2020 (7) TMI 416 - HC - Insolvency and Bankruptcy

CIRP process - grievance of the writ petitioner is that the police has refused to act on the First Information Report registered by them at the behest of the petitioners against the private respondents - HELD THAT - A perusal of the affidavit-in-opposition filed by the police authorities, taken in its full perspective, shows that the police took sufficient steps in connection with the complaint lodged by the present petitioners - However, since the intervening commencement of the CIRP and the moratorium following therefrom, to which effect an order has also been passed by the National Company Law Tribunal, Kolkata Bench, whatever action the police may take, will ultimately lead to an investigation as to the transactions of the company, which are the subject matter of the CIRP. Therefore, although agreeing with the principle that a moratorium under section 14 might not, in certain circumstances, directly stop a criminal proceeding from going on, however, in the present case, as is evident from the affidavit-in-opposition of the police, the police has done its level best up to the time when the moratorium started operating, and the order in connection with the CIRP was passed - Since any action of the police will have to be based on investigation on the subject matter of the transaction, which is directly within the purview of the CIRP, it is to be deemed that the police cannot take further steps in the matter unless and until the CIRP culminates, in a resolution or otherwise. The allegation, that the police are not taking sufficient steps on the complaint of the petitioners, cannot be accepted by this court - petition dismissed.

Summary

Issues:
Refusal of police to act on FIR due to CIRP - Application of moratorium on criminal proceedings - Police's actions in connection with the complaint - Allegation of insufficient police action - Dismissal of W.P. 21071(W) of 2019.

Analysis:
The writ petitioner's grievance was that the police refused to act on the FIR against the private respondents due to a Corporate Insolvency Resolution Process (CIRP) pending in connection with the company. The petitioner relied on a previous judgment stating that a moratorium does not prohibit criminal proceedings against the company or its directors. However, it was noted that while a moratorium may not directly affect criminal proceedings, it covers all aspects related to the company's loans and transactions under CIRP.

The police, in response, served a notice under section 41A of the Criminal Procedure Code on the respondent and initiated a police case based on the FIR. The accused admitted to procuring a loan from the petitioner company and being guarantors of the loan, stating that the loan amount was disbursed to their company's account. The police's affidavit-in-opposition indicated that they took sufficient steps regarding the complaint.

Despite the principle that a moratorium might not always stop criminal proceedings, the court observed that the police had acted diligently until the moratorium came into effect following the CIRP order. Any further police action would involve investigating the company's transactions under CIRP, making it necessary to wait for the CIRP to conclude before proceeding. Consequently, the court dismissed the writ petition, stating that the police had acted appropriately given the circumstances.