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TMI Blog2024 (11) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... y the plan is approved or the company gets dissolved, the Directors and the other accused cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. They will have to continue to face the prosecution'. Thus, it is clear that the corporate debtor cannot be prosecuted for the prior liability after the approval of the Resolution Plan. At the same time, it is to be bear in mind the protection under Section 32-A of Insolvency Bankruptcy Code, 2016 is restricted only to the corporate debtor and not to its Directors who were in-charge of the affairs of the Company when the offence committed or the signatory of the cheque. The Criminal Original Petitions are allowed. - THE HONOURABLE Dr. JUSTICE G.JAYACHANDRAN For the Petitioner: Mr.G.Gautham Ram Vittal For the Respondent: No appearance COMMON ORDER The petitioner company is accused in the complaints initiated by the respondent under section 138 of Negotiable Instruments Act. For dishonouring the cheques issued to discharge the liability, the petitioner company is facing prosecution. 2. Brief facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the petitioner Company submit that after the order passed by NCLT on 21/04/2017 in the application filed under Section 9 of IBC, the erstwhile Directors of the Company cease to be the Directors and they cannot represent the company after its Management vested with the IPR. Further, the claim of the creditor been settled under the resolution plan approved by the NCLT and therefore, no prosecution can sustain in view of the terms of resolution plan as approved by NCLT vide order dated 03/02/2023. 5. The respondent Company though received notice on 12/02/2024 sent through RPAD, had not participated in the proceedings. 6. The point for consideration is whether, the existing criminal liability of the Company and its erstwhile Directors will get extinguished in view of the resolution plan approved by NCLT? 7. The petitioner Company is facing trial in the following nine criminal complaints initiated under Section 138 of Negotiable Instruments Act. Sl.Nos. C.C.Nos. Court Cheque Date Amount 1. 312 of 2016 Metropolitan Magistrate, (FTC-II) Egmore, Chennai. 19.09.2015 1000000 2. 310 of 2016 Metropolitan Magistrate, (FTC-II) Egmore, Chennai. 19.09.2015 1000000 3. 311 of 2016 Metropoli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complaint as against the first accused Company which is the Corporate Debtor for the reasons stated above. 12. After insertion of Section 32-A in the IBC by way of amendment with effect from 28/12/2019, the liability of the corporate debtor for prior offences is restricted. In Ajay Kumar Radheshuyam Goenka case, the Hon ble Supreme Court, after considering the effect of the Section 32-A of IBC in respect of prior liability of the Company and its directors, particularly in proceedings under Section 138 of Negotiable Instrument Act, had vividly clarified the legal position as under:- 42. Unfortunately, Section 32-A is inelegantly drafted. The second proviso to Section 32-A(1) speaks of persons who are in any manner in charge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor and who are, directly or indirectly, involved in the commission of such offence i.e. the offence referred to in sub-section (1), as per the report submitted or complaint filed by the investigating authority . The report submitted here refers to a police report under Section 173 CrPC, and complaints filed by investigating authorities under special Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solving the corporate debtor from the same after a new management comes in. ........ (emphasis in original and supplied 68. Thus, I am of the view that by operation of the provisions of IBC, the criminal prosecution initiated against the natural persons under Section 138 read with Section 141 of the NI Act read with Section 200CrPC would not stand terminated. ........ 71. It is equally true that once the corporate debtor comes under the resolution process, its erstwhile Managing Director(s) cannot continue to represent the company. Section 305(2) CrPC states that where a corporation is the accused person or one of the accused persons in an inquiry or trial, it may appoint a representative for the purpose of the inquiry or trial and such appointment need not be under the seal of the corporation. Therefore, it is only the resolution professional who can represent the accused Company during the pendency of the proceedings under IBC. After the proceedings are over, either the corporate entity may be dissolved or it can be taken over by a new management in which event the company will continue to exist. When a new management takes over, it will have to make arrangements for representing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. They will have to continue to face the prosecution in view of the law laid down in Aneeta Hada [Aneeta Hada v. Godfather Travels Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241]. Where the company continues to remain even at the end of the resolution process, the only consequence is that the erstwhile Directors can no longer represent it. 13. As a result of the above discussion and the law laid in Ajay Kumar Radheshyam Goenka case, it is clear that the corporate debtor cannot be prosecuted for the prior liability after the approval of the Resolution Plan. At the same time, it is to be bear in mind the protection under Section 32-A of Insolvency Bankruptcy Code, 2016 is restricted only to the corporate debtor and not to its Directors who were in-charge of the affairs of the Company when the offence committed or the signatory of the cheque. 14. Before this Court in this application only the corporate debtor seeks quash. Therefore, the Criminal Original Petitions are allowed. The criminal prosecu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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