Case Summary: Vishnoo Mittal vs M/S.
Shakti Trading Company (17 March
2025)
Bench and Coram
Judge: Justice Sudhanshu Dhulia
Also Present: Justice Ahsanuddin Amanullah
Date of Judgment
17 March 2025
Facts, Background, and Circumstances
Appellant: Vishnoo Mittal, Director of M/s Xalta Food and Beverages Pvt. Ltd. (Corporate
Debtor)
Respondent: M/s Shakti Trading Company (Super Stockist of the corporate debtor)
Dispute Origin: Business dealings led to issuance of 11 cheques totaling ₹11,17,326 by the
corporate debtor to the respondent.
Event Timeline:
- 07.07.2018: Cheques dishonoured
- 25.07.2018: Insolvency proceedings commenced; moratorium imposed under Section 14 IBC;
IRP appointed
- 06.08.2018: Legal notice under Section 138 NI Act issued
- 21.08.2018: Cause of action for Section 138 NI Act matured (after 15 days of notice)
- 07.09.2018: Summons issued to appellant
- 21.12.2021: High Court dismissed the petition to quash complaint
- 2025: Supreme Court appeal
Legal Issues/Questions
1. Whether proceedings under Section 138 of the Negotiable Instruments Act can continue
against the director of a company when a moratorium under Section 14 of the IBC is in force.
2. Whether the cause of action under Section 138 arose before or after the moratorium
commenced.
Arguments by Parties
Appellant:
- Moratorium began on 25.07.2018.
- Legal notice under Section 138 NI Act issued after that date.
- As the director, he lacked control over the company or bank accounts post-moratorium.
Respondent:
- Relied on precedent P. Mohan Raj v. Shah Brothers Ispat Pvt. Ltd. to argue that natural persons
(like directors) are not protected by the moratorium under Section 14 IBC.
Legal Provisions and Precedents Cited
- Section 138, Negotiable Instruments Act, 1881
- Section 14, Insolvency and Bankruptcy Code, 2016
- Section 17, IBC (management by IRP)
- Section 482, Criminal Procedure Code (inherent powers)
- P. Mohan Raj v. M/S Shah Brothers Ispat Pvt. Ltd., (2021) 6 SCC 258
- Jugesh Sehgal v. Shamsher Singh Gogi, (2009) 14 SCC 683
Court’s Reasoning and Analysis
- Section 138 cause of action arises only when payment is not made 15 days after notice.
- In this case, the notice was issued after the moratorium began, so cause of action arose during
moratorium.
- Section 17 of IBC vested control in the IRP; appellant couldn’t legally comply with demand.
- Distinguished from P. Mohan Raj because in that case cause of action arose before moratorium.
Ratio Decidendi (Binding Legal Principle)
When the cause of action under Section 138 NI Act arises after the imposition of a moratorium
under Section 14 IBC, and the accused (director) is no longer in control of the company, the
complaint against such director cannot be sustained.
Obiter Dicta
General observations on the intent of Section 14 IBC, emphasizing protection of persons who
lose control of management due to insolvency.
Final Order / Decision
- Appeal Allowed
- High Court's order dated 21.12.2021: Set aside
- Summoning order dated 07.09.2018: Quashed
- Complaint Case No. 15580/2018 (Chandigarh CJM Court): Quashed
- Pending applications: Disposed of
