The intersection of commercial exigencies and criminal jurisprudence has long been a site of friction within the Indian legal framework. The Negotiable Instruments Act, 1881 (NI Act), particularly Section 138, was designed to foster confidence in the efficacy of banking operations and ensure the credibility of negotiable instruments. However, the procedural mechanization of this provision, which has increasingly resulted in multiple cases of cheque bounce under Section 138 of the NI Act, often collides with the fundamental liberties and protections enshrined in the Code of Criminal Procedure, 1973 (CrPC), and the Constitution of India. The recent pronouncement by the Supreme Court of India in Sumit Bansal v. M/s MGI Developers and Promoters (2026 LiveLaw (SC) 34) represents a significant, albeit contentious, development in this domain. By ruling that multiple complaints can be maintained for the dishonour of several cheques, even when they stem from a single underlying commercial transaction, the Court has privileged a strict, text-based interpretation of the NI Act over the holistic, equitable principles of the CrPC.

This report posits a respectful but firm disagreement with the rationale adopted in Sumit Bansal. Through an exhaustive analysis of statutory provisions, judicial precedents, and constitutional mandates, this document argues that the fragmentation of a singular liability into multiple cheque bounce cases under Section 138 NI Act constitutes an abuse of the legal process. It contends that the doctrine of “same transaction” under Section 220 of the CrPC, coupled with the constitutional safeguards against double jeopardy (Article 20(2)) and the right to a fair trial (Article 21), necessitates a consolidated approach to adjudication. The report dissects the Sumit Bansal judgment against the backdrop of landmark rulings such as Shyam Pal v. Dayawati Besoya, Mohan Baitha v. State of Bihar, and Damodar S. Prabhu v. Sayed Babalal H., illustrating how the current decision risks converting the judicial system into a tool for coercion rather than justice. By prioritizing the distinctness of the financial instrument over the unity of the transaction, the judgment inadvertently endorses a prosecutorial strategy that multiplies harassment under the guise of statutory compliance.

1. Introduction: The Commercial-Criminal Paradox

1.1 The Genesis of Section 138 Jurisprudence

The introduction of Chapter XVII into the Negotiable Instruments Act, 1881, by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, marked a paradigm shift in Indian commercial law. Prior to this, the dishonour of a cheque was largely a civil wrong, actionable through a cumbersome suit for recovery. Section 138 criminalized this default, imposing a strict liability framework where mens rea was largely presumed or rendered irrelevant once the technical ingredients of the offence were met. The legislative intent was unambiguous: to enhance the acceptability of cheques in the settlement of liabilities by making the drawer liable for penalties in case of bouncing due to insufficiency of funds.

However, this “criminalization of civil liability” created a hybrid legal creature—a “civil sheep in a criminal wolf’s clothing,” as famously described in judicial dicta. While the penalties are criminal (imprisonment and fine), the nature of the inquiry remains deeply rooted in civil concepts of debt, liability, and contract. This duality has perennially challenged the courts: should Section 138 proceedings be governed by the strict procedural rigour of criminal trials, or should they be flexible enough to accommodate the commercial realities of debt settlement?

1.2 The Crisis of Multiplicity

As the volume of commercial transactions grew, so did the practice of issuing multiple cheques for a single liability—post-dated cheques for Equated Monthly Installments (EMIs), security cheques, and cheques for interest and principal. When a borrower defaults on a singular loan agreement, it often triggers the dishonour of a cascade of instruments, giving rise to multiple cheque bounce proceedings under Section 138 of the NI Act. The question then arises: does the default constitute one criminal transaction, or does the dishonour of each piece of paper constitute a separate, standalone offenc

The Supreme Court’s decision in Sumit Bansal answers this in favour of the latter, allowing a creditor to file separate complaints for each dishonoured cheque. While textually defensible under the NI Act, this interpretation creates a “docket explosion” and places an oppressive burden on the accused, who must defend multiple fronts simultaneously for what is essentially a single financial failure. This report challenges this outcome, arguing that the principles of the Code of Criminal Procedure (CrPC) regarding the joinder of trials are not merely procedural conveniences but substantive safeguards against state-sponsored harassment.

2. Analytical Deconstruction of Sumit Bansal v. M/s MGI Developers

To understand the gravity of the dissent, one must first dissect the factual and legal matrix of the Sumit Bansal judgment itself.

2.1 The Factual Matrix

The dispute in Sumit Bansal (Citation: 2026 LiveLaw (SC) 34) originated from a singular commercial arrangement—an Agreement to Sell dated November 7, 2016. The complainant, Sumit Bansal, had paid approximately Rs. 1.72 crore to the respondent developers for three commercial units. The agreement contained a specific clause: if the sale deeds were not executed by September 30, 2018, the developers would refund the amount along with an appreciation sum of Rs. 35 lakh.

Upon the developer’s failure to execute the deeds, the refund liability crystallized. To discharge this single liability, the respondent firm (M/s MGI Developers) issued two cheques, and the promoter (Respondent No. 2) issued two personal cheques. The sequence of events unfolded as follows:

1. First Default: The promoter’s personal cheques were presented and dishonoured.
2. Second Default: The firm’s cheques were subsequently presented and dishonoured.
3. Third Default: Fresh cheques issued in 2019, intended to replace or supplement the earlier ones, were also dishonoured.

In total, the complainant filed five separate criminal complaints under Section 138 of the NI Act regarding these dishonours.

2.2 The High Court’s Rationale: The “Same Liability” Doctrine

The accused approached the Delhi High Court under Section 482 of the CrPC, seeking the quashing of these multiple complaints. The High Court, in its judgment dated April 17, 2025, adopted a holistic view of the transaction. It reasoned that the liability to refund the amount was singular. Once the complainant had chosen to prosecute on the basis of the personal cheques, filing a parallel prosecution on the firm’s cheques—issued for the same debt—amounted to an abuse of process. The High Court quashed the complaints related to the firm’s September 2018 cheques, holding that “parallel prosecution for the same liability was impermissible”. This reasoning aligned with the equitable principle that a creditor cannot wield multiple instruments to extract more than what is due or to harass the debtor through multiple litigations.

2.3 The Supreme Court’s Reversal: Technical Distinctness Over Transactional Unity

The Supreme Court, in an order delivered by a Bench comprising Justices Sanjay Karol and Prashant Kumar Mishra, set aside the High Court’s quashing order. The apex court’s reasoning was predicated on the following legal tenets:

1. Distinct Causes of Action: The Court held that under Section 138, the cause of action is not the debt per se, but the specific sequence of dishonour, notice, and failure to pay related to a specific instrument. Therefore, each cheque gives rise to a separate cause of action.
2. No Merger: The Court explicitly rejected the notion that cheques arising from a single transaction merge into a single cause of action. It clarified that multiple cheque bounce cases under Section 138 NI Act are treated as separate offences, even if they stem from the same underlying liability. The Court emphasized that determining whether the cheques were alternative securities, overlapping payments, or distinct undertakings is a “disputed question of fact.” Citing the limits of Section 482 jurisdiction, it held that such factual issues must be resolved at trial, not at the quashing stage..
3. Statutory Presumption: Reliance was placed on Sections 138 and 139, emphasizing that the presumption of liability stands until rebutted at trial.

2.4 The Core of the Dissent

While the Supreme Court’s decision adheres to the strict letter of the NI Act, it arguably fails to account for the broader protective scheme of the CrPC. By relegating the “same transaction” argument to a matter of trial, the Court subjects the accused to the very harassment the High Court sought to prevent. The dissent articulated in this report rests on the premise that when the “genus” of the dispute is a single contract, the “species” of the offence (the cheques) should not be allowed to spawn hydra-headed litigation. The following sections provide a detailed jurisprudential basis for this dissent.

3. The Code of Criminal Procedure and the Doctrine of Consolidated Trial

of constitutional liberty. A central tenet of the Code is the prevention of harassment through multiple cheque bounce trials under Section 138 NI Act. In Sumit Bansal, the Court allowed separate complaints to proceed without mandating consolidation, thereby bypassing the protections enshrined in Sections 219 and 220 of the CrPC.

3.1 Section 219 CrPC: The Rule of Limitation

Section 219(1) of the CrPC states: “When a person is accused of more than one offence of the same kind committed within the space of twelve months from the first to the last of such offences, whether in respect of the same person or not, he may be charged with, and tried at one trial for, any number of them not exceeding three”.

This provision acknowledges that an accused should not be dragged to court indefinitely for similar offences. However, it contains a numerical cap—three offences. In the context of Sumit Bansal, where five complaints were filed, Section 219 poses a statutory hurdle. A strict application would still require two separate trials (3 + 2).

• Judicial recognition of the limitation: The Supreme Court in Vani Agro Enterprises v. State of Gujarat recognized this limitation. While dealing with four dishonoured cheques, the Court could not legally order a single trial under Section 219 but directed the Trial Court to fix all cases on the same date to streamline proceedings.
• Critique: The reliance on Section 219 in isolation is misplaced in complex commercial disputes. Section 219 is a general rule for “offences of the same kind” (e.g., three thefts in a year). It does not contemplate the “same transaction” scenario, which is covered by the far more powerful Section 220.

3.2 Section 220 CrPC: The “Same Transaction” Exception

Section 220(1) of the CrPC is the pivot upon which this dissent turns. It reads: “If, in one series of acts so connected together as to form the same transaction, more offences than one are committed by the same person, he may be charged with, and tried at one trial for, every such offence”.

Crucially, Section 220 has no numerical limit. If an accused issues 50 cheques as part of a “single transaction,” all 50 can and should be tried together. The judgment in Sumit Bansal sidesteps this provision by treating the cheques as distinct causes of action, thereby ignoring the “transactional unity” that Section 220 seeks to preserve.

3.3 The Mohan Baitha Test: Defining “Same Transaction”

To understand why the Sumit Bansal facts fit squarely within Section 220, we must look to the definitive test laid down by the Supreme Court in Mohan Baitha v. State of Bihar. The Court held that the expression “same transaction” is incapable of exact definition but must be gathered from the circumstances of the case. The key indices identified were:

1. Proximity of Time: The acts must occur in close temporal sequence.
2. Unity of Place: They often, though not always, occur in the same jurisdiction.
3. Continuity of Action: There must be a logical sequence where one act leads to another.
4. Community of Purpose: This is the most vital element—is there a single objective binding the acts?

Application to Sumit Bansal:

• Community of Purpose: The sole purpose of every cheque issued—whether by the firm or the promoter, whether in 2018 or 2019—was to refund the Rs. 1.72 crore paid under the Agreement to Sell. There was no other debt. The purpose was singular and identical.
• Continuity of Action: The issuance of the “fresh cheques” in 2019 was a direct consequence of the dishonour of the 2018 cheques. It was a continuous attempt to discharge the same liability.
• Conclusion: Under the Mohan Baitha standard, the series of cheque issuances and dishonours in Sumit Bansal constitutes a “same transaction.” Therefore, under Section 220(1) CrPC, a joint trial was not just permissible but jurisprudentially necessary to prevent abuse. By failing to invoke or mandate this consolidation, the Supreme Court allowed the technicality of “separate complaints” to override the substantive protection of “same transaction.”

Table 1: Comparative Analysis of Joinder Provisions and Sumit Bansal

4. Constitutional Safeguards: Article 20(2) and Article 21

The dissent against Sumit Bansal is not merely statutory; it is constitutional. The judgment arguably infringes upon the protections against Double Jeopardy and the right to a Fair Trial.

4.1 Article 20(2) and the Spirit of Double Jeopardy

Article 20(2) of the Constitution incorporates the principle of Nemo Debet Bis Vexari Pro Una Et Eadem Causa—no one shall be vexed twice for the same cause. Technically, Indian law (and the Sumit Bansal judgment) distinguishes between “distinct offences.”

• The Sangeetaben Distinction: In Sangeetaben Mahendrabhai Patel v. State of Gujarat , the Supreme Court held that Section 138 NI Act and Section 420 IPC (Cheating) are distinct offences with different ingredients, allowing simultaneous prosecution. The reasoning is that one requires mens rea (Section 420) and the other does not (Section 138).
• The Sumit Bansal Flaw: In Sumit Bansal, we are not dealing with different statutes. We are dealing with the same statute (NI Act) applied multiple times to the same debt.

• If the accused is convicted in Complaint A (Personal Cheque) for the debt of Rs. 1.72 Crore, the debt is judicially recognized.
• If they are subsequently convicted in Complaint B (Firm Cheque) for the same Rs. 1.72 Crore, they are effectively punished twice for the failure to discharge a single liability.
• While technically these are separate “cheques,” substantively, it is double punishment for a single economic failure. This violates the spirit, if not the strict letter, of Article 20(2).

4.2 Article 21 and the Right to a Fair Trial

Article 21 guarantees the right to life and personal liberty, which the Supreme Court has interpreted to include the right to a fair and speedy trial (Maneka Gandhi v. Union of India, Hussainara Khatoon).

• Process as Punishment: When an accused is forced to defend five separate criminal cases for a single commercial dispute, the legal process itself becomes a punitive tool. The financial cost of engaging counsel for five trials, the time lost in court appearances, and the psychological stress constitute a violation of the “procedure established by law,” which must be “just, fair, and reasonable.”
• The “Speedy Trial” Paradox: The Sumit Bansal judgment contributes to judicial clogging. Five files require five times the judicial time of one consolidated file. This delay infringes upon the rights of not just the accused in this case, but all litigants in the system. As noted in Re: Expeditious Trial of Cases under Section 138 , 35.16 lakh cases were pending as of 2019. Decisions that multiply docket numbers exacerbate this systemic violation of Article 21.

5. Precedential Analysis: The Dissenting Jurisprudence

To substantiate this respectful disagreement, one must look to Supreme Court precedents that have recognized the unity of transactions and sought to mitigate the harshness of multiple prosecutions. These cases provide the jurisprudential anchor for the argument that Sumit Bansal is an outlier in its rigid formalism.

5.1 Shyam Pal v. Dayawati Besoya: The Doctrine of Concurrency

The most potent counter-argument to Sumit Bansal is found in the Supreme Court’s decision in Shyam Pal v. Dayawati Besoya (2016) 10 SCC 761.

• The Case: The appellant was convicted in two separate Section 138 cases involving cheques of Rs. 5 lakhs each. The cheques were issued for a series of loans between the same parties.
• The Ruling: The Supreme Court invoked Section 427 of the CrPC to direct that the substantive sentences in both cases run concurrently rather than consecutively.
• The Ratio: The Court explicitly held that “where the prosecution is based on a single transaction,” forcing the accused to undergo consecutive sentences would be unjust. It recognized the “overwhelming identicalness” of the features in both cases.
• Applying Shyam Pal to Sumit Bansal: If the Supreme Court acknowledges that multiple cheque bounce cases under Section 138 of the NI Act can form a “single transaction” for the purpose of sentencing, in order to prevent injustice, logic dictates that they must also form a “single transaction” for the purpose of trial. It is jurisprudentially inconsistent to say, “You must face five separate trials because these are distinct offences,” but then conclude, “We will merge your sentences because this was one transaction.” The unity recognised in Shyam Pal should apply ab initio to mandate a joint trial under Section 220 of the CrPC.

5.2 Damodar S. Prabhu v. Sayed Babalal H.: The Compensatory Principle

In Damodar S. Prabhu (2010) 5 SCC 663 , the Supreme Court laid down guidelines for compounding offences, emphasizing that the primary object of Section 138 is “compensatory” rather than “punitive.”

• The Argument: If the objective is restitution (getting the money back), then fragmenting the trial serves no legitimate purpose. It only serves a punitive purpose (harassment).
• Dissenting View: A interpretation that aligns with Damodar S. Prabhu would prioritize the streamlined recovery of the debt over the technical prosecution of multiple instruments. Sumit Bansal, by enabling multiple prosecutions, shifts the focus back to retribution.

5.3 Vani Agro Enterprises and the Recognition of Limits

As mentioned earlier, Vani Agro saw the Supreme Court directing the Trial Court to fix all cases on one date. This was a pragmatic judicial intervention to mitigate the rigours of Section 219. The Sumit Bansal judgment could have gone further by mandating such consolidation or transfer to a single court as a matter of law, rather than leaving it to the discretion of trial courts or requiring the accused to file transfer petitions.

6. Abuse of Process and Section 482 CrPC

The High Court in Sumit Bansal exercised its power under Section 482 CrPC to quash the complaints it viewed as an abuse of process. The Supreme Court reversed this, citing the limitations on interfering with factual disputes. This section argues that the High Court was correct in its identification of abuse.

6.1 The “Mini-Trial” Misconception

The Supreme Court criticized the High Court for conducting a “mini-trial” to determine if the cheques were security or overlapping.

• Counter-Argument: Determining whether cheques relate to the same transaction does not necessarily require a mini-trial. The complaint itself, and the statutory notice under Section 138, usually detail the underlying debt (e.g., “This cheque is for the refund of the amount paid under Agreement dated X”).
• If the complaint admits the debt is Rs. 1.72 crore, and the complainant has filed cheques totaling Rs. 3.4 crore (Firm + Personal), the abuse is apparent on the face of the record. The High Court does not need to weigh evidence to see that the complainant is trying to recover double the amount or use criminal pressure for civil leverage.
• By barring High Courts from stepping in at this stage, Sumit Bansal removes a critical filter against malicious prosecution.

6.2 The Weaponization of Jurisdiction

One of the most significant abuses in Section 138 cases is “forum shopping.” Although the 2015 Amendment attempted to fix jurisdiction based on the “branch where the payee maintains the account,” multiple cheques can still be manipulated to drag an accused to different courts if the complainant maintains multiple accounts.

• Scenario: A developer refunds money using 5 cheques. The buyer deposits Cheque 1 in Delhi, Cheque 2 in Mumbai, and Cheque 3 in Gurgaon.
• Consequence: Under Sumit Bansal, the accused must travel to three states. A “Same Transaction” approach under Section 220 CrPC would mandate a single trial, overriding this jurisdictional harassment.

7. Comparative Perspectives and Legislative Lacunae

7.1 The Legislative Gap

The Supreme Court in Re: Expeditious Trial explicitly noted that the strict cut-off in Section 219 (three offences) acts as a bottleneck. The Court recommended that the legislature amend the Act to allow “one trial for offences of the same kind… notwithstanding the restriction in Section 219.”

• Implication: The judiciary is aware that the current statutory framework is inadequate for modern commercial reality.
• The Role of the Court: In the absence of legislative amendment, the Supreme Court has often used Article 142 to fill the gap (e.g., Vishaka guidelines). The dissent argues that Sumit Bansal was a missed opportunity to fill this specific procedural gap by interpreting Section 220 CrPC expansively, rather than waiting for Parliament to act.

7.2 Global Context

In many jurisdictions (e.g., the UK under the Theft Act or US laws on check fraud), the focus is on the “course of conduct” or the fraudulent scheme, rather than the individual instrument. Prosecuting each check as a separate crime without consolidation is increasingly viewed as anachronistic in systems that prioritize judicial efficiency.

8. Conclusion: A Call for Unified Adjudication

The judgment in Sumit Bansal v. M/s MGI Developers stands on the solid ground of literal statutory interpretation. Section 138, read in isolation, does indeed create a distinct offence for every dishonoured cheque, a position that underpins the prosecution of multiple cheque bounce cases under Section 138 of the NI Act. However, the law does not exist in isolation; it operates within a broader web of procedural and constitutional rights.

This report respectfully dissents from the Sumit Bansal rationale on the grounds that it:

1. Ignores Section 220 CrPC: It fails to apply the “Same Transaction” doctrine to acts that clearly share a community of purpose and continuity of action, as defined in Mohan Baitha.
2. Violates the Spirit of Shyam Pal: It contradicts the jurisprudential logic that multiple cheques for a single debt constitute a single transaction for the purpose of justice (sentencing).
3. Undermines Constitutional Rights: It subjects citizens to the harassment of multiple trials (Article 21) and the risk of substantive double punishment (Article 20(2)) for a singular civil default.
4. Facilitates Abuse: It strips High Courts of the power to check prosecutorial overreach at the threshold.

Recommendation: It is submitted that the correct legal position should be the mandatory consolidation of all trials arising from multiple cheque bounce under Section 138 NI Act stemming from the same underlying contract or debt into a single proceeding under Section 220 of the CrPC. The “cause of action” should be interpreted broadly to encompass the transactional genus, not just the instrumental species. Until such a view is adopted—either by a larger bench of the Supreme Court or through legislative amendment—the sword of Section 138 will continue to hang heavy over the shield of the Constitution, often cutting through the protections of fair trial and due process.

Table 2: Summary of Dissenting Arguments

The legal community must continue to advocate for a “transactional approach” to Section 138, ensuring that the law serves as a mechanism for enforcing trust in commerce, not as an engine of oppression.

The post The Fragmentation of Criminal Liability: A Critical Dissent on Sumit Bansal v. M/s MGI Developers and Multiple Cheque Bounce Cases under Section 138 NI Act appeared first on Bhatt & Joshi Associates.

Introduction

The intersection of insolvency law and criminal liability has emerged as one of the most debated areas in contemporary Indian jurisprudence. The Bombay High Court’s recent judgment delivered by Justice M.M. Nerlikar on October 1, 2025, at the Nagpur Bench has reinforced a critical legal position: directors and officers of a company cannot escape their Personal Criminal Liability of Directors Under Section 138 for offences under the Negotiable Instruments Act, 1881 (NI Act) merely because insolvency proceedings have been initiated against their company under the Insolvency and Bankruptcy Code, 2016 (IBC). This ruling addresses the growing concern among creditors about whether company directors could use insolvency proceedings as a shield against prosecution for cheque dishonour, thereby undermining commercial morality and the sanctity of negotiable instruments.

The case involved M/s. Anand Distilleries and its directors who sought discharge from a criminal complaint for cheque dishonour on the ground that insolvency proceedings were initiated against the company before the cheque bounced. The High Court’s decision clarifies that the timing of IBC proceedings—whether initiated before or after the cause of action under the Section 138 NI Act arises—is immaterial to the personal criminal liability of directors. This judgment reinforces the principle that while corporate entities may receive protection under insolvency moratorium, natural persons who were responsible for the affairs of the company when the offence was committed remain accountable under criminal law.

Understanding Section 138 of the Negotiable Instruments Act

The Negotiable Instruments Act, 1881, was enacted to provide a legal framework for the use of negotiable instruments like cheques, promissory notes, and bills of exchange in commercial transactions. Section 138 was introduced through an amendment in 1988 to address the growing problem of cheque dishonour, which was eroding trust in commercial dealings and hampering business transactions. The provision criminalizes the dishonour of cheques issued in discharge of legal liability or debt.

Section 138 states that where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge of any debt or other liability, is returned by the bank unpaid for reasons of insufficient funds or that it exceeds the arrangement made, and the payee or holder makes a demand for payment through notice within thirty days of receiving information from the bank, and the drawer fails to make payment within fifteen days of receipt of such notice, the drawer shall be deemed to have committed an offence. The punishment prescribed includes imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both.

The offence under Section 138 is complemented by Section 141 of the NI Act, which extends criminal liability to persons who were in charge of and responsible for the conduct of the business of the company at the time the offence was committed. This vicarious liability provision is central to how courts assess the personal criminal liability of directors under Section 138, ensuring that directors, managers, and other officers cannot hide behind the corporate veil when a company commits the offence of cheque dishonour. The provision creates a presumption of culpability against such persons unless they can prove that the offence was committed without their knowledge or that they exercised due diligence to prevent the commission of the offence.

The quasi-criminal nature of proceedings under Section 138 distinguishes them from purely civil recovery proceedings. While the primary objective is to facilitate debt recovery through the threat of criminal sanctions, the proceedings follow criminal procedure and result in criminal consequences including imprisonment. This dual character has been the subject of extensive judicial interpretation, particularly in understanding how such proceedings interact with other laws like the IBC.

The Insolvency and Bankruptcy Code and Moratorium Provisions

The Insolvency and Bankruptcy Code, 2016, was enacted as comprehensive legislation to consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. The Code represents a paradigm shift from the debtor-in-possession model to a creditor-in-control regime, aimed at maximizing the value of assets and promoting entrepreneurship by balancing the interests of all stakeholders.

Section 14 of the IBC is a crucial provision that declares a moratorium upon admission of an insolvency application. The moratorium provision states that on the insolvency commencement date, the Adjudicating Authority shall by order declare that the moratorium shall have effect from the date of such order. During the moratorium period, several actions are prohibited including the institution of suits or continuation of pending suits or proceedings against the corporate debtor, execution of any judgment, decree or order against the corporate debtor, any action to foreclose, recover or enforce any security interest created by the corporate debtor, and the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

The purpose of the moratorium is multifold. It provides breathing space to the corporate debtor to enable the resolution professional to assess the viability of the business, prepare an information memorandum, and invite resolution plans from prospective resolution applicants. It prevents a race among creditors to enforce their claims, which could lead to the dismemberment of the corporate debtor’s assets and destroy its value as a going concern. The moratorium creates a level playing field where all creditors’ claims are dealt with in a collective and orderly manner rather than through individual enforcement actions.

However, the scope and extent of the moratorium have been subjects of intense litigation and judicial interpretation. A critical question has been whether the moratorium extends to criminal proceedings, particularly those under Section 138 of the NI Act. This question becomes even more complex when examining whether the moratorium protects not just the corporate debtor but also its directors and officers who face personal liability under criminal law. The law has evolved through several landmark Supreme Court judgments that have attempted to delineate the boundaries of moratorium protection in the context of different types of proceedings.

Evolution of Judicial Interpretation: Supreme Court Precedents

The judicial understanding of the interplay between the IBC moratorium and Section 138 proceedings has evolved significantly through several landmark Supreme Court decisions. These judgments have progressively clarified the scope of moratorium protection and its applicability to different categories of defendants and different stages of proceedings.

In the landmark judgment of P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., decided on March 1, 2021, a three-judge bench of the Supreme Court examined whether proceedings under Section 138 of the NI Act against a corporate debtor would be covered by the moratorium under Section 14 of the IBC [1]. The Court held that when a moratorium order is passed under the IBC, parallel proceedings under Section 138 of the NI Act against the corporate debtor cannot be allowed to continue. The Court reasoned that proceedings under Section 138 and 141 of the NI Act are quasi-criminal in nature and would amount to a proceeding within the meaning of Section 14(1)(a) of the IBC. The judgment emphasized that the legislative intent behind the moratorium was to provide a peaceful period for the resolution professional to attempt to revive the corporate debtor as a going concern.

The Court in P. Mohanraj analyzed the nature of proceedings under Chapter XVII of the NI Act and concluded that despite having criminal elements, these proceedings are fundamentally about debt recovery. The judgment stated that the object of the IBC is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The moratorium provision ensures that during the resolution process, the assets of the corporate debtor remain intact and are not depleted by individual enforcement actions. The Court explicitly held that continuing with Section 138 proceedings would defeat the very purpose of the moratorium as it would deplete the financial resources of the corporate debtor through fines and legal costs.

However, the P. Mohanraj judgment specifically dealt with proceedings against the corporate debtor itself, not its directors or officers. This distinction became crucial in subsequent litigation where directors sought to extend the benefit of moratorium to themselves. The Supreme Court addressed this issue in later judgments, particularly in the context of whether natural persons could claim immunity from Section 138 proceedings by virtue of their company being under insolvency resolution.

The Supreme Court further clarified the position regarding directors and officers in multiple subsequent decisions. In Sandeep Gupta v. Shri Ram Steel Traders decided by the Delhi High Court in 2023, the court held that Section 96 of the IBC concerning pre-packaged insolvency would not apply when a person is arrayed as an accused in a complaint under Section 138 in his capacity as a director of a company [2]. The judgment emphasized that the debt in question belonged to the company, not the director personally, but Section 141 of the NI Act fastens liability on every officer who was in management and control of the company’s affairs. This vicarious liability is personal to the director and cannot be extinguished by moratorium proceedings against the company.

The principle emerging from these cases is clear: while the corporate entity receives protection under the moratorium, natural persons who are liable under Section 141 of the NI Act remain exposed to criminal prosecution [3]. The moratorium cannot be used as a device to shield individual wrongdoers from facing consequences for offences committed while they were managing the company. This interpretation ensures that the protective mechanism of insolvency law does not become a refuge for those who have acted irresponsibly or fraudulently in their capacity as company directors or officers.

The Bombay High Court’s Decision: Case Analysis

The Bombay High Court judgment in the Ortho Relief Hospital and Research Centre case presents a critical clarification on the personal criminal liability of directors under Section 138 of the Negotiable Instruments Act, particularly in relation to insolvency proceedings. This detailed application of legal principles addresses a crucial question: can directors escape their personal criminal liability by invoking insolvency proceedings against their company?

The chronology of events in this case was particularly significant. In February 2018, Punjab National Bank initiated insolvency proceedings against M/s. Anand Distilleries under the IBC. The National Company Law Tribunal (NCLT) admitted the petition on February 14, 2018, which triggered the moratorium under Section 14 and led to the appointment of an Interim Resolution Professional. The petitioner hospital, being a creditor, lodged its claim with the resolution professional as required under the IBC process.

After the moratorium was declared, the directors of the company allegedly reassured the petitioner and asked them to present the cheque for encashment. When the cheque was presented on December 14, 2018, it was dishonoured with the remark of insufficient funds. Following the statutory procedure under the NI Act, the petitioner issued a legal notice on January 5, 2019, giving the drawer an opportunity to make payment within fifteen days. When no payment was received, the petitioner filed a criminal complaint under Section 138 of the NI Act.

The trial court, however, allowed an application filed by the directors on January 31, 2025, and discharged them from the criminal proceedings. The trial court’s reasoning was that since insolvency proceedings were initiated against the company before the cheque was dishonoured, the subsequent criminal complaint was barred by the moratorium provisions of the IBC. This interpretation suggested that the timing of the initiation of IBC proceedings was determinative of whether Section 138 proceedings could be maintained.

The petitioner challenged this discharge order before the Bombay High Court, represented by Advocate S.S. Dewani. The petitioner’s primary argument was that proceedings under the NI Act are penal in nature and fundamentally different from recovery proceedings under the IBC. It was contended that an approved resolution plan under the IBC pertains to the corporate debtor’s liabilities and does not absolve directors from their Personal Criminal Liability of Directors Under Section 138, which flows independently through Section 141 of the NI Act. The petitioner emphasized that directors, being natural persons, remain statutorily liable for prosecution regardless of any moratorium applicable to the corporate entity.

The respondent directors, represented by Advocate S.D. Khati, placed significant emphasis on the timeline of events. They argued that the IBC proceedings and moratorium were initiated on February 14, 2018, well before the cause of action for the Section 138 complaint arose through cheque dishonour on December 14, 2018. Their contention was that Section 14 of the IBC bars the institution of any legal proceedings against the corporate debtor after a moratorium is declared, and this bar should logically extend to directors who are prosecuted solely by virtue of their connection with the company. They sought to distinguish their case from situations where the cause of action arose before IBC proceedings, arguing that the temporal sequence was material to determining liability.

Justice M.M. Nerlikar framed the central legal question succinctly: whether prior initiation of proceedings under the IBC would frustrate the claim of the petitioner under Section 138 of the NI Act. After examining the Supreme Court precedents, the High Court concluded that the law on this issue is well-settled and the timing argument advanced by the respondents was legally untenable.

The High Court held that the moratorium under Section 14 of the IBC applies only to the corporate debtor, and natural persons mentioned in Section 141 continue to remain liable, reaffirming the personal criminal liability of directors under section 138 irrespective of insolvency proceedings. The judgment emphasized that proceedings under Section 138 are not recovery proceedings but are penal in nature, aimed at upholding the integrity of commercial transactions and maintaining faith in negotiable instruments. The personal penal liability of directors continues because such liability flows from their role in managing the company when the offence was committed, not merely from their association with the company.

The court explicitly rejected the timing argument, stating: “From the above discussion it is clear that it makes no difference whether the proceedings are initiated prior to initiation of IB Code proceeding or thereafter. The Supreme Court has in unequivocal terms held that natural persons cannot escape from their personal liability under Section 138 of the NI Act.” This categorical statement eliminates any ambiguity about whether the sequence of events affects the liability of directors under the NI Act.

The judgment further clarified that criminal proceedings do not fall under the category of proceedings that are to be kept in abeyance under Section 14 of the IBC when it comes to personal liability of directors and officers. The court held that the trial court had committed a gross error in allowing the discharge application and thereby discharging the accused directors. Consequently, the High Court allowed the writ petition, quashing and setting aside the trial court’s orders, and directed that the criminal complaint against the directors would proceed to trial. The court also rejected the respondents’ request to stay the judgment, indicating confidence in the correctness of its legal position.

Regulatory Framework Governing Directors’ Liability

The liability of company directors under Indian law is governed by a complex regulatory framework that spans multiple statutes including the Companies Act, 2013, the Negotiable Instruments Act, 1881, and the Insolvency and Bankruptcy Code, 2016. Understanding this framework is essential to appreciate how directors can be held personally liable for corporate defaults.

Section 141 of the Negotiable Instruments Act creates a specific statutory regime for holding company officials accountable for offences committed by the company. The provision states that if the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. This creates a presumption of culpability against directors and managing directors, subject to proving that the offence was committed without their knowledge or that they had exercised all due diligence to prevent the commission of the offence.

The Supreme Court has consistently held that to make a director liable under Section 141, it must be shown that he was in charge of and responsible for the conduct of the business of the company at the relevant time. Merely being a director is not sufficient unless the role is clearly established. However, once it is shown that a person was a director and was responsible for the affairs of the company, the burden shifts to that person to prove that they had no knowledge of the offence or had exercised due diligence.

When a director signs a cheque on behalf of the company, they are acting in their official capacity as a corporate agent. However, the personal criminal liability of directors under Section 138 that may arise from the cheque’s dishonour is distinctly personal and cannot be deflected onto the corporate entity. This is because the criminal liability relates directly to the individual director’s role in the decision-making process that led to the dishonour.

The IBC adds another layer to this framework. While Section 14 provides moratorium protection to the corporate debtor, Section 32A of the IBC specifically addresses criminal liability in approved resolution plans. This provision states that where the Adjudicating Authority has approved a resolution plan, no action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process. However, this protection extends only to the corporate debtor and its properties, not to any person other than the corporate debtor who is involved in the commission of such an offence.

The distinction drawn by Section 32A is critical. It recognizes that while the corporate debtor should be allowed a fresh start under an approved resolution plan, individuals who committed offences while managing the company should not escape personal accountability. This ensures that insolvency resolution does not become a mechanism for personal immunity from criminal prosecution [5].

The interplay between these provisions creates a nuanced system where corporate rehabilitation is balanced against individual accountability. The corporate entity may be protected to enable its revival, but those who were responsible for decisions leading to criminal offences remain answerable under law. This prevents moral hazard where directors might engage in reckless or fraudulent conduct knowing that subsequent insolvency proceedings would shield them from consequences.

Distinction Between Corporate and Personal Liability

One of the fundamental principles established through judicial interpretation is the clear distinction between the corporate entity and the natural persons who manage it. This distinction is rooted in the basic principle of corporate law that a company is a separate legal entity distinct from its shareholders and directors. However, this separation does not mean that individuals can always escape liability for corporate wrongdoing.

When a cheque issued by a company is dishonoured, two parallel liabilities are created under the NI Act. First, the company as the drawer of the cheque is liable under Section 138. Second, by virtue of Section 141, directors and officers who were in charge of the company’s affairs at the relevant time also become personally liable. These are distinct liabilities even though they arise from the same wrongful act.

The moratorium under Section 14 of the IBC operates only on the corporate debtor. The term corporate debtor is specifically defined in Section 3(8) of the IBC to mean a corporate person who owes a debt to any person. This definition does not include natural persons who are directors or officers of the corporate debtor. Therefore, when a moratorium is declared, it freezes actions against the corporate debtor but does not automatically extend to individuals connected with that corporate debtor.

This distinction has important practical implications. When the NCLT admits an insolvency application and declares a moratorium, creditors cannot proceed with recovery actions against the company, attach its properties, or continue litigation against it for recovery of debts. However, these restrictions do not prevent creditors from proceeding against directors who are personally liable under statutory provisions like Section 141 of the NI Act [6].

The rationale for maintaining this distinction is grounded in both legal principle and policy considerations. From a legal standpoint, criminal liability is personal and cannot be diluted by corporate insolvency. The offence under Section 138 involves elements of mens rea and actus reus that are attributable to individuals who made decisions on behalf of the company. These individuals had the power to ensure that cheques issued by the company would be honored, and their failure to do so attracts personal criminal liability.

From a policy perspective, allowing directors to escape prosecution by hiding behind corporate insolvency would undermine the entire purpose of Section 138 of the NI Act. The provision was enacted to restore credibility to negotiable instruments and ensure that parties who issue cheques do so responsibly. If directors knew they could avoid prosecution through insolvency proceedings, it would incentivize irresponsible issuance of cheques and erode commercial morality.

The Supreme Court has emphasized that the IBC is designed to provide a fresh start to the corporate entity as a going concern, not to provide immunity to individuals who may have engaged in wrongful conduct. The resolution plan under the IBC addresses the debts and liabilities of the company, not the criminal liability of individuals. An approved resolution plan may release the company from its financial obligations, but it cannot extinguish the criminal prosecution of directors who were responsible for offences committed during their tenure.

Impact on Commercial Transactions and Creditor Protection

The Bombay High Court’s judgment has significant implications for commercial transactions and creditor rights in India. By clarifying that directors remain personally liable for cheque dishonour regardless of insolvency proceedings against the company, the judgment strengthens the deterrent effect of Section 138 and enhances creditor protection.

In commercial practice, cheques serve as important instruments of credit and payment. Businesses routinely accept post-dated cheques as security for loans and advances, relying on the legal consequences of dishonour as a safeguard against default. If directors could escape liability by initiating insolvency proceedings against the company after issuing cheques, it would significantly undermine the utility of cheques as security instruments. Creditors would become reluctant to accept cheques, leading to increased transaction costs and reduced liquidity in commercial dealings.

The judgment ensures that creditors who have accepted cheques as security retain meaningful recourse against responsible individuals even when the corporate entity enters insolvency. This is particularly important for small and medium enterprises that often extend credit to larger companies based on the assurance provided by cheques signed by responsible directors. These creditors may not have the resources to conduct extensive due diligence or secure complex collateral arrangements, and they rely heavily on the deterrent effect of criminal prosecution under Section 138.

The decision also addresses a potential avenue for abuse where unscrupulous directors might deliberately trigger insolvency proceedings after issuing multiple cheques to different creditors, hoping to escape personal liability. By holding that the timing of IBC proceedings is irrelevant to directors’ liability under Section 138, the court eliminates this possibility and ensures that individuals cannot strategically use insolvency law to evade criminal consequences [7].

However, the judgment also maintains a balance by recognizing that not all directors are automatically liable. The requirement under Section 141 that the accused must have been in charge of and responsible for the conduct of business provides a safeguard against indiscriminate prosecution of all directors. Nominee directors, independent directors, or those who had no role in the financial decisions leading to the dishonour can potentially defend themselves by demonstrating their lack of involvement.

From the perspective of insolvency resolution, the judgment does not hinder the IBC process. The corporate debtor continues to receive moratorium protection, allowing the resolution professional to work on revival plans without interference from individual creditors. The continuation of criminal proceedings against directors operates on a parallel track and does not impede the collective resolution process. In fact, by maintaining pressure on directors who were responsible for the company’s financial mismanagement, it may incentivize better cooperation with the resolution process and more realistic resolution proposals.

Comparative Analysis with Personal Insolvency Provisions

An interesting dimension of the legal framework is the treatment of directors under personal insolvency provisions. Section 96 of the IBC deals with interim moratorium in personal insolvency cases. When an individual debtor files an application for initiating a resolution process, an interim moratorium period commences during which various actions against the debtor are prohibited.

Several directors who faced Section 138 prosecution have attempted to invoke Section 96 by filing personal insolvency applications, arguing that they should receive moratorium protection in their individual capacity. However, courts have consistently rejected this argument, holding that directors cannot escape their vicarious criminal liability under Section 141 of the NI Act by resorting to personal insolvency proceedings [8].

The Delhi High Court in Sandeep Gupta v. Shri Ram Steel Traders explicitly addressed this issue, holding that Section 96 of the IBC would not be applicable when a person is arrayed as an accused in a complaint under Section 138 in his capacity as a director of a company. The court reasoned that the debt for which the cheque was issued belonged to the company, not the director personally. The director’s liability under Section 141 is not because he owes the debt but because he was responsible for the company’s conduct when it committed the offence—an approach that reflects how courts have treated the personal criminal liability of directors under Section 138 as independent of any insolvency process.

This distinction is crucial. Personal insolvency provisions are designed to provide relief to individual debtors who are unable to pay their personal debts. They are not intended to shield individuals from criminal liability arising from their role in corporate management. If directors could use personal insolvency to avoid Section 138 prosecution, it would create an absurd situation where any person facing criminal prosecution could escape by declaring personal insolvency.

The courts have emphasized that criminal liability is not a debt that can be discharged through insolvency. The punishment under Section 138 includes both fine and imprisonment, and the imprisonment aspect cannot be addressed through any insolvency mechanism. Even if the fine component could theoretically be considered a debt, the criminal nature of the proceedings and the imprisonment sanction distinguish them from ordinary debt recovery.

Conclusion and Future Implications

The Bombay High Court’s judgment represents an important affirmation of established legal principles regarding the interplay between insolvency law and criminal liability under the Negotiable Instruments Act. By holding that directors cannot escape their personal liability for cheque dishonour by relying on insolvency proceedings against the company, the court has strengthened creditor protection and maintained the deterrent effect of Section 138.

The judgment resolves an important question about timing by clarifying that it is immaterial whether IBC proceedings were initiated before or after the cause of action under Section 138 arose. What matters is whether the accused was in charge of and responsible for the company’s affairs at the time the cheque was issued and dishonoured. This temporal neutrality prevents strategic manipulation of insolvency law to evade criminal liability.

Looking forward, this judgment is likely to significantly influence how directors approach their responsibilities in managing company finances. With the law now clarifying that Personal Criminal Liability of Directors Under Section 138 cannot be avoided through corporate insolvency proceedings, directors have a stronger incentive to maintain responsible financial stewardship and ensure stricter compliance in all cheque-related transactions.

For creditors, the judgment provides assurance that accepting cheques as security remains meaningful even in situations where the debtor company subsequently faces insolvency. This is particularly valuable for small creditors who may not have sophisticated security arrangements and rely primarily on the deterrent effect of criminal prosecution [9].

The decision also contributes to the evolving jurisprudence on the scope and limits of moratorium protection under the IBC. While the Code provides powerful tools for corporate rehabilitation, it does not create a zone of absolute immunity. The balance struck by courts between protecting viable businesses and ensuring individual accountability is essential for maintaining trust in both the insolvency system and the broader commercial ecosystem.

As insolvency law continues to develop in India, the principles established in this judgment will serve as important guideposts. They affirm that corporate rehabilitation and individual accountability are not mutually exclusive objectives but can coexist within a coherent legal framework. The judgment demonstrates judicial commitment to preventing the abuse of beneficial legislation while ensuring that legitimate creditor rights are protected.

References

[1] Supreme Court of India. (2021). P. Mohanraj & Ors. v. M/s. Shah Brothers Ispat Pvt. Ltd., (2021) 6 SCC 258. Available at: https://indiankanoon.org/doc/97452657/ 

[2] Delhi High Court. (2023). Sandeep Gupta v. Shri Ram Steel Traders & Anr., CRL.M.C. 381/2022. Available at: https://www.scconline.com/blog/post/2023/03/17/initiation-ibc-proceedings-does-not-absolve-company-director-signatories-of-criminal-liability-under-section-138-negotiable-instruments-act-supreme-court-legal-research-news-updates/ 

[3] LiveLaw. (2021). Moratorium Under Section 14 IBC Covers Section 138 NI Act Proceedings Against Corporate Debtor. Available at: https://www.livelaw.in/top-stories/moratorium-under-section-14-ibc-covers-section-138-ni-act-proceedings-against-corporate-debtor-supreme-court-170508 

[4] Bombay High Court. (2025). Ortho Relief Hospital and Research Centre v. M/s. Anand Distilleries & Ors., decided on October 1, 2025. Available at: https://lawtrend.in/prior-ibc-proceedings-do-not-bar-section-138-ni-act-action-against-company-directors-bombay-hc/ 

[5] Bar & Bench. (2021). Moratorium order under Section 14 IBC bars parallel proceedings against Corporate Debtor under Section 138 of NI Act. Available at: https://www.barandbench.com/news/litigation/moratorium-order-section-14-ibc-bars-parallel-proceedings-section-138-negotiable-instruments-act-supreme-court 

[6] SCC Online. (2023). Liability of the Erstwhile Directors: Section 138, Negotiable Instruments Act versus Insolvency and Bankruptcy Code, 2016. Available at: https://www.scconline.com/blog/post/2023/10/12/liability-of-the-erstwhile-directors-section-138-negotiable-instruments-act-versus-insolvency-and-bankruptcy-code-2016/ 

[7] LiveLaw. (2025). No S.138 NI Act Case Against Ex-Director Of Company When Cause Of Action Arose After IBC Moratorium Was Declared: Supreme Court. Available at: https://www.livelaw.in/supreme-court/no-s138-ni-act-case-against-ex-director-of-company-when-cause-of-action-arose-after-ibc-moratorium-was-declared-supreme-court-286691 

[8] LegitEye. (2023). Only corporate debtor is protected by moratorium while signatories/directors cannot escape from their penal liability u/s 138 of NI Act. Available at: https://legiteye.com/in-crlmc-3812022-punj-hc-only-corporate-debtor-is-protected-by-moratorium-while-signatoriesdirectors-cannot-escape-from-their-penal-liability-us-138-of-ni-act-by-filing-personal-insolvency-proceedings-delhi-hc-justice-jasmeet-singh-15-05-2023/ 

[9] iPleaders. (2021). The changing dynamics of section 14 of the IBC, 2016 vis-à-vis section 138 proceeding of NI Act,1881. Available at: https://blog.ipleaders.in/changing-dynamics-section-14-ibc-2016-vis-vis-section-138-proceeding-ni-act1881/ 

The post Personal Criminal Liability of Directors Under Section 138 NI Act Remains Unaffected by IBC Moratorium: Bombay High Court Ruling appeared first on Bhatt & Joshi Associates.

Introduction

The Supreme Court of India, in a landmark judgment delivered on July 14, 2025, in Dhanasingh Prabhu v. Chandrasekar & Another, clarified the scope of partner liability under Section 138 NI Act. The ruling confirms that individual partners can be prosecuted for cheque dishonour even if the partnership firm is not named as an accused, strengthening the principles of joint and several liability in partnership law.

This decision resolves a significant procedural question that has been the subject of conflicting interpretations across various High Courts and provides essential guidance for practitioners dealing with cheque dishonour cases involving partnership firms. The judgment clarifies the distinction between partnership firms and companies in the context of criminal liability and establishes important precedents for the interpretation of Section 141 of the Negotiable Instruments Act.

Factual Background and Legal Context

Case Genesis and Procedural History

The appellant, Dhanasingh Prabhu, filed a complaint under Section 138 of the Negotiable Instruments Act against the respondents, Chandrasekar and another, regarding the dishonour of a cheque worth Rs. 21 lakh. The cheque was issued in the name of a partnership firm called ‘Mouriya Coirs’ to repay a debt. Crucially, while the cheque was issued on behalf of the partnership firm, the statutory notice under Section 138 NI Act was sent only to the individual partners, and the firm itself was neither issued a notice nor made a party to the complaint.

The respondents challenged the maintainability of the complaint, arguing that the partnership firm should have been formally arraigned as an accused and issued a statutory notice for the proceedings to be valid. This contention was based on established jurisprudence requiring proper compliance with the procedural requirements of Section 138 NI Act, particularly the mandatory issuance of statutory notice to the drawer of the dishonoured cheque.

Madras High Court Decision

The Madras High Court, in its judgment dated February 26, 2024, accepted the respondents’ arguments and quashed the complaint filed under Section 138 NI Act. The High Court held that since no statutory notice was issued to the partnership firm ‘Mouriya Coirs’ and the firm was not arraigned as an accused in the complaint, the rigours of Section 141 of the Negotiable Instruments Act were not complied with, rendering the complaint non-maintainable against the partners.

The High Court’s reasoning was based on a strict interpretation of the procedural requirements under Section 138 and Section 141, treating the partnership firm as a distinct entity that must be formally included in the proceedings for the complaint to be maintainable against its partners. This approach reflected the court’s adherence to technical compliance with statutory notice requirements.

Supreme Court Intervention

Aggrieved by the High Court’s decision, the appellant approached the Supreme Court, challenging the interpretation that would render complaints non-maintainable merely due to the absence of formal arraignment of the partnership firm. The Supreme Court granted leave to appeal and proceeded to examine the fundamental legal principles governing partnership liability under Section 138 NI Act

Legal Framework: Partnership Law and Criminal Liability

Partnership Act, 1932 – Fundamental Principles

The legal foundation for understanding partnership firm liability lies in the Partnership Act, 1932, which establishes the fundamental characteristics of partnerships and the relationship between firms and their partners. Section 4 of the Partnership Act clearly establishes that “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all” [2].

Crucially, the Partnership Act does not grant partnership firms separate legal personality independent of their partners. Unlike corporations, partnership firms are not distinct legal entities but represent collective arrangements between individuals who agree to conduct business together. This fundamental principle has far-reaching implications for criminal liability and procedural requirements under various statutes.

Section 18 of the Partnership Act establishes that “Partners are agents of the firm and also of each other,” creating a framework of mutual agency and shared responsibility that extends beyond mere contractual obligations. This agency relationship forms the basis for joint and several liability principles that govern partnership operations and legal consequences.

Section 138 and 141 of the NI Act

Section 138 of the Negotiable Instruments Act, 1881, creates criminal liability for dishonour of cheques, stating: “Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid… such person shall be deemed to have committed an offence” [3].

Section 141 extends this liability to companies and firms, providing: “If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence” [4].

The Explanation to Section 141 specifically states: “(a) ‘company’ means any body corporate and includes a firm or other association of individuals; and (b) ‘director’, in relation to a firm, means a partner in the firm.” This explanation brings partnership firms within the ambit of Section 141 while recognizing the unique nature of partnerships.

Joint and Several Liability Principles

The concept of joint and several liability is fundamental to partnership law and distinguishes partnerships from other business entities. Under this principle, each partner is individually liable for the entire amount of partnership debts and obligations, while also being collectively liable with other partners and the firm itself.

This liability structure means that creditors can pursue recovery from any individual partner, all partners collectively, or the partnership firm, without being required to exhaust remedies against one before proceeding against another. The practical effect is that partners cannot escape liability by arguing that they should not be pursued individually when the firm has not been formally included in proceedings.

Supreme Court’s Legal Analysis and Reasoning

Distinction Between Partnership Firms and Companies

The Supreme Court’s analysis began with a fundamental examination of the legal distinctions between partnership firms and companies, particularly in the context of criminal liability under the Negotiable Instruments Act. The Court emphasized that “a partnership firm, unlike a company registered under the Companies Act, does not possess a separate legal personality, and the firm’s name is only a compendious reference for describing its partners.”

This distinction is crucial because it affects how criminal liability attaches and how procedural requirements should be interpreted. The Court noted that “unlike a company which is a separate juristic entity from its directors thereof, a partnership firm comprises of its partners who are the persons directly liable on behalf of the partnership firm and by themselves.”

The Court further elaborated: “In the case of a partnership firm, the said juristic entity is always understood as a compendious term, namely, the partnership firm along with its partners.” This understanding forms the foundation for the Court’s conclusion that procedural requirements can be satisfied through actions directed at partners, even when the firm is not formally included.

Joint and Several Liability under Section 138 NI Act

The Supreme Court provided comprehensive analysis of how joint and several liability principles apply in the context of Section 138 proceedings. The Court stated: “If a partnership firm is liable for the offence under Section 138 NI Act, it would imply that the liability would automatically extend to the partners of the partnership firm jointly and severally.”

This automatic extension of liability eliminates the need for separate proceedings against the firm and its partners, as the liability is inherent and indivisible. The Court emphasized: “The partners who form a partnership firm are personally liable in law along with the partnership firm. It is a case of joint and several liability and not vicarious liability as such.”

The distinction between direct liability and vicarious liability is significant because it affects both the procedural requirements and the substantive legal consequences. While company directors may face vicarious liability under Section 141, partners face direct personal liability that coexists with firm liability.

Interpretation of Section 141 Requirements

The Supreme Court addressed the argument that Section 141 requires both the firm and partners to be formally arraigned for proceedings to be maintainable. The Court rejected this interpretation, stating: “If Parliament intended that the partners of the firm be construed as separate entities for the purpose of penalty, then it would have provided so by expressly stating that the firm, as well as the partners, would be liable separately for the offence under Section 138 of the Act.”

The Court found that “Such an intention does not emanate from Section 141 of the Act as the offence proved against the firm would amount to the partners of the firm also being liable jointly and severally with the firm. Therefore, there is no separate liability on each of the partners unless subsection (2) of Section 141 applies, when negligence or lack of bona fides on the part of any individual partner of the firm has been proved.”

This interpretation recognizes that Section 141 creates a unified liability framework rather than requiring separate procedural compliance for each potentially liable party.

Procedural Flexibility and Practical Justice

The Supreme Court demonstrated a pragmatic approach to procedural requirements, emphasizing that technical defects should not defeat substantial justice when the underlying legal principles support the proceedings. The Court stated: “If the complainant herein has proceeded only against the partners and not against the partnership firm, we think it is not something which would go to the root of the matter so as to dismiss the complaint on that ground.”

The Court suggested alternative approaches that could cure any procedural defects: “Rather, opportunity could have been given to the complainant to implead the partnership firm also as an accused in the complaint even though no notice was sent specifically in the name of the partnership. Alternatively, notice to the partners/accused could have been construed as notice to the partnership firm also.”

This flexible approach reflects the Court’s commitment to ensuring that procedural technicalities do not undermine the substantive goals of the Negotiable Instruments Act, which is designed to provide effective remedies for victims of cheque dishonour.

Constitutional and Policy Considerations

Access to Justice and Procedural Fairness

The Supreme Court’s decision reflects broader constitutional principles related to access to justice and procedural fairness. Article 21 of the Constitution guarantees the right to life and personal liberty, which has been interpreted to include the right to fair and reasonable legal procedures that do not create unnecessary barriers to justice.

By rejecting overly technical interpretations of procedural requirements, the Court has ensured that complainants are not denied justice due to formalistic compliance issues that do not affect the substantive merits of their cases. This approach aligns with the constitutional mandate to provide accessible and effective legal remedies.

Legislative Intent and Statutory Interpretation

The Court’s analysis reflects careful consideration of legislative intent behind the Negotiable Instruments Act and the Partnership Act. The Court recognized that “the Negotiable Instruments Act was enacted to provide effective remedies for victims of cheque dishonour” and that overly restrictive interpretations of procedural requirements could undermine this objective.

The Court applied principles of harmonious construction, ensuring that the Negotiable Instruments Act and Partnership Act are interpreted in a manner that gives effect to both statutes’ underlying purposes. This approach prevents conflicts between different legal frameworks and ensures coherent application of legal principles.

Economic Efficiency and Commercial Certainty

The decision has important implications for commercial transactions and economic efficiency. By clarifying that complaints can be maintained against partners without formal firm arraignment, the Court has reduced procedural uncertainty that could otherwise complicate debt recovery and commercial dispute resolution.

This clarity benefits both creditors and debtors by providing predictable legal frameworks for resolving payment disputes. Commercial parties can now structure their transactions and legal strategies with greater confidence regarding the procedural requirements for Section 138 proceedings.

Implications for Legal Practice and Commercial Transactions

Drafting and Documentation Considerations

Legal practitioners must now consider the implications of this judgment for drafting commercial agreements and documenting business relationships involving partnership firms. While the decision provides greater procedural flexibility, it also emphasizes the importance of clear documentation regarding partnership structures and individual partner responsibilities.

The judgment suggests that statutory notices can be effectively served on partners without separate service on the firm, but practitioners may still prefer to include both the firm and partners as recipients to avoid any potential challenges. This approach provides additional protection while taking advantage of the procedural flexibility recognized by the Supreme Court.

Litigation Strategy and Case Management in Section 138 proceedings

The decision affects litigation strategy in Section 138 proceedings involving partnership firms. Complainants now have greater flexibility in structuring their cases and are not required to make complex determinations about firm registration status or formal entity recognition before filing complaints.

However, the judgment also suggests that courts may exercise discretion to allow firms to be added as parties during proceedings, which means that defense strategies must account for potential modifications to the complaint structure. This flexibility cuts both ways, providing opportunities for both complainants and defendants to adjust their positions as cases develop.

Risk Assessment and Commercial Decision-Making

Commercial entities dealing with partnership firms can now make more informed risk assessments based on clearer understanding of liability principles. The joint and several liability framework means that creditors can pursue recovery from any partner individually, regardless of whether formal proceedings have been initiated against the firm itself.

This understanding may influence commercial decision-making regarding credit terms, security requirements, and due diligence procedures when dealing with partnership firms. The decision provides greater certainty about liability enforcement mechanisms while emphasizing the personal nature of partner liability.

Comparative Analysis with Corporate Liability

Aneeta Hada Precedent and Distinguishing Factors

The Supreme Court specifically distinguished the present case from its earlier decision in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. (2012) 5 SCC 661, which established that company directors cannot be prosecuted under Section 138 without the company being arraigned as an accused [5].

The Court explained that this distinction is justified because “directors have vicarious liability, whereas partners have direct and personal liability under partnership law.” This fundamental difference in the nature of liability justifies different procedural approaches for companies versus partnership firms.

The Court emphasized that corporate liability involves “separate juristic entities” where directors’ liability is derivative of corporate wrongdoing, while partnership liability involves direct personal obligation that coexists with collective firm responsibility.

Vicarious vs. Direct Liability Framework

The judgment clarifies the important distinction between vicarious liability (applicable to corporate directors) and direct liability (applicable to partners). This distinction has procedural and substantive implications that affect how Section 138 proceedings should be structured and conducted.

For corporate entities, the requirement to arraign the company as an accused ensures that the primary responsible party is included in proceedings before pursuing vicarious liability against directors. For partnerships, the direct liability of partners means that they are primary responsible parties regardless of whether the firm is formally included.

This framework provides coherent and principled approach to different business structures while recognizing their distinct legal characteristics and liability frameworks.

Future Implications and Legal Development

Harmonization of Commercial Law

The Supreme Court’s decision contributes to the ongoing harmonization of commercial law principles across different business entities and legal frameworks. By providing clear guidance on partnership liability under the Negotiable Instruments Act, the Court has reduced conflicts between different legal regimes and provided greater coherence in commercial dispute resolution.

Future legislative developments may build upon this clarification to provide even more comprehensive frameworks for addressing commercial liability across different entity types. The decision provides a foundation for continued development of commercial law that recognizes both business flexibility and creditor protection.

Impact on Alternative Business Structures

The decision may influence how alternative business structures, such as Limited Liability Partnerships (LLPs) and other hybrid entities, are treated under commercial law. The Court’s emphasis on the underlying economic reality of business relationships rather than formal entity structures suggests that future interpretations may focus on substance over form.

This approach could lead to more nuanced treatment of emerging business structures that combine elements of partnerships and corporations, ensuring that liability frameworks remain appropriate for evolving commercial practices.

Technological and Digital Commerce Considerations

As commercial transactions increasingly move to digital platforms and involve complex technological intermediation, the principles established in this judgment provide important guidance for determining liability in digital commerce contexts. The focus on direct economic relationships and practical business control may be particularly relevant for platform-based businesses and digital intermediaries.

The decision’s emphasis on substance over technical compliance may also be relevant for addressing liability issues in emerging technologies such as blockchain-based transactions and smart contracts, where traditional entity concepts may require adaptation.

Conclusion

The Supreme Court’s decision in Dhanasingh Prabhu v. Chandrasekar represents a significant clarification of partnership liability principles under the Negotiable Instruments Act. By establishing that complaints under Section 138 are maintainable against partners without formal firm arraignment, the Court has resolved important procedural uncertainties while reaffirming fundamental principles of partnership law.

The judgment’s emphasis on joint and several liability reflects a sophisticated understanding of partnership law principles and their interaction with criminal liability frameworks. The Court has successfully balanced procedural clarity with substantive justice, ensuring that technical requirements do not defeat legitimate creditor rights while maintaining appropriate protections for all parties.

The decision provides valuable guidance for legal practitioners, commercial entities, and courts handling cheque dishonour cases involving partnership firms. By clarifying the scope of partner liability under Section 138 NI Act, the Supreme Court has paved the way for more efficient and predictable resolution of such disputes, while upholding the integrity of the legal framework.

Most importantly, the judgment demonstrates the Supreme Court’s commitment to principled legal interpretation that serves both commercial efficiency and procedural fairness. By grounding its decision in fundamental partnership law principles while addressing practical commercial needs, the Court has provided a framework that should serve the legal system well as commercial practices continue to evolve.

The decision’s impact extends beyond immediate procedural clarifications to contribute to the broader development of commercial law principles that recognize the diversity of business structures while maintaining coherent liability frameworks. This contribution to jurisprudential development ensures that the legal system remains responsive to commercial needs while preserving essential protections for all stakeholders in the commercial ecosystem.

References

[1] Dhanasingh Prabhu v. Chandrasekar & Another, Supreme Court Judgment dated July 14, 2025. 

[2] The Partnership Act, 1932, Section 4. Available at: https://www.indiacode.nic.in/bitstream/123456789/15327/1/negotiable_instruments_act,_1881.pdf 

[3] Section 138, The Negotiable Instruments Act, 1881. Available at: https://indiankanoon.org/doc/686130/ 

[4] Section 141, The Negotiable Instruments Act, 1881. Available at: https://indiankanoon.org/doc/686130/ 

[5] Supreme Court Clarifies Law on Liability of Persons in Charge of Company/Firm. Available at: https://www.lexology.com/library/detail.aspx?g=e0114cbf-f6b0-4311-93b6-98f800a2541d 

[6] Partnership Firm Liability Under Negotiable Instruments Act Analysis. Available at: https://www.scconline.com/blog/post/2021/07/20/section-141-ni-act/ 

Written and Authorized by Dhrutika Barad 

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Introduction

In a significant ruling impacting individuals facing cheque dishonour cases while simultaneously undergoing personal insolvency proceedings, the Supreme Court of India has clarified the scope of the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 (IBC). In its judgment dated April 1, 2025, primarily addressing appeals like Rakesh Bhanot vs. M/S.Gurdas Agro Pvt. Ltd. (arising out of SLP (Crl.) No. 6087 of 2023), the Court held that this moratorium does not shield individuals (such as personal guarantors or directors) from criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

This common judgment addresses a crucial conflict between the protective measures of the IBC and the punitive provisions of the NI Act concerning personal liability.

Background: Personal Insolvency vs. Cheque Dishonour Prosecution

The cases involved appellants/petitioners facing criminal trials under Section 138 read with Section 141 of the NI Act for cheque dishonour. These individuals, often directors or personal guarantors, had subsequently initiated personal insolvency resolution processes by filing applications under Section 94 of the IBC.

Filing a Section 94 application triggers an automatic interim moratorium under Section 96 IBC. This provision stays pending legal actions and prohibits new ones “in respect of any debt”. The appellants argued their Section 138 NI Act proceedings fell under this stay. Their requests were denied by lower courts, leading to the Supreme Court appeals.

Key Legal Issue: Can Section 96 IBC Moratorium Stay Section 138 NI Act Proceedings?

The Supreme Court identified the central issue in paragraph 4 of the judgment:

4. The common legal question that arises for consideration herein is, whether the proceedings initiated against the appellants / petitioners under Section 138 read with Section 141 of the N.I. Act, 1881 should be stayed in view of the interim moratorium under Section 96 IBC having come into effect upon the appellants / petitioners’ filing applications under Section 94 IBC.

Supreme Court’s Analysis and Reasoning

The Court undertook a detailed analysis, emphasizing the distinct nature of Section 138 NI Act proceedings compared to civil debt recovery actions.

Nature of Section 138 Proceedings:
The Court highlighted that NI Act proceedings target the act of dishonour, not just the debt itself. Paragraph 29 states:

29. … The protection is not available against penal actions, the object of which is to not recover any debt. This moratorium serves as a critical mechanism, allowing the debtor to reorganize their financial affairs without the immediate threat of creditor actions. The clear and unequivocal language of this provision reflects the legislative intent to provide a protective shield for debtors during the insolvency process.
    13. On the other hand, the proceedings under Section 138 of the N.I. Act, 1881, pertain to the dishonor of cheques issued by the respective appellants / petitioners in their personal capacity. These proceedings are distinct from the corporate insolvency proceedings and are aimed at upholding the integrity of commercial transactions by holding individuals accountable for their personal actions…

Interpreting the Scope of Section 96 Moratorium:
The Court focused on the limiting phrase “in respect of any debt” within Section 96. Paragraph 28 clarifies this interpretation:

28. … Upon filing of the application under section 94 [IBC], a moratorium comes into effect, designed to protect the debtors from any legal actions concerning their debts. Specifically, Section 96 IBC provides that any legal proceedings pending against the debtor concerning any debt shall be deemed to have been stayed. The term “any legal action or proceedings” does not mean “every legal action or proceedings”. In sub-clauses 96 (b) (i) and (ii), the term “legal action or proceedings” are followed by the term “in respect of any debt”. The term “legal action or proceedings” would have to be understood to include such legal action or proceedings relating to recovery of debt by invoking the principles of noscitur a sociius. The purpose of interim moratorium contemplated under Section 96 is to be derived from the object of the act, which is not to stall the proceedings unrelated to the recovery of the debt.

Further, paragraph 10.1 distinguishes the objective:

10.1. … The use of the words “all the debts” and “in respect of any debt” in Sub-section (1) of Section 96 is not without a purpose, as the moratorium is intended to offer protection only against civil claim to recover the debt. Hence, such period of moratorium prescribed under Section 14 or 96 is restricted in its applicability only to protection against civil claims which are directed towards recovery and not from criminal action.

Liability of Natural Persons (Directors/Guarantors):
The Court heavily relied on its previous rulings in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. and Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd., which established that even under a Section 14 IBC moratorium (for corporate insolvency), the criminal liability of individuals under Section 141 NI Act continues. The Court extended this principle to the Section 96 scenario.

Quoting its conclusion in P. Mohanraj, the Court stated in paragraph 31:

31. … This being the case, it is clear that 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.”

The Court also cited the Ajay Kumar Radheyshyam Goenka judgment in paragraph 16, quoting paragraph 75 from that decision:

16. … quoting para 75: “Thus, where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the Directors and the other accused cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. They will have to continue to face the prosecution…”

Final Determination on Stay Application:
Based on this reasoning, the Court concluded that the moratorium under Section 96 IBC cannot be used to halt criminal prosecution under the NI Act. Paragraph 17 states the opinion:

17. For the foregoing discussion, we are of the opinion that the object of moratorium or for that purpose, the provision enabling the debtor to approach the Tribunal under Section 94 is not to stall the criminal prosecution, but to only postpone any civil actions to recover any debt. The deterrent effect of Section 138 is critical to maintain the trust in the use of negotiable instruments like cheques in business dealings. Criminal liability for dishonoring cheques ensures that individuals who engage in commercial transactions are held accountable for their actions…

Paragraph 19 delivers the final verdict:

19. For the foregoing discussion, the prayer of the appellants / petitioners to stay the prosecution under Section 138 of the N.I. Act, 1881, relying on the interim moratorium under Section 96 IBC, cannot be entertained. Therefore, the judgments / orders passed by the different High Courts affirming the orders of the trial court, which had rightly refused to stay the section 138 proceedings, need not be interfered with by us.

Key Takeaways: Section 96 IBC Moratorium vs. Section 138 NI Act Liability

• Section 138 NI Act Prosecution Continues: Individuals facing cheque dishonour charges cannot halt these criminal proceedings using the Section 96 IBC interim moratorium triggered by their personal insolvency application.
• Moratorium Limited to Civil Debt Recovery: The Section 96 moratorium stays legal actions specifically aimed at recovering debt, not penal actions like Section 138 NI Act prosecution.
• Personal Criminal Liability Persists: Insolvency proceedings under IBC do not absolve individuals (directors, guarantors, signatories) of their personal criminal liability under Section 141 NI Act for cheque dishonour.
• Dual Objectives Upheld: The judgment balances the IBC’s goal of financial resolution with the NI Act’s goal of ensuring commercial integrity and accountability for cheque transactions.

Conclusion 

The Supreme Court’s decision in the Rakesh Bhanot batch of cases provides definitive clarity: the protective shield of the Section 96 IBC interim moratorium does not extend to criminal prosecution under Section 138 of the Negotiable Instruments Act. Individuals remain personally accountable for cheque dishonour offences, irrespective of their concurrent personal insolvency proceedings. This ruling underscores the distinct nature of criminal liability and its separation from the civil debt resolution processes governed by the IBC.

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Introduction

In a significant ruling on June 24, 2024, the Supreme Court observed that an accused cannot seek the transfer of a case related to the offence of dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). This decision came from the vacation bench of Justices AS Oka and Rajesh Bindal, who dismissed the transfer petition sought by the accused in the case of Kasthuripandian S vs. RBL Bank Limited (Diary No. 23680/2024).

Background

The Negotiable Instruments Act, 1881, under Section 138, criminalizes the dishonour of cheques for insufficiency of funds or if it exceeds the amount arranged to be paid from that account. The section ensures that the drawer of the cheque is held accountable for issuing cheques without sufficient funds, which can be punishable by imprisonment and/or a fine.

Key Observations by the Supreme Court

Transfer Petition by Accused under Section 138 of the NI Act

The Supreme Court’s ruling emphasized that an accused cannot file for the transfer of a complaint under Section 138 of the NI Act. Justice AS Oka stated:

“At the instance of the accused, we cannot issue an order of transfer of a complaint under Section 138 of the Negotiable Instruments Act, 1881. The petitioner can always apply for grant of exemption from personal appearance to the concerned Court.”

This ruling reiterates the principle that the transfer of cases should not be influenced by the convenience of the accused, as it could undermine the judicial process and delay justice.

Exemption from personal appearance in NI Act cases

The Court suggested that instead of seeking a transfer, the accused could apply for an exemption from personal appearance:

“The petitioner can always apply for grant of exemption from personal appearance to the concerned Court.”

Justice Oka also mentioned his consistent stance on such matters, referencing previous instances where similar transfer petitions were dismissed:

“I have been a party to a dozen of such matters where I have rejected such transfer petitions.”

Previous Rulings and Context under Section 138 of the NI Act

In a previous case, Justice Oka dismissed a transfer petition filed by a senior citizen woman accused under Section 138. The Court had then observed that the Trial Judge should consider the exemption application favourably, ensuring that the accused is not unduly burdened.

Implications of the Ruling

Legal Precedents under Section 138 of the NI Act

This ruling sets a clear precedent that accused individuals cannot seek the transfer of cheque dishonour cases, reinforcing the importance of maintaining the integrity of the judicial process.

Judicial Efficiency

By discouraging the transfer of cases based on the accused’s convenience, the ruling aims to prevent unnecessary delays and ensure that justice is delivered efficiently.

Rights of the Accused

While the ruling limits the ability of the accused to transfer cases, it simultaneously upholds their rights by allowing them to seek exemptions from personal appearance, thus balancing judicial efficiency with individual rights.

Case Details

Case Title: Kasthuripandian S vs. RBL Bank Limited

Diary No.: 23680/2024

Conclusion

The Supreme Court’s ruling on Section 138 NI Act in the case of Kasthuripandian S vs. RBL Bank Limited underscores the principle that the judicial process should not be swayed by the convenience of the accused. By denying the transfer petitions while allowing applications for exemption from personal appearance, the Court ensures a fair balance between judicial efficiency and the rights of the accused. This ruling serves as a critical reference point for future cases under Section 138 of the NI Act, promoting a more streamlined and just legal process.

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