Section 32A IBC| Company Can’t Be Prosecuted For Offences Committed Prior To Approval Of Resolution Plan: Delhi HC Quashes CBI Case Against Company
The Delhi High Court quashed an FIR registered by the CBI against a Company while observing that it cannot be prosecuted for offences committed prior to the approval of the resolution plan.
The Court allowed the Petition filed by Gangakhed Sugar & Energy Ltd. (Petitioner), quashing the FIR registered by the Central Bureau of Investigation (CBI) under Sections 120B and 420 of the IPC and Sections 13(2) and 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act). The Court explained that Section 32A of the Insolvency and Bankruptcy Code (IBC) prohibits and bars prosecution of the corporate debtor (CD) for the offences which have been committed prior to the approval of the resolution plan.
A Single Bench of Justice Chandra Dhari Singh held, “This Court is of the view that the CD, i.e., the petitioner herein cannot be prosecuted for the alleged offences committed by the erstwhile management and directors of the petitioner from the date the resolution plan was approved by the learned NCLT under Section 31 of the IBC as the resolution plan has resulted in the change of management/control of the CD…Thus, the petitioner company is duly entitled to the grant of immunity from any prosecution or punishment in relation to the impugned FIR and investigation thereto under Section 32A of the IBC. In light of the same, this Court finds merit in the instant petition and is of the considered view that the impugned FIR is liable to be quashed.”
Senior Advocate Mohit Mathur represented the Petitioner, while SPP Rajesh Kumar appeared for the Respondents.
A complaint was filed by the UCO Bank, acting as the lead bank of a consortium of lenders, alleging that the Petitioner and its former management had committed financial irregularities. A forensic audit conducted raised allegations of diversion of funds and misrepresentation of accounts.
The account was declared a non-performing asset (NPA) and subsequently classified as fraudulent. The CBI registered an FIR against them.
However, the Petitioner successfully underwent CIRP, and its resolution plan was approved by the National Company Law Tribunal (NCLT). The Petitioner argued that the resolution process had extinguished all liabilities relating to past offences under Section 32A of the IBC.
The High Court clarified that Section 32A of the IBC provides that if a prosecution had been instituted during the CIRP against a CD, it shall stand discharged from the date of approval of the resolution plan.
“However, prior to the registration of the FIR in the year 2023, the petitioner company‟s CIRP commenced vide order dated 10th October, 2019 passed by the learned NCLT. Thereafter, during the pendency of the investigation in the said FIR, the resolution plan submitted by the resolution applicant namely M/s Six Sigma Investment Fund was approved vide order dated 17th February, 2023,” the Bench noted.
Consequently, the Court held that the offences alleged in the complaint and the FIR were before the commencement of the CIRP. “The resolution plan has been approved by the learned NCLT and there has been no objection/appeal against the same; the respondent CBI has not objected or brought on record any contention to submit to the effect that the resolution applicant is related to the persons accused of commission of offences, this Court is of the view that there are cogent grounds to invoke Section 32A of the IBC,” it observed.
Accordingly, the High Court dismissed the Petition.
Cause Title: Gangakhed Sugar And Energy Ltd. v. Central Bureau Of Investigation & Ors. (Neutral Citation: 2024:DHC:9907)
Appearance:
Petitioner: Senior Advocate Mohit Mathur; Advocates Varun Kalra, Samir Malik, Honey Satpal and Krishan Kumar
Respondents: SPP Rajesh Kumar; Advocates Mishika Pandita, Mohd. Changez Ali Khan and Sarfaraz Khan
