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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
J.M. KHAZI
L. Ramesh, S/o. Shri. Subbarao Lagadapati – Appellant
Versus
Insolvency And Bankruptcy Board Of India, Rep By Umesh Kumar Sharma – Respondent
| Table of Content |
|---|
| 1. common proceedings of related petitions. (Para 1 , 2 , 3) |
| 2. petitioners' contest against complaint validity. (Para 4) |
| 3. respondent's defense on insolvency relevance. (Para 5) |
| 4. court's decision on continuance of prosecution. (Para 6 , 13) |
| 5. quashing of certain charges in the ruling. (Para 14) |
ORDER :
(J.M. KHAZI, J.)
In Writ Petition No.46570/2019, filed under Article 227 of the Constitution of India r/w Section 482 of the Code of Criminal Procedure, accused Nos.2 and 5 and in Crl.P.No.7020/2019, filed under Section 482 of the Code of Criminal Procedure, accused No.3 are seeking quashing of criminal proceedings initiated against them vide order dated 10.07.2019 in Spl.C.No.783/2019 on the file of LIX Addl.Civil and Sessions Judge, Bengaluru, taking cognizance for the offences punishable under Sections 69 (a), 70(1)(c), 73(b) and 19(1) of the Insolvency and Bankruptcy Code, 2016 .
2. For the sake of convenience, parties are referred to by their ranks before the trial Court.
3. Since these two petitions are arising out of the same proceedings, the grounds urged by the respective accused are common and involves common discussion, they are clubbed together and disposed of
Court ruled that prior findings negate certain fraud allegations in insolvency cases, allowing only non-cooperation charges to proceed.
The court ruled that under Section 32-A of the Insolvency Code, 2016, a corporate debtor cannot be prosecuted for offences committed prior to the commencement of Corporate Insolvency Resolution Proce....
Section 32A of the IBC extinguishes criminal liability for the corporate debtor post-resolution but not for directors under Section 138 of the NI Act.
The court emphasized that the essential ingredients to constitute an offence under the Indian Penal Code were absent, and the lodging of the FIR appeared to be attended mainly with the ulterior motiv....
The moratorium under the IBC does not protect directors from criminal liability under Section 138 of the N.I. Act, as these proceedings are distinct from civil recovery actions.
IBC moratorium applies solely to corporate debtor, not shielding directors from Section 138 NI Act criminal proceedings, which continue independently despite company liquidation.
The Court highlighted the need for the trial court to examine the allegations and evidence before deciding on the quashing of a criminal complaint.
Section 32A of the IB Code, 2016 provides immunity to corporate debtors from prosecution for prior offences upon approval of a resolution plan, ensuring a clean slate for new management.
The court ruled that Section 66(1) of the IBC is constitutional, ensuring proper jurisdiction over fraudulent conduct without violating Article 14.
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