# P. Mohanraj & Ors. Vs. Shah Brothers Ispat Pvt. Ltd. Civil Appeal No. 10355 of 2018

> SC judgment dated 2021-03-01. Citation: TCN-2021-SC-00069. The case involves appeals against orders related to Section 138/141 of the Negotiable Instruments…

- **Court:** SC
- **Order date:** 1 Mar 2021
- **Citation:** TCN-2021-SC-00069
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/p-mohanraj-ors-vs-shah-brothers-ispat-pvt-ltd-civil-appeal-no-10355-of-2018-d37aeaec

## Summary

### Background

The case involves appeals against orders related to Section 138/141 of the Negotiable Instruments Act, 1881, in the context of the Insolvency and Bankruptcy Code, 2016 (IBC). The respondent supplied steel products to Diamond Engineering Pvt. Ltd. (the corporate debtor), resulting in outstanding dues. The corporate debtor issued 51 cheques, which were dishonored due to insufficient funds. Consequently, the respondent issued statutory demand notices. Criminal complaints were filed against the company and its directors (appellants) under Section 138 read with Section 141 of the Negotiable Instruments Act. Simultaneously, a statutory notice under Section 8 of the IBC was issued, and the Adjudicating Authority admitted an application under Section 9 of the IBC, initiating

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## Facts

The respondent, M/s. Shah Brothers Ispat Pvt. Ltd., supplied steel products to Diamond Engineering Pvt. Ltd. (the corporate debtor) between 2015-09-21 and 2016-11-11, resulting in outstanding dues of INR 24,20,91,054. The corporate debtor issued 51 cheques to the respondent, all of which were dishonored on 2017-03-03 due to 'funds insufficient'. The respondent issued a statutory demand notice on 2017-03-31 under Section 138 read with Section 141 of the Negotiable Instruments Act, calling upon the company and its three directors (appellants) to pay the amount. On 2017-04-28, two cheques totaling INR 80,70,133 were dishonored for the same reason. A second demand notice was issued on 2017-05-05. Two criminal complaints were filed by the respondent against the company and

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## Issues and analysis

### Issue 1: Whether the institution or continuation of a proceeding under Section 138/141 of the Negotiable …

**Ratio:** The ratio decidendi is that the expression 'proceedings' in Section 14(1)(a) of the IBC

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**Reasoning:** The court reasoned that a quasi-criminal proceeding under Section 138/141 of the

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**Interpretation:** The court interpreted Section 14 of the IBC to mean that the moratorium

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**Application:** The court applied the ratio and reasoning to the specific facts of the case,

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## Parties

- **Judges:** ROHINTON FALI…; NAVIN S…; +1 more
- **Appellants:** P. Moha…
- **Respondents:** Diamond Engineerin…; M/S. Shah…
- **Other parties:** 7th Edition…; IBC Morat…; +10 more

## Timeline

- **2015-09-21 — Supply of Steel…**: Respondent started supplying steel…
- **2016-11-11 — End of S…**: Respondent completed supplying steel products to Diamond Engineering Pvt. Ltd., resulting…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 8 — Insolvency resolution by operational creditor](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-8)

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