The Supreme Court has referred to a larger Bench the question whether cheque bounce proceedings under Section 138 of the Negotiable Instruments Act can be stayed during the moratorium period under Part III of the Insolvency and Bankruptcy Code, while holding that such proceedings are predominantly criminal in nature and not merely debt recovery actions.
A Bench comprising Justice JB Pardiwala and Justice KV Viswanathan observed that proceedings under Section 138 NI Act cannot be treated purely as legal action for recovery of money. The Court disagreed with the view in P Mohanraj and others v M/s Shah Brothers Ispat Ltd (2021) that cheque dishonour cases are essentially civil in nature, stating that the core objective of Section 138 is…