Pendency of Case U/S 138/141 of NI Act Amounts To Admission Of Debt: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) on November 13, 2018, in the case of Sudhi Sachdev v. APPL Industries Ltd. has held that if a case under Section 138/441 of Negotiable Instruments Act, 1881, is pending, it amounts to admission of debt and not an existence of dispute.

A Bench comprising of Justice S. J. Mukhopadhaya (Chairperson) and Justice Bansi Lal Bhat (Member-Judicial) was considering an appeal against an order passed by the National Company Law Tribunal (NCLT), New Delhi Bench in which the tribunal had allowed an application under Section 9 of Insolvency & Bankruptcy Code, 2016, preferred by APPL Industries Ltd. (Operational Creditor) and had also passed an order of moratorium.

The appellant contended that application under section 9 of I&B Code, 2016, was not maintainable while the proceeding under Section 138 of Negotiable Instruments Act, 1881, is pending because such proceeding is a civil case of recovery of the money.

The contention was, however, dismissed by the tribunal observing that, “the pendency of the case under Section 138/441 of the Negotiable Instruments Act, 1881, even if accepted as recovery proceeding, it cannot be held to be a dispute pending before a court of law.”

Relying on a Supreme Court judgment in Innoventive Industries Ltd. v. ICICI Bank and Ors. the Bench held that the pendency of the case under Section 138/441 of the Negotiable Instruments Act, 1881, actually amounts to admission of debt and not an existence of dispute. Accordingly, it dismissed the appeal finding no merits therein.

* As per our knowledge there are only 148 sections in the Negotiable Instruments Act, 1881. The order actually states “Section 441”, but is presumed to be an error for “Section 141”. To read the whole Negotiable Instruments Act, 1881, click here.