25/03/2019
APPLICABILITY OF MORATORIUM TO CRIMINAL PROCEEDINGS
[2019] 148 CLA (Mag.) 1
T V Narayanaswamy
Moratorium - Prohibiting institution of a proceeding - Does it apply to criminal proceedings - Moratorium is confined only to civil proceedings and not to criminal proceedings.
QUERY
Whether the moratorium prohibiting institution of a proceeding under section 14 of the Insolvency and Bankruptcy Code, 2016 applies to criminal proceedings also ?
REPLY
On the insolvency commencement date, the Adjudicating Authority (i.e., National Company Law Tribunal) is required under section 14 of the Insolvency and Bankruptcy Code, 2016 ('the Code') to declare a moratorium for prohibiting, the institution of suits or continuation of pending suits or proceedings against the corporate debtor including ex*****on of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority. In this regard a question would arise as to whether the word 'proceedings' used in section 14 would include criminal proceedings or would it be confined to civil proceedings only.
In accordance with one of the golden rules of interpretation of statutes, the word 'proceedings' used in section 14, would take colour from the word used preceding thereto. In other words, this word has to be interpreted ejusdem generis with the word 'suits' used earlier thereto. If so interpreted, it would be apparent that the word proceeding has to be interpreted as proceedings arising in the nature of a suit and orders passed there under. Further the Legislature has not conspicuously used the words 'criminal' as an adjective to the word 'proceedings'. Therefore, it leads to a legitimate presumption that the Legislative intent is not to prohibit initiation of or continuation of criminal proceedings. If it is otherwise, the Code which is complete in all respects in regard to corporate insolvency resolution would have used the adjective before the word 'proceedings' occurring in section 14
In this view of the matter it would be apparent that the moratorium contemplated in section 14 is confined to civil proceedings only and not to criminal proceedings
In this connection reference is invited to the judgment of the Bombay High Court in Tayal Cotton (P.) Ltd.v. State of Maharashtra [2018] 147 CLA 122 (Bom.).
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