The moratorium under Section 14 of the Insolvency and Bankruptcy Code applies to the company but not to its Directors, even in their capacity as guarantors. The doctrine of piercing the corporate veil may be adopted to examine the role of the Directors in the alleged actions of the company leading to the proposed declaration of Wilful Defaulter.

JUDGMENT

Sabyasachi Bhattacharyya, J. - The Court:

1. The petitioners are the erstwhile Directors of a company, M/s. A K Power Industries Private Limited. The company took loan from the respondent no.1-bank and subsequently failed to repay the same. The loans were secured by primary and collateral securities and equitable mortgage of immovable properties standing in the name of the petitioners, as well as by the guarantee of the petitioners. At the behest of the respondent no.1- bank, forensic audit was carried out into the affairs of the company in April, 2019. Pursuant to the forensic report placed before the members of the joint lenders' meeting held on May 10, 2019, the respondent no.1 declared the account of the company as a 'No Fraud Account'.

2. Subsequently, the company forwarded an One-Time Settlement proposal, which was accepted by the respondent no.1-bank.

3. In the interregnum, Corporate Insolvency Resolution Process (CIRP) was commenced in respect of the company by an order dated October 1, 2019 passed by the National Company Law Tribunal, Kolkata Bench.

4. During pendency of the CIRP, respondent no.1 issued a notice on November 4, 2019 calling upon the company and the petitioners to showcause and make submissions in writing within 30 days from the date of receipt of the letter as to why their names should not be included in the list of Wilful Defaulters as per the relevant Reserve Bank of India (RBI) guidelines.

5. The petitioners replied to such notice. Subsequently, several letters were issued to the petitioners as well as the company, asking the petitioners and the company to appear before the Wilful Defaulter Identification Committee for personal hearing. Such notices dated March 17, 2020, March 23, 2020, July 18, 2020, July 27, 2020, August 6, 2020, October 28, 2020 and December 7, 2020 have been annexed to the writ petition.

6. In the present writ petition, the petitioners challenge the notice dated August 6, 2020 (wrongfully described in portions of the writ petition and the prayer portion as "August 8, 2020").

7. Learned counsel appearing for the petitioners argues that in view of the prior commencement of CIRP under the Insolvency and Bankruptcy Code, 2016 (IBC), the Identification Committee had no authority to issue the show-cause notice dated November 4, 2019 and the subsequent notices for personal hearing pursuant thereto.

8. Learned counsel for the petitioners argues that, in view of the moratorium envisaged in Section 14 of the IBC, the proceeding for declaration of Wilful Defaulter did not lie against the company. Since the notices to the petitioners were all issued in their capacity as Directors of the company, such notices were also not tenable in the eye of law. It is argued that, as per the scheme of the IBC, the 'unit' (here, the company), if the subject-matter of a CIRP, its Directors, acting in that capacity, would also not be prosecuted in any legal proceeding before any authority, including the Identification Committee. It is illogical, learned counsel submits, that if all proceedings against the company itself are arrested by virtue of Section 14 of the IBC, the Committee could continue to proceed against the petitioners in the capacity of Directors of the company.

9. By relying on the show-cause notice dated November 4, 2019, learned counsel appearing for the petitioners contends that the notice was addressed not only to the company but the present petitioners and the other Directors of the company. All allegations in the show-cause notice were against the company and, as such, the impugned notices are bad in law.

10. Learned counsel appearing for the respondent-bank, on the other hand, contends that the writ petition is premature, since the petitioners have not yet given a representation before the Wilful Defaulter Identification Committee, despite having received the show-cause. The petitioners are evading personal appearance before the Committee, which is evident from the several lette