Moratorium Period Under IBC Does Not Bar Payment Of Compensation Under NI Act: J&K High Court Orders ₹4 Crore Interim Compensation

The Jammu and Kashmir High Court held that the declaration of a moratorium would not bar the complainant from filing a complaint under the NI Act. The court said that the debtor cannot take refuge under the Code to frustrate proceedings under the NI Act if he is found liable to pay compensation in the proceedings.

Justice Puneet Gupta held that Section 14 of the IBC, which places a moratorium on the institution of suits or the continuation of pending suits, does not include criminal proceedings, which is the nature of proceedings under Section 138 of the NI Act.

The court relied on Ajay Kumar Radheysham Goenka v. Tourism Finance Corporation of India Ltd., wherein the Supreme Court held that proceedings under the two Acts are quite different and do not intercede with each other.

The court refused to interfere with the orders passed by the trial court, stating that both the trial and revisional courts had correctly applied the law. However, it reduced the interim compensation further from 5% of the cheque amount to 4%. The trial court had initially ordered the petitioner to pay 15% of the cheque amount, which was later reduced to 5% by the revisional court. The instant court further reduced it to 4%.

The court said that reasonable interim compensation is required to be given, as it is not meant to serve as a punishment, considering that the final determination in the matter is yet to take place.

The petitioner had challenged the orders passed by the trial and revisional courts, arguing that they were bad in law, as the provisions of the Insolvency and Bankruptcy Code (IBC), 2016, do not envisage the utilization of the company's assets after the declaration of a moratorium.

BACKGROUND

The respondent filed a complaint under Section 138 read with Section 142 of the Negotiable Instruments Act (NI Act), alleging that three cheques issued by the petitioners, amounting to ₹100 crores, were dishonored upon presentation. The complainant also filed an application under Section 143-A of the NI Act, seeking interim compensation.

The trial court directed the petitioners to pay 15% (₹15 crores) as interim compensation within 60 days. The petitioners filed a revision before the Additional Sessions Judge, Srinagar, who reduced the compensation to 5% of the cheque amount. Still aggrieved, the petitioner approached the instant court under Section 482 Cr.P.C.

The petitioner claimed protection under Section 14 of the IBC, arguing that after the declaration of a moratorium, the assets of the company could not be utilized.

The court held that criminal proceedings under the NI Act are separate from insolvency proceedings and cannot be stayed. It stated that the moratorium declared under the IBC would not prevent the court from imposing interim compensation; however, it added that the compensation must be reasonable.

APPEARANCE:

Shariq Reyaz Jan, Adv. FOR Petitioners

Danish Majid Dar, Adv. FOR Respondents

Case-Title: Bilal Hassan Anim vs Shafeeq Ahmad Mir

Citation: 2025 LiveLaw (JKL) 71

Click Here To Read/Download Order