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The High Court of Punjab and Haryana through its judgment dated 20.07.2026 in Ajay Gupta and Another v. Can Bank Factors Limited1 dismissed a Petition filed under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of criminal proceedings under Sections 138 and 141 of the Negotiable Instruments Act, 1881 (“NI Act”) on the ground that insolvency proceedings had been initiated against the company under the IBC. The Court held that the subsequent commencement of insolvency proceedings or liquidation of the corporate debtor does not extinguish or bar the criminal liability of the directors and other persons in charge of the affairs of the company for the offences that had already been committed under the NI Act.
The issue before the Court was whether the initiation of the Corporate Insolvency Resolution Process (“CIRP”), declaration of moratorium under Section 14 of the IBC, and subsequent liquidation of the corporate debtor would render criminal proceedings under Sections 138 and 141 of the NI Act against the directors of the company legally unsustainable.
The Court held that the offence under Section 138 of the NI Act stood completed upon dishonour of the cheques and failure to make payment, much before the commencement of CIRP. The Court, while relying upon the earlier decisions of the Supreme Court in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd.2 and Ajay Kumar Radheshyam Goenka v. Tourism Finance Corporation of India Ltd.3, held that even though the moratorium under Section 14 of the IBC protects the corporate debtor, it does not extend to the independent criminal liability of the directors and other persons covered under Section 141 of the NI Act. The Court observed that subsequent suspension of the directors’ powers upon appointment of an interim resolution professional or liquidator does not erase criminal liability that had already been crystallised and accordingly dismissed the petition seeking quashing of the complaint and summoning order.
Footnotes
1. CRM-M-45498-2019 (O&M)
2. (2021) 6 SCC 258
3. (2023) 10 SCC 545
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