Co accused in NSEL scam discharged under IBC clause granting immunity
Insolvency and Bankruptcy Code
(IBC), which grants immunity to corporate debtors once a resolution plan is approved and management changes hands.
In a recent order, special judge V P Desai referred to citations and said it was crystal clear that once the resolution plan forwarded by Resolution Professional is accepted by the NCLT, immunity cannot be denied to the corporate debtor. "The provision of section 32A is not to shield the wrongdoers. The extinguishment of the criminal liability of the corporate debtor is apparently important to the new management to make a clean break with the past and start on a clean slate.
It must also not overlook the principle that the provision is part of an economic measure," the judge said.
The judge further said that, thus, though it can be gathered that the company was involved in the offence committed by the prime accused, Surender Gupta in conspiracy along with others, as the resolution plan is accepted by NCLT, there is immunity to the corporate debtor. "Therefore, in view of section 32A (1) of IBC, as the corporate debtor cannot be liable for criminal proceedings committed prior to commencement of the Corporate Insolvency Resolution Process, M/s Dunar Foods Ltd needs to be discharged," the judge said.
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The CBI alleged a conspiracy was hatched between 2007 and 2013 to defraud M/s PEC Ltd of approximately Rs 120 crore through fraudulent agro-commodity trades on the NSEL platform, with Dunar Foods Ltd identified as a major beneficiary.
However, Dunar Foods Ltd sought discharge, arguing its financial creditor, State Bank of India, initiated insolvency proceedings. A resolution plan was approved by the National Company Law Tribunal on Nov 26, 2019, leading to a change in the company's management with a man being appointed as the Successful Resolution Applicant.
The defence submitted that the new management, having paid the entire amount along with interest under the approved resolution plan, should not face ongoing criminal proceedings due to the protection offered by Section 32A of IBC. They cited several Supreme Court and high court judgments, emphasizing on the principle of a "fresh slate" for successful resolution applicants, preventing them from being burdened by pre-existing claims.
The CBI opposed the plea, submitting allegations of fraudulent transactions and the company's alleged role as beneficiary of misappropriated funds. But the court noted CBI's arguments did not specifically address the applicability of Section 32A of IBC. The judge said the resolution plan for Dunar Foods Ltd was approved on Nov 26, 2019, and the company's criminal liability ceased from that date.
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