Interpretation of the phrases “all the debts” and “any legal actions or proceedings pending in respect of any debt” as are referred to in Section 96 of IBC and proceedings under Section 138 of NI Act, 1881 even a cheque was issued by the Personal Guarantor in his personal capacity and was not in any manner in discharge of any corporate debt – Vijay Kumar Ghai Vs. Pritpal Singh Babbar – Punjab & Haryana High Court

Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881, would also remain stayed in terms of Section 96 of the Code, even where the cheque in question was not issued to discharge a corporate debt, though issued by a personal guarantor qua a corporate debtor. The Hon’ble High Court held that personal guarantors to corporate debtors are to be treated differently from other categories of individuals who would be covered by Part III of the Code, with it to be again observed that personal guarantors have however only been defined in Section 5(22) falling in Part II thereof and not in Part III. Though in the opinion of this court otherwise a proceeding under Section 138 of the Act, qua a debt as is wholly incurred qua an individual who is not in any manner connected to the corporate debtor that the petitioner stood a personal guarantor for, nor to the corporate debt itself, would need to proceed independently so as not to make the complainant in such proceedings under Section 138 suffer further delays, especially when in the present case he has already suffered a delay of about 10 years since his complaint was initially filed, however, in the light of the aforesaid observations as also the fact that Section 96 of the Code does not specifically carve out any exception qua such a debt as is subject matter of an instrument in the context of which a complaint under Section 138 of the Act has been filed, this court would have to interpret the terms “all the debts” and “any legal action or proceedings pending in respect of any debt” as occur in Section 96 of the Code, to mean that it would cover all such debts including any debt not pertaining to a corporate debtor for whom the accused in such a complaint under Section 138 stood as a personal guarantor to, even in his capacity as a Director of such corporate debtor.

Interpretation of the phrases “all the debts” and “any legal actions or proceedings pending in respect of any debt” as are referred to in Section 96 of IBC and proceedings under Section 138 of NI Act, 1881 even a cheque was issued by the Personal Guarantor in his personal capacity and was not in any manner in discharge of any corporate debt – Vijay Kumar Ghai Vs. Pritpal Singh Babbar – Punjab & Haryana High Court Read Post »