The Bombay High Court has held that the interim moratorium available under Section 96 of the IBC to an individual who has filed for personal insolvency operates only in respect of that individual's own debts, and cannot be invoked by a company director to stay a criminal prosecution under Sections 138/141 of the Negotiable Instruments Act arising from a cheque issued by the company itself.
The Court reasoned that a director's liability under the NI Act is personal and distinct from the company's own liability on the cheque, so it survives independently of any moratorium the director may have obtained by filing for their own personal insolvency — the two are legally separate obligations that a Section 96 moratorium was never designed to blend together.
The ruling closes off a tactic where directors facing cheque-bounce prosecution sought protection by filing for personal insolvency, confirming that NI Act criminal trials against directors can proceed regardless of a Section 96 moratorium obtained on the director's own personal debts.