2020 (3) TMI 666 - HC - Companies Law

Continuation of prosecution proceedings against the company in cases CIRP proceedings where resolution plan has been approved - offences punishable under the Companies Act, 2013; offences punishable under the Companies Act, 1956 and; certain offences under the Indian Penal Code, 1860 - petitioner submits that in terms of Section 32A of the IBC, as inserted by Section 10 of the Insolvency of Bankruptcy Code (Amendment) Ordinance, 2019; the petitioner is required to be discharged from the aforesaid proceedings - HELD THAT - Section 32A(1) of the IBC states that a Corporate Debtor would not be liable for any offence committed prior to commencement of the CIRP and the corporate debtor would not be prosecuted if a resolution plan has been approved by the Adjudicating Authority. In the present case, there is no dispute that a resolution plan has been approved by the Adjudicating Authority (NCLT) and in the circumstances, there is much merit in the contention that the petitioner cannot be prosecuted and is liable to be discharged. Petition allowed.

Summary

Issues: Petition to quash order taking cognizance of offences under various acts, including Companies Act and Indian Penal Code; Application of Section 32A of the Insolvency and Bankruptcy Code, 2016 for discharge from proceedings.

Analysis:
1. The petitioner challenged an order taking cognizance of offences under the Companies Act, 2013, Companies Act, 1956, and the Indian Penal Code. The petitioner also sought to quash the summons issued by the learned ASJ and the complaint filed by the Serious Fraud Investigation Office.

2. The petitioner, formerly known as 'Bhushan Energy Limited,' underwent Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. Tata Steel Limited submitted a Resolution Plan approved by the Committee of Creditors and the NCLT, resulting in the acquisition of 99.9% of the petitioner's equity capital.

3. Following the Resolution Plan, new promoters took over the management of the petitioner company, unrelated to the previous management.

4. The petitioner's counsel argued that Section 32A of the IBC, inserted by the Insolvency of Bankruptcy Code (Amendment) Ordinance, 2019, mandates the petitioner's discharge from the proceedings.

5. Section 32A(1) of the IBC specifies that a corporate debtor's liability for offences ceases upon approval of the resolution plan by the Adjudicating Authority, if there is a change in management to an unrelated party. Prosecution against the corporate debtor is halted upon approval of the resolution plan.

6. The Court noted that as a resolution plan had been approved by the Adjudicating Authority (NCLT), the petitioner could not be prosecuted and was entitled to discharge.

7. Consequently, the petition was allowed, setting aside the impugned order and summons. The complaint against the petitioner was also quashed.

8. The judgment clarified that the order did not impact the prosecution of former promoters or officers directly responsible for the offences related to the petitioner company.