# In the matter of Shah Brothers Ispat Pvt. Ltd. Vs. P. Mohanraj & Ors. CA (AT) No. 306-2018

> NCLAT judgment dated 2018-07-31. Citation: TCN-2018-NCLAT-00175. The case involves an appeal against an order by the Adjudicating Authority (National Company…

- **Court:** NCLAT
- **Order date:** 31 Jul 2018
- **Citation:** TCN-2018-NCLAT-00175
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/shah-brothers-ispat-pvt-ltd-vs-p-mohanraj-ors-ca-97b45c37

## Summary

### Background

The case involves an appeal against an order by the Adjudicating Authority (National Company Law Tribunal) directing the Appellants to withdraw a complaint case filed under Section 138 of the Negotiable Instruments Act, 1881. The complaint was filed after the order of moratorium was issued in the Corporate Insolvency Resolution Process. The Adjudicating Authority viewed the complaint as a deliberate attempt to misuse the process of law. The Appellants had filed two complaints under Section 138 of the NI Act, one before and one after the initiation of the Corporate Insolvency Resolution Process.

## Facts

Shah Brothers Ispat Pvt. Ltd. (Appellant) filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against P. Mohanraj & Ors. (Respondents). Two complaints were filed: CC No.552/SS/2017 before the initiation of the Corporate Insolvency Resolution Process (CIRP) and CC No.690/SS/2017 after the CIRP commenced on June 6, 2017, and a moratorium was ordered. The Respondents, being Directors, argued before the Adjudicating Authority (NCLT) that the Section 138 proceedings were not maintainable during the moratorium. The Adjudicating Authority, Chennai, directed the Appellants to withdraw the complaint case, viewing it as a misuse of the process. The Appellant appealed this decision. The key fact is the conflict between the moratorium under IBC and the

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## Issues and analysis

### Issue 1: Whether the order of moratorium under Section 14 of the Insolvency and Bankruptcy Code covers …

**Ratio:** Section 14 of the Insolvency and Bankruptcy Code (IBC) imposes a moratorium on the

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**Reasoning:** The court reasoned that Section 138 of the Negotiable Instruments Act is a penal

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**Interpretation:** The interpretation of Section 14 of the IBC is that it primarily aims to

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**Application:** In this case, the court applied the ratio by holding that the proceedings under

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## Parties

- **Judges:** S.J. Mukhop…; Bansi Lal…
- **Respondents:** Shah Brothers…; P. Moha…

## Timeline

- **2017-06-06 — Initiation…**: Corporate Insolvency Resolution Process…
- **2017-01-01 — CC No.552/SS/2…**: Complaint under Section 138…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 14 — Moratorium](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-14)

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