Merely because of initiation of proceedings under the Code, 2016 the signatory of the cheque cannot escape from his liability, it is held that conviction recorded by Trial Court was not bad on account of initiation of proceedings under the Code, 2016-Madhya Pradesh HC

Anurodh Mittal vs Rehat Trading Company 

MCRC no 17782 of 2024

Facts:

1. The Applicant has filed the miscellaneous application to quash the condition to deposit Rs.13,73,890/- imposed in impugned order dated 16/04/2024 against the Petitioner in the application under Section 389 CrPC seeking suspension of the execution of sentence (including the order to pay compensation) during the pendency of appeal on account of effect of interim moratorium as per Section 96 of Insolvency and Bankruptcy Code, 2016 as imposed by Hon’ble National Company Law Tribunal, Indore Bench, for initiating/undergoing the insolvency resolution process, vide Company Petition(IB)/74(MP)2022, with effect from 14/10/2022.

Issue: Whether the application can be allowed ?

Argument:

Applicant:

1. Counsel for applicant submitted that by judgment dated 13.03.2024 passed by J.M.F.C., Burhanpur in SC-NIA/723/2019, applicant has been convicted under Section 138 of Negotiable Instruments Act and has been directed to undergo the jail sentence of 6 months with compensation amount of Rs.68,69,457.24. Being aggrieved by said judgment of conviction, applicant filed an appeal alongwith an application under Section 389 of Cr.P.C.

2. Counsel submitted that applicant was the Guarantor of M/s Shree Geeta Textiles Private Limited, who has committed a default due to non-payment of borrowed debts. Accordingly, borrower moved an application under Section 94 of the Code.

Decision: Hon’ble HC dismissed the application.

Rationale:

1) Relying on Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Limited, reported in (2023) 10 SCC 545, it held that merely because of initiation of proceedings under the Code, 2016 the signatory of the cheque cannot escape from his liability, it is held that conviction recorded by Trial Court was not bad on account of initiation of proceedings under the Code, 2016.

2) It also held that Appellate Court did not commit any mistake by directing the applicant to deposit an amount of Rs.13,73,890/- as a condition precedent for suspension of sentence.

Order: