Liability for prior offences etc. [ section 32A] - Insolvency Resolution And Liquidation For Corporate Persons - IBC

Liability for prior offences etc. By way of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 (replaced with the Insolvency and Bankruptcy Code (Amendment) Act, 2020), section 32A was inserted in the IBC to, inter alia, provide immunity against prosecution of CDs resolved under the IBC, to prevent action against the property of such CDs, and to provide for the successful resolution of the applicant subject to fulfillment of certain conditions. Liability of corporate debtor for an offence prior to the commencement of CIRP [ Section 32A(1) ] Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31 , if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not- (a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled: Provided further that every person who was a designated partner as defined in section 2(j) of the Limited Liability Partnership Act, 2008 , or an officer who is in default , as defined in section 2(60) of the Companies Act, 2013 , or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor's liability has ceased under this sub-section. Action against the property of the Corporate Debtor [ Section 32A(2) ] No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31 , which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not- (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or ( ii ) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation. - For the purposes of this sub-section, it is hereby clarified that,- (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; (ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law as may be applicable. Providing assistance and cooperation to investigating authority [ Section 32A(3) ] Subject to the provisions contained in sections 32A(1) and Section 32A(2) , and notwithstanding the immunity given in this section , the corporate debtor and any person who may be required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process. Relevant Case Law Manish Kumar Vs. Union of India Anr. - SC Dated 19.01.2021 The extinguishment of the criminal liability of the CD is apparently important to the new management to make a clean break with the past and start on a clean slate. The provision is carefully thought out. It is not as if the wrongdoers are allowed to get away. They remain liable. Tata Steel BSL Ltd. Anr. Vs. Union of India Anr. - HC, New Delhi Dated 16.03.2020 CD would not be liable for any offence committed prior to commencement of the CIRP. JSW Steel Ltd. Vs. Mahender Kumar Khandelwal Ors. - NCLAT order dt. 17.02.2020 The ED/other investigating agencies do not have the powers to attach assets of a CD, once a resolution plan stands approved and the criminal investigations against the CD stands abated.