Moratorium - Cheque encashment during CIRP/Liquidation

If demand notice u/s 138 of NI Act, 1881 is issued before moratorium sets in or winding up proceedings are initiated and cognizance of the offence is taken subsequent to the moratorium or winding up proceedings kicking in, the prosecution against Corporate Debtor and its Directors cannot be allowed to be continued – Re- Catmoss Retail Pvt. Ltd. – Delhi High Court

In this important judgment, Hon’ble High Court of Delhi holds that:
(i) It has been a consistent legal proposition that if the demand notice and the cognizance of complaint under Section 138 of the NI Act is taken after initiation of winding up proceedings and/or IBC proceedings, the proceedings under Section 138 of the NI Act cannot continue not only against the corporate debtor but also its directors.
(ii) This Court in an earlier case titled Govind Prasad Todi & Another v. Govt. of NCT of Delhi rightly distinguished the aspect in the case P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd. (2021) ibclaw.in 24 SC, wherein 51 cheques were issued by the company in favour of the respondent towards the amounts payable from 21.09.2015 to 11.11.2016 and it was a case where statutory notice of demand under Section 138 read with Section 141 of the NI Act was issued on 21.03.2017 while the commencement of CIRP under Section 14 of the IBC came to be enforced on 06.06.2017. It was a case where the cheques had got dishonoured and even demand notices were issued prior to the moratorium kicking in.
(iii) In other words, if the statutory demand notice is issued before the moratorium sets in or winding up proceedings are initiated and cognizance of the offence is taken subsequent to the moratorium or winding up proceedings kicking in, the prosecution against the corporate debtor and its directors cannot be allowed to be continued.

If demand notice u/s 138 of NI Act, 1881 is issued before moratorium sets in or winding up proceedings are initiated and cognizance of the offence is taken subsequent to the moratorium or winding up proceedings kicking in, the prosecution against Corporate Debtor and its Directors cannot be allowed to be continued – Re- Catmoss Retail Pvt. Ltd. – Delhi High Court Read Post »

Whether Cheques dated prior to commencement of CIRP can be encashed during the Moratorium u/s 14 of IBC – Ms. Vaishali Patrikar, RP Vs. Darshan Developers and Others – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench holds that Section 14 of the Code provides that the Adjudicating Authority shall by order declare moratorium for prohibiting, amongst others, transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein. Upon commencement of CIRP, the Bank Accounts of the Corporate Debtor are to be managed and operated by the appointed Insolvency Professional. Further, we find that if the argument of the Ld. Counsel for the Respondent that Section 14 of the Code does not apply to cheques dated prior to commencement of CIRP but intended to be cleared after funds are available therein, we feel that this will defeat the basic object of scheme of the Code which mandates resolution of claims of creditors out of assets of the Corporate Debtor available as on Insolvency Commencement date. Hence, we are of considered view that these cheques were encashed in violation of provisions of Section 14 of the Code.

Whether Cheques dated prior to commencement of CIRP can be encashed during the Moratorium u/s 14 of IBC – Ms. Vaishali Patrikar, RP Vs. Darshan Developers and Others – NCLT Mumbai Bench Read Post »

On the date when cheque is handed over the payment shall be treated to have been made – Pratim Bayal RP of Rajpratim Agencies Pvt. Ltd. Vs. Tata Motors Finance Solutions Ltd. – NCLAT New Delhi

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On the date when cheque is handed over the payment shall be treated to have been made – Pratim Bayal RP of Rajpratim Agencies Pvt. Ltd. Vs. Tata Motors Finance Solutions Ltd. – NCLAT New Delhi Read Post »

NCLT directs a Bank Officer to deposit the amount of cheque encashed after initiation of CIRP/ during CIRP – Mr. Niraj Kumar Agrawal, RP of Raghav Sarees Pvt. Ltd. Vs. Narendra Kumar Agarwal & 3 Others – NCLT Kolkata Bench

Vide order dated 13.06.2022, CIRP was initiated u/s 7 of IBC. The RP found that there is violation of moratorium by Bank and immediately wrote e-mail to Bank. In response, Bank had duly replied stating that the cheque was handed over before commencement of CIRP.
Thereafter, the RP obtained copy of cheques and found that the cheque for Rs. 66,000/- was dated post CIRP and also deposited post CIRP date i.e. on 16.06.2022.
NCLT Kolkata Bench directed the respondent No. 1, (Bank Officers) to deposit the said amount of Rs.76,693/- with the RP within two weeks of communication of this order to him. If he failed to do so within the aforesaid time, appropriate order will be passed under the provisions of the Insolvency and Bankruptcy Code, 2016.

NCLT directs a Bank Officer to deposit the amount of cheque encashed after initiation of CIRP/ during CIRP – Mr. Niraj Kumar Agrawal, RP of Raghav Sarees Pvt. Ltd. Vs. Narendra Kumar Agarwal & 3 Others – NCLT Kolkata Bench Read Post »

Cheque issued prior to CIRP admission date and enchased during CIRP cannot be termed as preferential transaction or violative of the moratorium u/s 14 of IBC – Pratim Bayal Vs. Tata Motors Finance Solutions Ltd. – NCLT Kolkata Bench

In this case, the Erstwhile management of the Corporate Debtor had issued a cheque dated 08.01.2022. CIRP was admitted against the Corporate Debtor on 12.01.2022. The Cheque dated 08.01.2022 was presented for encashment on 17.02.2022 and was encashed on 18.02.2022 and was appropriated against the outstanding dues towards loans provided.
RP application that transaction may be considered as a preferential transaction as the subject encashment is in complete violation of Section 14 of IBC seeking refund thereof along with the interest in the CIRP account.
NCLT Kolkata Bench, referring the decision of in the case of K. Saraswathy v. P.S.S. Soma Sundaram Chettiar held that the payments of the cheque released subsequently relates back to the receipt of the cheque which in the instant case appears 08.01.2022 and since the moratorium was declared on 12.01.2022, this transaction in view of the ratio of the Ogale glass works(supra) does not violate the moratorium.

Cheque issued prior to CIRP admission date and enchased during CIRP cannot be termed as preferential transaction or violative of the moratorium u/s 14 of IBC – Pratim Bayal Vs. Tata Motors Finance Solutions Ltd. – NCLT Kolkata Bench Read Post »

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