Full Text
HIGH COURT OF DELHI
Date of Decision: 31.07.2026 # CNR No. DLHC010072052026
SHASHANK PATHAK .....Petitioner
Through: Mr. Manoj Singh, Mr. Abhay Singh, Mr. Sanjay Kumar and Ms. Shaarika Singh, Advs.
Through: Ms. Jyoti Dutt Sharma, Ms. Esha, Mr. Mani Kant and Ms. Shikha Singh, Advs.
# CNR No. DLHC010072062026
JUDGMENT
1. This hearing has been done through hybrid mode.
2. With the consent of learned counsel for both the parties, the main petitions are taken up for final hearing today.
3. These three petitions raise a common question concerning the effect of a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘IBC’) on proceedings under Sections 138 and 141 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the ‘NI Act’) against a Director and signatory of the corporate debtor. The petitions are, accordingly, being decided by this common order.
4. The Petitioner has invoked Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, corresponding to Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of: i. The summoning order dated 26.04.2019 passed in C.C. No. 4275/2019, challenged in CRL.M.C. 1549/2026; ii. The summoning order dated 26.07.2019 passed in C.C. No. 7492/2019, challenged in CRL.M.C. 1550/2026; and iii. The summoning order dated 11.09.2019 passed in C.C. No. 9180/2019, challenged in CRL.M.C. 1589/2026.
FACTUAL MATRIX
5. The Respondent/Complainant had booked a residential unit in a project being developed by M/s Unnati Fortune Holdings Ltd. (hereinafter referred to as the ‘Company’). On account of the delay in completion of the project, the parties entered into a Memorandum of Settlement dated (‘MOS’) dated 07.12.2018.
6. Under the said MOS, the amount payable to the Respondent was quantified at Rs.2,60,00,000/-. A sum of Rs.70,00,000/- was recorded as having already been paid. The balance amount was agreed to be discharged in the manner set out in the MOS, including through post-dated cheques.
7. The Petitioner signed the MOS on behalf of the Company. The subject cheques were also handed over under the said MOS. The complaints allege that the Petitioner was a director and authorised signatory of the Company, was responsible for its affairs and had signed the cheques in question.
8. On 27.03.2019, the National Company Law Tribunal, Principal Bench, New Delhi, admitted the insolvency proceedings against the Company in C.P. No. (IB)-45(PB)/2018. A moratorium under Section 14 of the IBC was declared and an Interim Resolution Professional (‘IRP’) was appointed. Consequently, the powers of the Board of Directors stood suspended under Section 17 of the IBC.
9. The particulars of the cheques forming the subject matter of the three complaints are set out below in a tabular form: COMPLAINT CASE CHEQUE DETAILS DATE OF PRESENTATION AND DISHONOUR DEMAND NOTICE C.C. NO. 4275/2019 Cheque Nos. 730249 and 730250, both dated 20.12.2018, for Rs.21,00,000/- and Rs.3,60,000/-, respectively. Presented on 05.03.2019 and dishonoured on 06.03.2019 with the endorsement “Account Blocked”. 13.03.2019 C.C. NO. 7492/2019 Cheque No. 730181 dated 20.05.2019 for Rs.25,00,000/- Presented and dishonoured on 22.05.2019 with the Blocked” 30.05.2019 C.C. NO. 9180/2019 Cheque No. 730183 dated 20.06.2019 for Rs.25,00,000/- Presented on 02.07.2019 and dishonoured on 03.07.2019 with the Blocked” 29.07.2019 SUBMISSIONS ADVANCED BY THE PARTIES
10. Learned counsel for the Petitioner submits that the petitions rest entirely upon the decision of the Supreme Court in Vishnoo Mittal v. Shakti Trading Company, MANU/SC/0345/2025. He vehemently submits that an offence under Section 138 of the NI Act is completed only upon the failure of the drawer to make payment within fifteen days from the receipt of the statutory demand notice. Since the said period expired after the declaration of the moratorium on 27.03.2019, it is contended that the cause of action arose only thereafter.
11. Learned counsel for the Petitioner further submits that once the IRP was appointed, the Petitioner ceased to control the affairs and bank accounts of the Company. He was, therefore, legally incapable of complying with the demand notices. On this basis, it is contended that the complaints and the summoning orders deserve to be quashed.
12. Per contra, learned counsel for the Respondent submits that the moratorium under Section 14 of the IBC operates only in favour of the corporate debtor. It does not extend to Directors, signatories or other natural persons covered by Section 141 of the NI Act. Reliance is placed upon P. Mohanraj v. Shah Brothers Ispat (P) Ltd., MANU/SC/0132/2021 and Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd., MANU/SC/0244/2023.
13. Learned counsel for the Respondent submits that the Petitioner obtained the order dated 23.04.2026 passed by this Court granting exemption from personal appearance by incorrectly representing that he was not a director when the cheques were drawn. Learned counsel refers to the MOS dated 07.12.2018 and the Petitioner’s plea of defence recorded under Section 251 CrPC. She submits that the Petitioner admitted that the cheques belonged to the Company and bore his signatures. Furthermore, the Petitioner also admitted that the amount paid by the Respondent had not been refunded and that a liability of Rs.1,30,00,000/- remained outstanding.
FINDINGS AND ANALYSIS
14. This Court has heard the learned counsel for the parties and perused the material on record.
15. The question before this Court is a short one. It is whether the moratorium imposed against the corporate debtor under Section 14 of the IBC, by itself, requires the quashing of proceedings under Sections 138 and 141 of the NI Act against the Petitioner, who is alleged to have signed and issued the subject cheques.
16. The scope of Section 14 of the IBC in relation to proceedings under Sections 138 and 141 of the NI Act was considered by a three Judge Bench of the Supreme Court in P. Mohanraj (supra). After holding that proceedings against the corporate debtor are covered by the moratorium, the Supreme Court drew a clear distinction between the corporate debtor and the natural persons liable under Section 141 of the NI Act. Paragraph 77 of the said judgment reads as under:
17. The declaration in P. Mohanraj (supra) is categorical. The moratorium operates against the corporate debtor. During the same period, proceedings may be initiated or continued against the natural persons mentioned in Sections 141(1) and 141(2) of the NI Act. Significantly, the principle is not confined to proceedings which commenced before the moratorium. Para 77 expressly recognises that proceedings may be “initiated or continued” against the natural persons during the Corporate Insolvency Resolution Process (‘CIRP’).
18. The same position was reiterated by another three Judge Bench in Ajay Kumar Radheyshyam Goenka (supra). The Supreme Court held that no provision of the IBC bars the continuation of criminal prosecution against the Directors and officials of the corporate debtor. It was further held that the personal penal liability of a director or signatory does not stand extinguished merely because the corporate debtor has undergone insolvency resolution.
19. The law has thereafter been restated in Rakesh Bhanot v. Gurdas Agro Pvt. Ltd., MANU/SC/0447/2025. Although the said case arose in the context of an interim moratorium under Section 96 of the IBC, the Supreme Court expressly compared the scope of Sections 14 and 96 and held: “10.1. ……That apart, the object of interim moratorium can be no different from that of the moratorium specified Under Section 14. It is also clear from Section 14 that the protection from legal action during the period of moratorium is not available to the surety or in other words, to a personal guarantor. The use of the words "all the debts" and "in respect of any debt" in Sub-section (1) of Section 96 is not without a purpose, as the moratorium is intended to offer protection only against civil claim to recover the debt. Hence, such period of moratorium prescribed Under Section 14 or 96 is restricted in its applicability only to protection against civil claims which are directed towards recovery and not from criminal action.”
20. The Supreme Court in Rakesh Bhanot (supra) further clarified that proceedings under Section 138 of the NI Act are distinct from insolvency proceedings and that the personal statutory liability of Directors under Section 141 of the NI Act continues irrespective of any moratorium applicable to the corporate debtor. The relevant paragraph of the judgment are reproduced hereinbelow:
21. The legal position which emerges is, therefore, that insolvency proceedings may restrict proceedings against the corporate debtor and its assets. They do not, merely by reason of the moratorium, extinguish the statutory liability of natural persons under Section 141 of the NI Act.
22. The Petitioner places reliance upon Vishnoo Mittal (supra). In that case, although the cheques had been dishonoured before the declaration of the moratorium, the statutory demand notice was issued after the IRP had assumed control over the corporate debtor. The Supreme Court distinguished
23. The decision in Vishnoo Mittal (supra) does not, however, lay down that every complaint against a Director or signatory is liable to be quashed merely because the statutory period under Section 138 of the NI Act expired after the declaration of the moratorium. The larger Bench declaration in P. Mohanraj (supra) that proceedings may be initiated or continued against natural persons covered by Sections 141(1) and 141(2) of the NI Act continues to hold the field. Further, in the subsequent decision in Rakesh Bhanot (supra), the Supreme Court reiterated that the statutory liability of Directors under the NI Act is personal and continues “irrespective of any moratorium applicable to the corporate debtor”.
24. Thus, the fact that the cause of action arose after the declaration of the moratorium is a relevant circumstance, but is not, by itself, conclusive of the liability of a natural person sought to be prosecuted under Section 141 of the NI Act. The complaint, the role attributed to such person and the admitted or undisputed material on record must also be considered.
25. In the present cases, the MOS and the delivery of the subject cheques preceded the commencement of the CIRP. The complaints contain specific averments regarding the Petitioner’s role, and the Petitioner admits that the cheques bear his signatures. In these circumstances, the subsequent suspension of the powers of the Board does not, by itself, render the complaints legally untenable against the Petitioner. The defences available to him under Section 141 of the NI Act may be established before the learned Trial Court in accordance with law.
26. The complaints specifically allege that the Petitioner was a director and authorised signatory, was responsible for the affairs of the Company and had signed and issued the subject cheques. The case is, therefore, not founded merely upon the Petitioner holding a formal designation in the Company.
27. The suspension of the powers of the Board under Section 17 of the IBC affects the authority of the erstwhile management to operate the affairs and accounts of the corporate debtor. It does not retrospectively erase the acts performed by the Petitioner before the moratorium or extinguish the statutory liability which may arise from those acts. The questions as to whether the offence was committed without the Petitioner’s knowledge, whether he exercised due diligence, or whether the appointment of the IRP otherwise affords him a defence are matters to be examined at trial. These issues cannot be conclusively decided in a petition under Section 528 of the BNSS when the complaints contain the necessary averments and the Petitioner is admittedly the signatory of the cheques.
28. A perusal of the Petitioner’s plea of defence under Section 251 CrPC, though not being treated as proof of guilt, shows that the present cases cannot be treated as cases where the complaints, even if accepted in their entirety, disclose no offence against the Petitioner. The nature of the liability, the circumstances in which the cheques were issued, the effect of the moratorium and the defences available to the Petitioner must be determined on the evidence led before the learned Trial Court.
29. Accordingly, this Court finds no ground to interfere with the summoning orders dated 26.04.2019, 26.07.2019 and 11.09.2019 insofar as they relate to the Petitioner. CRL.M.A. 22918/2026 in CRL.M.C. 1549/2026 CRL.M.A. 22917/2026 in CRL.M.C. 1550/2026 CRL.M.A. 22921/2026 in CRL.M.C. 1589/2026
30. Learned counsel for the Respondent asserts that the Petitioner obtained the order dated 23.04.2026 by representing that he was not a director when the subject cheques were drawn and had resigned before the dates mentioned on the cheques. The said order dated 23.04.2026 is reproduced hereinbelow: “Since according to the petitioner, he was not the Director when the cheques were drawn and had already resigned prior to the date mentioned on the cheque, he would be exempted from personal appearance before the learned Trial Court till the disposal of the present petitions.”
31. A perusal of the pleadings of the Petitioner makes it evident that they do not contain any such assertion. On the contrary, the petitions specifically state that the Petitioner joined the Board of the Company on 01.03.2018 as a director and authorised signatory. The petitions also rely upon the MOS dated 07.12.2018 bearing the Petitioner’s signatures on behalf of the Company.
32. The plea that a director had resigned much before the dates of the cheques was taken by the co-accused, Anil Mithas, in CRL.M.C. Nos. 3499/2023 and 3500/2023. The order dated 16.05.2023 passed in those petitions records that Anil Mithas claimed to have resigned on 08.02.2014.
33. The written pleadings of the Petitioner are inconsistent with the recital contained in the order dated 23.04.2026. The plea that a director had resigned before the dates of the cheques was raised by the co-accused, Anil Mithas, in CRL.M.C. No. 3499/2023. Apart from the recital in the order dated 23.04.2026, no material has been placed before this Court to establish that the Petitioner deliberately made a false statement or suppressed his status as a director and authorised signatory.
34. In these circumstances, this Court is not persuaded to return an adverse finding of deliberate suppression or misrepresentation against the Petitioner. The decisions in K.D. Sharma v. Steel Authority of India Ltd., (2008) 12 SCC 481 and Rekha Sharad Ushir v. Saptashrungi Mahila Nagari Sahkari Patsansta Ltd., 2025 INSC 399, do not assist the Respondent on the facts of the present case.
CONCLUSION
35. The moratorium imposed under Section 14 of the IBC operates in favour of the corporate debtor. It does not suspend or extinguish the statutory liability of a Director, authorised signatory or other natural person falling within Sections 141(1) and 141(2) of the NI Act.
36. The Petitioner is alleged to have signed and issued the subject cheques pursuant to the MOS dated 07.12.2018. The complaints contain specific averments regarding his role. He has also admitted before the learned Trial Court that the cheques bear his signatures. The matters, therefore, require trial and do not warrant interference under Section 528 of the BNSS.
37. Accordingly, CRL.M.C. 1549/2026, CRL.M.C. 1550/2026 and CRL.M.C. 1589/2026 are dismissed. Pending application(s), if any, also stand disposed of.
38. All interim orders operating in favour of the Petitioner in these petitions stand vacated.
39. The Petitioner shall appear before the learned Trial Court on the date fixed or on such date as may be directed by the learned Trial Court. The learned Trial Court shall proceed with the complaint cases in accordance with law.
40. It is clarified that the observations made herein are only for deciding the present petitions. The learned Trial Court shall decide the complaints on their own merits, without being influenced by any observation touching upon the final guilt or innocence of the Petitioner.
41. Next date of hearing i.e., 02.09.2026 stands cancelled.
42. The order be uploaded on the website forthwith.
MADHU JAIN (JUDGE) JULY 31, 2026/JYH/m