANCE CORPORATION OF INDIA LTD.

AJAY KUMAR RADHEYSHYAM GOENKA versus TOURISM FINANCE CORPORATION OF INDIA LTD.

The Supreme Court held that (i) the moratorium under Section 14 IBC does not encompass criminal proceedings under Section 138 NI Act and such penal proceedings may continue; (ii) Section 32A IBC may extinguish criminal liability of the corporate debtor after approval of a resolution plan insofar as the corporate debtor is taken over by a new management satisfying Section 32A(1) conditions, but prosecutions under Section 138/141 in relation to signatories, directors or persons covered by the provisos to Section 32A(1) continue and cannot be extinguished by the resolution plan or dissolution of the company; and (iii) clauses in a resolution plan cannot override statutory provisions or...

Parties
Appellant; Accused No.2; Promoter and Managing Director of M/s Rainbow Papers Limited: Ajay Kumar Radheyshyam Goenka; Respondent; Complainant; Financial Creditor: Tourism Finance Corporation of India Ltd.; Accused No.1; Corporate Debtor: M/s Rainbow Papers Limited
Jurisdiction
India
Judgment Date
15 March 2023
Procedural Posture
Criminal Appeal No. 172 of 2023 / Appeal to Supreme Court Against Order Dated 23.11.2019 of the Additional Sessions Judge Dismissing Criminal Revision and Refusing Discharge of Accused in Section 138 NI Act Complaint; Underlying NI Act Trial and Parallel CIRP Under IBC Before NCLT
Outcome
Appeals dismissed
Legal Topics
IBC Moratorium (section 14), Effect of Approved Resolution Plan (section 31), Liability of Corporate Debtor and Officers (section 32 A), Dishonour of Cheque (section 138 NI Act), Vicarious Liability of Directors (section 141 NI Act), Compounding Vs Quashing of Offences, Representation of Corporate Accused (section 305 Cr Pc)
Insolvency and Bankruptcy Criminal Law Negotiable Instruments Law Criminal Procedure IBC Moratorium (section 14) Effect of Approved Resolution Plan (section 31) Liability of Corporate Debtor and Officers (section 32 A) Dishonour of Cheque (section 138 NI Act) +3 more

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Parties

Ajay Kumar Radheyshyam Goenka

Appellant; Accused No.2; Promoter and Managing Director of M/s Rainbow Papers Limited

Tourism Finance Corporation of India Ltd.

Respondent; Complainant; Financial Creditor

M/s Rainbow Papers Limited

Accused No.1; Corporate Debtor

Procedural Posture

Criminal Appeal No. 172 of 2023 / Appeal to Supreme Court Against Order Dated 23.11.2019 of the Additional Sessions Judge Dismissing Criminal Revision and Refusing Discharge of Accused in Section 138 NI Act Complaint; Underlying NI Act Trial and Parallel CIRP Under IBC Before NCLT

Legal Issues

  1. 1 Whether approval of a resolution plan or extinguishment of debt under the IBC (including Section 31 or liquidation provisions) extinguishes criminal liability under Section 138/141 of the Negotiable Instruments Act for signatories/directors
  2. 2 Whether the moratorium under Section 14 IBC bars continuation of criminal proceedings under Section 138 NI Act
  3. 3 Effect and scope of Section 32A IBC on criminal liability of corporate debtor and persons in charge

Ratio Decidendi

The Supreme Court held that (i) the moratorium under Section 14 IBC does not encompass criminal proceedings under Section 138 NI Act and such penal proceedings may continue; (ii) Section 32A IBC may extinguish criminal liability of the corporate debtor after approval of a resolution plan insofar as the corporate debtor is taken over by a new management satisfying Section 32A(1) conditions, but prosecutions under Section 138/141 in relation to signatories, directors or persons covered by the provisos to Section 32A(1) continue and cannot be extinguished by the resolution plan or dissolution of the company; and (iii) clauses in a resolution plan cannot override statutory provisions or...

Court Disposition

Appeals dismissed

Orders

  • Criminal appeals dismissed
  • Pending applications, if any, disposed of