Page 25 - Banking Finance May 2021

LEGAL UPDATE

known acquaintances are lost Rs. 3.10 considered necessary to urgently address required to report compliance to RBI
lakh. It is alleged that the two men the specific requirements of Micro, Small and submit a board-approved System
siphoned off Rs. 3.10 lakh from her and Medium Enterprises relating to the Audit Report (SAR) conducted by a
bank account and later splurged the resolution of their insolvency, due to the CERT-In empanelled auditor within the
money at various bars and pubs in Goa. unique nature of their businesses and timelines specified therein.
simpler corporate structures.
According to Rachakonda Police, P.
Srinivasulu and Uday Manish were It is considered expedient to provide an Cheque dishonor cases
residing at the same hostel in efficient alternative insolvency can't be filed or continued
Ameerpet while looking for a job. Both resolution process MSMEs to ensure a
the accused came in contact with the quicker, cost-effective and value against firms facing
women through one of their maximising outcomes for all insolvency proceedings: SC
acquaintances, Ganesh. The three of stakeholders, in a manner which is least The Supreme Court has recently held
them became friendly with each other. disruptive to the continuity of their
that the cheque bounce cases can
businesses and which preserves jobs.
The woman contacted the accused as neither be instituted nor be continued
she wanted an auto-rickshaw to take against companies which are facing
her puppy out for a walk. When the American Express & Diners insolvency proceedings and are
accused asked Rs. 500 for payment to Club International barred protected under a provision of
the autorickshaw, the woman shared Insolvency and Bankruptcy Code (IBC)
her banking credentials for the fare from adding new putting a moratorium on legal
payment without knowing the customers proceedings against them.
consequences. Later, the accused, Reserve Bank of India has recently However, the court did not extend the
after stealing her debit card went to imposed restrictions on American benefit of moratorium on judicial
Goa and spent Rs. 3.10 lakh at pubs Express Banking Corp and Diners Club proceedings in cheque bounce cases to
and other locations in the city.
International Ltd. from on-boarding directors or signatories of cheques of
new domestic customers onto their such firms, stating criminal cases would
Govt. amends insolvency
card networks from May 1, 2021. As continue against "natural persons".
law; launches pre- per the statement of RBI, these two A bench headed by Justice R F Nariman
packaged resolution entities have been found non- was faced with the legal issue of
compliant with the directions on whether "the institution or
process for MSMEs storage of payment system data. The continuation of a proceeding under
The government has recently statement also added that the order Section 138/141 (cheque bounce cases)
amended the insolvency law to provide will not impact existing customers. of the Negotiable Instruments Act can
for a pre-packaged resolution process Diners Club International Ltd. and be said to be covered by the
for Micro, Small and Medium American Express Banking Corp are moratorium provision, namely, Section
enterprises. An ordinance was payment system operators authorised 14 of IBC".
promulgated to amend the Insolvency to operate card networks in the
and Bankruptcy Code on April 4, 2021, country under the Payment and Holding that the judicial proceedings in
according to the notification. Settlement Systems Act, 2007 (PSS cheque bounce cases are covered
under IBC, the apex court stated, "It
The latest move comes less than two Act). The supervisory action has been is clear that a Section 138 proceeding
weeks after the suspension of certain taken in exercise of powers vested in can be said to be a 'civil sheep' in a
IBC provisions ended. The suspension - RBI under Section 17 of the PSS Act. 'criminal wolf's' clothing, as it is the
wherein fresh insolvency proceedings In terms of RBI circular on storage of interest of the victim that is sought to
were not allowed for a year starting payment system, all payment system be protected, the larger interest of the
from March 25, 2020 - was providers were directed to ensure that state being subsumed in the victim
implemented amid the Corona Virus within a period of six months, the alone moving a court in cheque
pandemic disrupting economic entire data relating to payment bouncing cases, as has been seen by us
activities. systems operated by them is stored in in the analysis made in Chapter XVII of
According to the ordinance, it is a system only in India. They were also the Negotiable Instruments Act. T

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