Immunities under 32A of IBC, cannot be denied to Corporate Debtors: Bombay HC

Issue  

Writ Petition filed before Bombay HC under Article 227 of the Constitution of India read with Section 482 of the Criminal Procedure Code, seeks to challenge order dated 20th August, 2021. 

“Whether Section 32(1)(a) of IBC lays down a direction that, Corporate Debtor, would be absolved of all criminal offences committed prior to commencement of CRIP, from the date of approval of Resolution Plan, although, appeals against Section 31 order of the IBC were pending before the NCLAT ?” 

Facts  

• 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• On 20th November 2019, RBI superseded Board of Directors of DHFL owing to governance concerns and defaults in meeting various payment obligations.  
• 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. 
• 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. 
• On March 7, 2020, CBI registered FIR against the DHFL, its former Directors, Kapil Wadhwan (accused no.2), Dhiraj Wadhwan (accused no.3) and others including one, Mr. Rana Kapoor under Section 420 read with Section 120B of the Indian Penal Code and Sections 7, 12, 13(2) read with Section 13(1)(B) of the Prevention of Corruption Act, 1988. 
• On June 25 2020, CBI filed a chargesheet before the learned Metropolitan Magistrate under Section 420 read with Section 120B of the Indian Penal Code and Section 7(12), 13(2) read with Section 13(1) (d) of the Prevention of Corruption Act. 
• In the meantime, as required by provisions of the IBC the Administrator appointed by NCLAT and nominated by RBI in discharge of its duties invited Resolution Plans from prospective resolution applicants to resolve the Insolvency of DHFL under the provisions of IBC. 
• The Resolution Plan submitted by Piramal Capital and Housing Finance Limited ([Petitioner in Cri. Writ Petition No.3221 of 2021) was approved by majority of 93.65% of votes in the Committee of Creditors (CoC). 
• On 7th June 2021, NCLAT approved Piramal Capitals’ Resolution Plan for DHFL with effect from 7th June, 2021 and appointed Interim Monitoring Committee. 
• On 6th July 2021, Piramal Capital obtained all requisite regulatory and statutory approvals in relation to the scheme of arrangement between Piramal Capital and Corporate Debtor. 
• The Resolution Plan order dated 7th June, 2021 was challenged by one, 63, Moons Technologies Limited, before the NCLAT by filing Company Appeals. On 6th July, 2021 and 23rd July, 2021, NCLAT, rejected 63 Moon’s prayer for a stay on implementation of Resolution Plan (i.e., order dated 7th June, 2021). 
• In the meantime, Mr. Kapil Wadhwan, former Chairman of the DHFL, also challenged the said Section 31 order, and Resolution Plan before NCLAT. On 2nd August, 2021 NCLAT issued notice in this Appeal. However, no interim relief was granted. 
• 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.  
• On 5th August, 2021, Kapil Wadhwan (intervenor herein), sought intervention in the application of the DHFL under Section 32A of the IBC. 
• 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). 

Findings  

This court is of the view that immunities under 32A of IBC, cannot be denied to Corporate Debtor because; 

• Resolution Plan in regard to Corporate Debtor has been approved by the Adjudicating Authority under Section 31 IBC.  
• Resolution Plan approved caused and resulted in change in management of Corporate Debtor. 
• Change in management is in Favour of persons who were not related to party of Corporate Debtor. 

In Madan Kumar Singh V/s. District Magistrate, (2009) 9 SCC 79 case it was 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. 

Judgement  

Bombay High Court held that the application preferred by the successful resolution person, was not pre-matured. The impugned order is quashed and set aside. The application of Dewan Housing Finance Corporation Limited moved under Section 32A of the Insolvency and Bankruptcy Code, 2016 in Criminal Complaint No.355/PW/2002 corresponding Sessions Case No. 830 of 2021 is granted. 

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