IBC Acts As a Shield against Cheque Bouncing Proceedings – Fact or Myth?

Section 138 of the NI Act penalises cheque bouncing, blending civil recovery with criminal penalties. Under the IBC, Section 14 imposes a moratorium shielding corporate debtors from legal proceedings, including s.138 actions, to provide "breathing space" for resolution. However, the Supreme Court clarified that this protection only applies to the company; directors and signatories remain personally liable for criminal prosecution. Recent jurisprudence in Surana (2026) complicates this by proposing a "tiered" approach that separates penal and compensatory facets, referring the conflict to a larger bench for final determination. INTRODUCTION One of the most popular sections that several businessmen are aware of is s.138 of the Negotiable Instruments Act, 1881 (“the NI Act”), also colloquially known as the cheque bouncing section. This section provides for imprisonment in certain cases of dishonoured cheques issued by a drawer. On the other hand, the Insolvency and Bankruptcy Code, 2016 (“the Code”) has become one of the most dynamic and fast-changing legislations. The Code provides for the insolvency resolution process of corporate debtors. The Code gets triggered when a corporate debtor commits a default in payment of a debt, which could be financial or operational. One of the important facets of