Case Note & Summary
The High Court of Judicature at Bombay considered a batch of applications and writ petitions raising a common question of law: whether the moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 applies to initiation or continuation of a criminal complaint for an offence punishable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against directors or persons liable under Section 141. The representative case involved an application by Jagmohan Garg (A2), director and authorised signatory of M/s Mohan India Private Limited (A1), seeking stay of a pending complaint filed by National Spot Exchange Limited (NSEL). NSEL, a spot exchange, alleged that A1, a trading and clearing member, owed amounts under a settlement award and had issued a cheque for Rs.30 Crores which was dishonoured due to insufficient funds. During pendency of the complaint, A2 filed an application under Section 94 of the IBC before NCLT Delhi on 13 May 2024 and contended that the interim moratorium under Section 96 IBC automatically stayed the criminal proceedings. The court heard arguments from senior advocate Sudeep Pasbola for the applicant and other advocates for the parties, including NSEL and the State. The judgment was reserved on 23 July 2026 and pronounced on 18 August 2026. The court's final reasoning and operative directions are not within the provided excerpt.
Headnote
A) Insolvency Law - Interim Moratorium - Applicability to NI Act Proceedings - Insolvency and Bankruptcy Code, 2016, Section 96; Negotiable Instruments Act, 1881, Section 138, Section 141 - The core question was whether the interim moratorium under Section 96 IBC triggered by filing an application under Section 94 IBC stays a pending criminal complaint for an offence under Section 138 read with Section 141 NI Act against directors/persons liable. The court examined the factual scenario where a director filed the insolvency resolution process application and argued that all legal proceedings including the cheque dishonour prosecution must be stayed. (Paras 2, 5.9-5.10)
Issue of Consideration
Whether the moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 applies to the initiation or continuation of a complaint for an offence punishable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against directors/persons liable under Section 141.
Law Points
- Moratorium under Section 96 of Insolvency and Bankruptcy Code
- 2016
- interim moratorium
- applicability to criminal proceedings
- Section 138 read with Section 141 of Negotiable Instruments Act
- 1881
- directors and persons liable under Section 141
- initiation of insolvency resolution process under Section 94 of IBC
Case Details
2026 LawText (BOM) (08) 90
Application No. 1749 of 2024 with connected Applications and Writ Petitions
Sudeep Pasbola, Vinay J Bhanushali, Aakanksha Nehra, Rishi Bhuta, Arvind Lakhawat, D J Haldankar
Jagmohan Garg, Prashant Boorugu, Kamal Kant Dewan, Lotus Refineries Pvt Ltd, Jai Shankar Shrivastava, Jay Shankar Shrivastava
National Spot Exchange Ltd & Anr
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Nature of Litigation
Application seeking stay of criminal complaint for cheque dishonour under Section 138 NI Act during pendency of insolvency resolution process.
Remedy Sought
Applicant sought stay of proceedings in the complaint under Section 96 of IBC, 2016.
Filing Reason
Applicant filed application under Section 94 of IBC before NCLT on 13 May 2024 and contended interim moratorium applies.
Issues
Whether the moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 applies to initiation or continuation of a complaint for an offence punishable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against directors/persons liable under Section 141.
Submissions/Arguments
Applicant contended that upon filing the insolvency resolution process application under Section 94 IBC, the interim moratorium under Section 96 IBC came into effect and stays all legal proceedings including the prosecution under Section 138 NI Act.
Judgment Excerpts
In these Petitions and Applications the core question that arises for consideration is the applicability of the moratorium under the provisions of Section 96 of the Insolvency and Bankruptcy Code, 2016 (“IBC 2016”) to the initiation or continuation of a complaint filed for the commission of an offence punishable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (“the NI Act, 1881”) qua the directors/the persons liable for commission of such offence under Section 141 of the NI Act, 1881?
A2 contended that with the initiation of the IR Petition, the interim moratorium contained in Section 96 of IBC, came into effect. Resultantly, all the legal proceedings, including the subject prosecution for an offence punishable under Section 138 of the N.I. Act, 1881, were deemed to have been stayed.
Procedural History
The complainant NSEL filed a complaint under Section 138 read with Section 141 of NI Act against A1 company and its directors A2 and A3 based on dishonour of a cheque for Rs.30 Crores issued towards settlement award. During pendency, A2 filed an application under Section 94 IBC before NCLT Delhi on 13 May 2024 and subsequently sought stay of the criminal complaint under Section 96 IBC.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: Section 94, Section 96
- Negotiable Instruments Act, 1881: Section 138, Section 141
- Arbitration and Conciliation Act, 1996: Section 73
