Cheque Bounce Liability Continues Despite IBC Liquidation Under Section 138 NI Act: Supreme Court

(MENAFN- KNN India) New Delhi, May 2 (KNN) The Supreme Court has dismissed a Special Leave Petition challenging a Bombay High Court ruling that criminal liability under cheque bounce law continues even after liquidation proceedings under the Insolvency and Bankruptcy Code (IBC), 2016.

A Bench of Justices B.V. Nagarathna and Ujjal Bhuyan declined to interfere with the High Court's decision, which had set aside the discharge of the accused directors.

The Court clarified that all arguments on merits remain open before the trial court.

Case Background

The dispute arose from a Rs 15 lakh loan allegedly taken by the accused from Ortho Relief Hospital and Research Centre. A post-dated cheque issued in December 2018 was dishonoured, leading to criminal proceedings under Section 138 of the Negotiable Instruments (NI) Act, 1881.

During the proceedings, the company entered liquidation in April 2019. The accused directors sought discharge, arguing that they could no longer be held liable after losing control of the company.

High Court's Stand

The High Court had ruled that initiation of insolvency or liquidation under the IBC does not extinguish criminal liability under Section 138, and therefore set aside the trial court's discharge order.

Supreme Court's Observation

Upholding the High Court's view, the apex court found no grounds to interfere and dismissed the petition. It emphasised that its order does not affect the parties' right to contest the case during trial.

Implication

The ruling reinforces that cheque bounce offences remain prosecutable despite insolvency or liquidation proceedings, ensuring accountability of company directors for financial defaults.

(KNN Bureau)

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