Supreme Court Affirms: IBC Moratorium Does Not Shield Company Directors from Cheque Bounce Prosecution
The intersection of insolvency laws and penal statutes often creates complex legal battlegrounds. A recurring judicial question has been whether the initiation of corporate insolvency or liquidation proceedings grants immunity to the directors of a defaulting company against criminal prosecution. In the landmark matter of Abhaykumar Anandkumar Bhambore & Anr. Vs Ortho Relief Hospital And Research Centre & Anr., the Supreme Court of India has definitively clarified this position. The Apex Court ruled that the protective umbrella of the Insolvency and Bankruptcy Code, 2016 (IBC) applies strictly to the corporate debtor and does not extinguish the personal criminal liability of its directors under the Negotiable Instruments Act, 1881.
Executive Summary of the Judicial Pronouncement
The Supreme Court dismissed a Special Leave Petition challenging a Bombay High Court order. The High Court had previously reversed a Trial Court's decision to discharge company directors from a cheque dishonour case. The core judicial consensus established here is that criminal proceedings initiated for the dishonour of cheques operate independently of corporate insolvency resolutions or liquidation processes. The statutory moratorium is designed to protect the corporate entity's assets, not to absolve natural persons of their penal liabilities.