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Vishnoo Mittal v. M/S Shakti Trading Company

Criminal Appeal · 2025 INSC 346Decided 17 Mar 2025
Crl.A. No.-001287-001287 - 2025 (arising out of SLP (Crl.) No.1104 of 2022)
Justice Sudhanshu Dhulia · Justice Ahsanuddin Amanullah

Background

The appellant was a director of a company that had drawn eleven cheques totalling about Rs.11.17 lakh in favour of the respondent, its business partner. The cheques were dishonoured, and insolvency proceedings against the company (with a moratorium under Section 14 of the IBC and appointment of an interim resolution professional) began on 25 July 2018, before the demand notice for the dishonoured cheques was even issued on 6 August 2018. Despite this, a criminal complaint under Section 138 of the Negotiable Instruments Act was filed against the appellant personally, and the Punjab and Haryana High Court refused to quash it.

Decision Breakdown

The Supreme Court held that the High Court wrongly relied on P. Mohan Raj v. Shah Brothers Ispat, since in that case the cause of action under Section 138 arose before the moratorium, whereas here it arose only after the moratorium began (the 15-day payment window following the demand notice expired only in late August 2018). The Court explained that a cheque-bounce offence is only complete when the drawer fails to pay within 15 days of the demand notice, and once the moratorium was imposed and an interim resolution professional (IRP) took over management under Section 17 of the IBC, the appellant (suspended as director) had no power to arrange repayment at all. Since the appellant was legally incapable of complying with the demand notice, prosecuting him personally was unjustified, and the Court quashed the summoning order and the criminal complaint.

Lesson Learnt

Once a company enters insolvency and an interim resolution professional takes charge, a suspended director cannot be held personally liable for a cheque bounced on the company's behalf if the demand notice and payment deadline fall entirely within the moratorium period, because he genuinely loses the power to pay.

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

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