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Rakesh Bhanot v. M/s Gurdas Agro Pvt. Ltd.

Criminal Appeal · 2025 INSC 445Decided 1 Apr 2025
Criminal Appeal No. 1607 of 2025 (arising out of SLP(Crl.) No. 6087 of 2023), decided along with a large batch of connected appeals and one writ petition
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

Rakesh Bhanot and several others were facing criminal prosecution under Section 138 of the Negotiable Instruments Act (cheque dishonour) for cheques that bounced due to insufficient funds. While these criminal cases were pending, the accused persons filed applications under Section 94 of the Insolvency and Bankruptcy Code (IBC) seeking personal insolvency resolution, and then argued that the "interim moratorium" this triggered under Section 96 IBC should automatically stay the criminal cheque-bounce proceedings against them. Multiple High Courts had rejected this argument, leading to this batch of appeals (and one writ petition raising the same question) before the Supreme Court.

Decision Breakdown

The Supreme Court dismissed the appeals (except for three cases where the facts were different and the point was conceded), holding that the interim moratorium under Section 96 IBC protects a debtor only from civil proceedings aimed at recovering a debt. It does not extend to criminal prosecution under Section 138 of the Negotiable Instruments Act. The Court reasoned that cheque-dishonour prosecution punishes personal criminal wrongdoing (dishonouring a negotiable instrument), not merely recovery of a debt, and that allowing the IBC moratorium to block such prosecutions would let wrongdoers escape criminal accountability simply by filing for insolvency. It reaffirmed its earlier ruling in P. Mohanraj that similar reasoning applies even under the company-insolvency moratorium (Section 14 IBC), and clarified that directors/individuals liable under Section 141 of the NI Act remain personally answerable regardless of any moratorium applicable to a corporate debtor.

Lesson Learnt

Filing for personal or corporate insolvency does not give a person immunity from criminal prosecution for bounced cheques: the insolvency law's protective "moratorium" only pauses civil debt-recovery actions, not criminal liability for dishonouring a cheque.

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

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