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Ajay Kumar Radheyshyam Goenka vs Tourism Finance Corporation of India Ltd.

Criminal Appeal · 2023 INSC 232Decided 15 Mar 2023
Criminal Appeal No. 172 of 2023
Sanjay Kishan Kaul

Background

The appellant, Ajay Kumar Radheyshyam Goenka, was the Promoter and Managing Director of M/s Rainbow Papers Limited, which had taken a Rs. 30 crore term loan from Tourism Finance Corporation of India Ltd. A post-dated cheque of about Rs. 25.5 lakh issued towards an instalment was dishonoured because the account had been closed, leading to a criminal complaint under Section 138 of the NI Act against the company and the appellant personally. While the complaint was pending, insolvency proceedings were admitted against the company under the IBC, and a resolution plan was eventually approved by a new management. The appellant argued that once the debt was extinguished or restructured under the IBC's resolution process, the basis for the Section 138 prosecution against him personally disappeared, and sought discharge: a plea rejected by the Magistrate and the High Court, leading to this appeal.

Decision Breakdown

The Court held that proceedings under the IBC and under Section 138 of the NI Act operate in entirely different fields: the IBC moratorium under Section 14 covers only the corporate debtor, and does not extend to the personal, penal liability of a director or signatory of a dishonoured cheque under Section 141 of the NI Act. Cheque-dishonour proceedings are penal, not mere debt-recovery proceedings, so a resolution plan absolving or restructuring the company's debt does not automatically extinguish the signatory's individual criminal liability. Drawing on Section 32A of the IBC and prior precedent (P. Mohanraj and Manish Kumar), the Court explained that Section 32A discharges only the corporate debtor from criminal liability once a new, unconnected management takes over under an approved resolution plan; persons who were in charge of, or responsible for, the company's affairs at the time of the offence, including directors and signatories covered by the provisos to Section 32A(1), continue to be liable and can still be prosecuted and punished. On this basis, the appeal and the connected appeals were all dismissed, without costs, and the criminal proceedings against the appellant were allowed to continue.

Lesson Learnt

Signing a cheque on behalf of a company carries personal criminal exposure under Section 138/141 of the NI Act that survives even if the company itself is taken over or its debts are restructured through an IBC resolution plan: directors and authorised signatories cannot use the company's insolvency resolution as a shield against their own cheque-bounce liability.

Official source (sci.gov.in)View Judgment (PDF)

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