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TMI Blog2021 (11) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... Court for reconsideration - subsequent events indisputably caused change in management and control of Corporate Debtor. The immunities under 32A of IBC, cannot be denied to Corporate Debtor - the petitioner-DHFL, stands discharged from the CBI Special Case pending before the CBI Cases Sessions Court, Mumbai. Whether successful resolution applicant was eligible to invoke Section 32A of IBC, when appeals against the order of the Adjudicating Authority, were pending before NCLAT? - HELD THAT:- Although Section 32 provides for appeal against an order approving the Resolution Plan, yet, mere filing of appeal would by itself not operate as a stay, until a specific prayer in this regard is made and orders thereon are passed, as held in the case of MADAN KUMAR SINGH (D) THR. LR. VERSUS DISTT. MAGISTRATE, SULTANPUR ORS [ 2009 (8) TMI 1140 - SUPREME COURT] . Infact, herein appeals were filed with a specific prayer to grant stay to the Section 31 order. However, the NCLAT by reasoned order, declined to stay the order. Thus, the application preferred by the successful resolution person, was not pre-matured. The point is answered accordingly. The application of Dewan Housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Case No.820/2021. 5. Background facts disclosed in these petitions are as under : (i) Dewan Housing Finance Corporation Limited (DHFL), is a Non-Banking Financial Company ( NBFC ) and Financial Service Provider (FSP), regulated by Reserve Bank of India (RBI). On 20th November 2019, RBI superseded Board of Directors of DHFL owing to governance concerns and defaults in meeting various payment obligations; whereupon Shri. R. Subramania kumar was appointed as, Administrator to manage the affairs, of the DHFL. (ii) On November 29 2019, RBI filed Company Petition under the Insolvency and Bankruptcy (Insolvency and Liquidation proceedings of Financial Service Provider and Application to Adjudicating Authority) Rules, 2019 to initiate Corporate Insolvency Resolution Process (CIRP) against DHFL under IBC. (iii) On December 3 2019, National Company Law Tribunal (NCLAT) admitted the said Company Petition and directed commencement of moratorium period in terms of Section 14 of IBC, from the date of filing of the Company Petition and confirmed the appointment of Administrator. (iv) On March 7, 2020, respondent no.1-CBI registered FIR against the DHFL, its erstwhil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust, 2021 NCLAT issued notice in this Appeal. However, no interim relief was granted. (xv) On 2nd July 2021, DHFL filed an application under Section 32A of IBC, seeking discharge from CBI case in view of the order passed by the NCLT under Section 31 of the IBC. (xvi) On 5th August, 2021, Kapil Wadhwan (intervenor herein), sought intervention in the application of the DHFL under Section 32A of the IBC. Although the application by co-accused was not maintainable, it was allowed and Mr. Kapil Wadhwan was permitted to intervene in 32A application, proceedings. (xvii) On August 20, 2021 the CBI Court partially allowed the 32A application by which the prayer for discharge made by the DHFL, was rejected; yet Corporate Debtor was permitted to be prosecuted through its erstwhile Directors, Kapil Wadhwan (accused no.2) and Dhiraj Wadhwan (accused no.3). 6. Feeling aggrieved by the order dated 20th August, 2021 DHFL and Piramal Capital Housing Finance Limited, a successful resolution applicant, have challenged this order in these petitions, under Article 227 read with Section 482 of the Criminal Procedure Code. 7. Before adverting to deal with the contentions of rival pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would largely rely on paragraph no.317 of Manish Kumar (supra), to submit that, Section 32A is divided into three parts, consisting of subsections (1) to (3). Under sub-section (1), liability of a Corporate Debtor for an offence committed prior to CRIP, ceases and the Corporate Debtor shall not be liable to be prosecuted for such an offence subject to conditions that, (i) a Resolution Plan with regard to Corporate Debtor must be approved by the adjudicating authority under Section 31 of the Code, (ii) the Resolution Plan, so approved must result in change in the management or control of Corporate Debtor and (iii) the change in management or control under the approved Resolution Plan must not be in favour of a person who was Promoter and in management or control of Corporate Debtor or in favour of related party of the Corporate Debtor. 11. Mr. Kadam learned Senior Counsel submitted that, herein Resolution Plan was approved by the Adjudicating Authority on 7th June, 2021 and pursuant thereto, Piramal Capital and Housing Finance Limited has merged into DHFL with effect from 30th November, 2021 as contemplated under scheme of arrangement (reverse merger) provided u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the commission of the offence and the report or complaint filed thereto. (viii) The Corporate Debtor and its property in the context of the scheme of the code constitute a distinct subject matter justifying the special treatment accorded to them. (ix) Creation of a criminal offence as also abolishing criminal liability must ordinarily be left to the judgment of the legislature. 13. Mr. Kadam, therefore submitted, having fulfilled conditions contemplated under Section 32A of IBC and Corporate Debtor and its property, in context of the Scheme of the Code, being a distinct subject matter, justifying special treatment accorded to them, the learned Special Judge, unnoticing the law enunciated in Manish Kumar (supra), erroneously permitted, the prosecution of the Corporate Debtor through its erstwhile Directors, accused nos.2 and 3. 14. Mr. Kadam, has taken me through the impugned order to submit that, the learned Judge has failed to appreciate rational of Section 32A of the IBC, in as much as, although he was satisfied that the approval of the Resolution Plan by the NCLAT has, caused change in the management, yet prosecution of the Corporate Debtor has been permitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, impugned order being passed in application under Section 32A which was pre-mature, it be kept in abeyance till the Section 31, order attains finality. 16. Mr. Venegaonkar, learned Counsel for the CBI, would rely on the judgment of the Apex court in the case of Dharam Pal and Others V/s. State of Haryana, (2014) 3 SCC 306 to contend that, a cognizance of the offence cannot be taken twice and therefore until statutory appeals are decided, it would not be appropriate to discharge the Corporate Debtor of criminal liability incurred prior to CRIP. Reasons : 17. Facts of the case and in particular subsequent events (stated above), has indisputably established, change in management of a Corporate Debtor. This fact is hardly disputed by the Intervenor in his Affidavit, contending that, DHFL ought to issue equity shares to shareholders of PCHFL i.e. PEL and thereafter upon allotment, DHFL will become a wholly owned subsidiary of PEL. It may be stated that, Intervenor has not disputed appointment of six Additional Directors on the Board of Director of DHFL, with effect from 30th September, 2021, consequent to reverse merger and implementation of Resolution Plan. The ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of IBC, when appeals against the order of the Adjudicating Authority, were pending before NCLAT ? 22. Mr. Badheka, learned Counsel for the Intervenor, would submit that, once Appeal is admitted, the correctness of order of Adjudicating Authority becomes made open and in such an Appeal, the Court is entitled to go into both, questions of facts, as well as law, and in such an event, the correctness of the order dated 7th June, 2021 is in jeopardy. It is therefore argued that, until Appeals which are statutorily provided under the IBC, are finally disposed off, there is no finality to the order Section 31 of IBC, and therefore application under Section 32A moved by the successful resolution applicant was premature and not maintainable. Mr. Badheka, has relied on the judgment of the Apex Court in the case of Union of India V/ s. West Coast Papers Mills, 2004 2 SCC 747. In this case, a suit was filed by respondent-plaintiff based on declaration dated 18th April, 1966 made by the Railway Rates Tribunal, qua, revised freight charges. Order of tribunal was challenged in Special Leave Petition by Railways. Apex Court passed, limited interim orders but refused to grant stay. In J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners, in which the Division Bench has held; The tribunal is last fact finding court of appeal and presided over by retired judge of the High Court. They exercise judicial powers. In the circumstances, their orders bind the parties. Once, the appeal of the revenue in this case has been admitted, but interim stay is refused, then we do not think that, the Tribunals order can be kept in abeyance and indefinitely. Thus, in consideration of the facts of the case and in view of the law laid down in aforesaid judgment and order, I hold that the application preferred by the successful resolution person, was not pre-matured. The point is answered accordingly. 24. It takes me to the last submission of the petitioners who contended, that impugned order permitting to prosecute the Corporate Debtor through accused nos.2 and 3 was erroneous and perverse, in as much as, accused nos.2 and 3, who were Directors of the Corporate Debtor, were ousted from the Board of Directors by the Reserve Bank of India, approximately two years ago and has since no control over the management of the petitioner. I do not see any reason to discard this submission to hold that, the learned Judge h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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