'Directors Cannot Use Personal Insolvency To Stop Company Cheque-Bounce Trials': Bombay HC

Mumbai, August 20, 2026 - The Bombay High Court has dismissed a petition from company directors who sought to halt criminal proceedings for unpaid cheques issued by their firms. According to the court, directors cannot invoke personal insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) to prevent criminal trials under the Negotiable Instruments Act.

The case concerned multiple companies including Mohan India Private Limited, Lotus Refineries, Metkore Alloys and White Water Foods, which were accused by National Spot Exchange Limited (NSEL) of owing large sums. Directors argued that personal insolvency protection under the IBC, including an interim moratorium, should shield them from prosecution.

However, the court ruled that directors' liability under the Negotiable Instruments Act remains personal, even during IBC proceedings. The court confirmed that NSEL's complaint against the directors, who were deemed natural persons responsible for their companies' affairs, could not be stayed by the directors' insolvency proceedings.

The court emphasized that even if a moratorium applied to compensation ordered against directors, the criminal trial itself could not be halted.