I have taken a project term loan
8 months ago
I have taken a project term loan against my firm from XYZ Bank where I am the proprietor of the firm. The moratorium period is from Jan 2018 to Dec 2019. I supposed to pay quarterly interest against the disbursed amount during the moratorium period but I missed the quarterly payment of Oct 2019 and my cheque got bounce. The XYZ bank initiated 138 N.I Act against the cheque bounce. Can a financial institution initiate legal action like N.I Act during loan moratorium period?
A.Dear Client,
The Hon'ble Supreme Court of India on March 1, 2021 held in the case of P. Mohanraj & Ors. v. M/S. Shah Brothers Ispat Pvt. Ltd. that the criminal proceedings against cheque bouncing under Section 138 of the Negotiable Instrument Act, 1881 shall remain stayed against the company during the period of moratorium applicable to insolvency proceedings of any company. The proceedings would however continue against the directors and other officials of the company who are made accused in cheque bouncing proceedings. Section 14 of the Insolvency and Bankruptcy Code, 2016 ('IBC') specifies that when an order declaring moratorium is passed, the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, or arbitration panel would be prohibited. The moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act, i.e., the directors and officers of the company shall remain liable for cheque bouncing.
The Hon'ble Supreme Court of India on March 1, 2021 held in the case of P. Mohanraj & Ors. v. M/S. Shah Brothers Ispat Pvt. Ltd. that the criminal proceedings against cheque bouncing under Section 138 of the Negotiable Instrument Act, 1881 shall remain stayed against the company during the period of moratorium applicable to insolvency proceedings of any company. The proceedings would however continue against the directors and other officials of the company who are made accused in cheque bouncing proceedings. Section 14 of the Insolvency and Bankruptcy Code, 2016 ('IBC') specifies that when an order declaring moratorium is passed, the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, or arbitration panel would be prohibited. The moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act, i.e., the directors and officers of the company shall remain liable for cheque bouncing.
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