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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
GITA GOPI, J.
M/s Vimal Oils And Foods Ltd Thro M/s Arrhum Tradelink private Limited By Rakesh Baluram Lahoti - Appellant
Versus
State Of Gujarat - Respondent
R/Criminal Misc.Application No. 11557 of 2021
Decided on : 24-08-2022
Constitution of India, 1950- Article 14 – Indian Penal Code, 1860 – Section 120B, 420 – Criminal Procedure Code, 1973 - Section 305, 91, 154 -Prevention of Corruption Act, 1988 – Section 13(1)(d) – Companies Act, 2013 – Section 2 –- Insolvency and Bankruptcy Code, 2016 - Sections 35, 50, 52 ,54, 32A, section 33(1)(a) - Resolution Regulations, 2016 - Regulation 37 – Criminal offence – Facts narrated in memo of petition can be enumerated has been bought Pvt. Ltd., registered under Companies Act, 1956, in liquidation process conducted by Liquidator appointed by Bench through public e-auction – Held, Thus, through Section 32A of IB Code, insulation is provided to corporate debtor and to its properties as they would be susceptible to investigations or proceedings related to criminal offences committed by its, prior to commencement of a CIRP, which would lead to imposition of liabilities and restrictions on corporate debtor and its properties even after they were lawfully acquired by a resolution applicant or a successful bidder respectively – Section 29A read with section 35(1) (f), places restrictions on related parties of corporate debtor from proposing a resolution plan and purchasing property of corporate debtor in CIRP and liquidation process respectively – Proceedings under IB Code are designed to ensure maximization of value, that requires transfer of corporate debtor to bonafide persons, where position is safeguarded by ring-fencing them from prosecution and liabilities under offences committed by erstwhile promoter etc – When bonafide persons, takes over management of corporate debtor, they should not be penalized for action of erstwhile management of corporate debtor – Thus, VOFL as a going concern and its properties would not be liable for alleged fraud of earlier management – Petition allowed.
JUDGMENT :
1. The present petition has been filed by M/s. Vimal Oils & Foods Ltd., through its buyer M/s. Arrhum Tradelink Private Ltd., under section 482 of the Code of Criminal Procedure, 1973, (for short "the Cr.P.C.") praying to quash and set aside FIR No.RC2222021A0002 of 2021, lodged by first informant - Deputy General Manager at Bank of India Large Corporate Bank, Ahmedabad with AC-IV (VYAPAM) Bhopal Police Station, Bhopal under section 120B read with section 420 of Indian Penal Code and section 13(2) read with section 13(1)(d) of the Prevention of Corruption Act, 1988 (for short ' PC Act') qua the present petitioner - M/s. Vimal Oils & Foods Ltd.
2. The facts narrated in the memo of petition can be enumerated as under:
2.1 M/s. Vimal Oil & Foods Ltd. (for short 'VOFL') has been bought by M/s. Arrhum Tradelink Pvt. Ltd., registered under the Companies Act, 1956, on 04.12.2020, in the liquidation process conducted by Liquidator appointed by the N.C.L.T. Ahmedabad Bench through public e-auction.
2.2 M/s. Vimal Oils & Foods Ltd., registered under the Companies Act, 1956 having office at Mehsana, had availed loan facilities from a consortium of 9 banks. It is alleged that the said company and its erstwhile directors in collusion have caused wrongful loss of Rs.678.92 crores plus uncharged interest to the lending banks. The loan accounts were declared by Bank of India as NPA on 30.09.2015 and other banks declared the same on different dates. It is alleged that various audits pertaining to the accounts of M/s. Vimal Oil & Foods Ltd. was conducted and from time to time findings or conclusion were noted in Joint Lenders Meetings (JLM) of bankers and in one of the meeting conducted on 13.01.2016, it was decided to conduct forensic audit and on 06.04.2016, in 8th JLM meeting it was noted that, none of the banks have red flagged the account or declared the company as willful defaulter.
2.3 It is stated that on 09.11.2016, in 12th JLM, M/s. S.P. Mangal & Co. for conducting Forensic Audit and on 05.06.2017, the banks have discussed the Forensic Audit report and noted that the forensic auditor has certified that there is no diversion of funds. Thereafter, M/s. R.S.Patel & Co. Charted Accountants, was appointed for conducting of forensic audit of VOFL from 01.04.2016 to 19.12.2017, the report was discussed and noted on 29.08.2018 to the effect that no material transactions under section 66 of Insolvency and Bankruptcy Code, 2016 (in short "IB Code) for fraudulent trading or wrongful trading, was observed.
2.4 It is stated that after selling the Vimal Oil & Foods Ltd. through public e-auction and receiving the sale proceeds amount, the Bank of India on 21.05.2021 has complained about fraud perpetrated by VOFL and its erstwhile directors. Thereafter, SARFEASI action was initiated against it and recovery suits were filed by the banks before the DRT, Ahmedabad. It is stated that one of the creditors, Bank of Baroda approached the NCLT for initiating the Corporate Insolvency Resolution process of the Company under Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'IB Code' for short), which was admitted on 19.12.2017. An application was moved for passing an order under section 33(1)(a) of the IB Code for liquidation of the corporate debtor and vide its order dated 19.12.2019, the NCLT passed liquidation order appointing a liquidator.
2.5 The e-auction process was started of VOFL and M/s. Arrhum Tradelink Pvt. Ltd. paid the deposit amount on 09.11.2020 and on 04.12.2020, public e-auction was conducted and M/s. Arrhum Tradelink Pvt. Ltd. emerged as highest bidder of Rs.69.95 Crores. Thereafter, M/s. Arrhum Tradelink Pvt. Ltd. deposited the amount of bid and with prior permission of banks, the liquidator executed the sale agreement on 03.03.2021 for sale of VOFL and on 11.03.2021, sale certificate of VOFL as going concern was executed. The NOCs were arranged to the effect of undertaking from the banks to withdraw the name of VOFL from
The main legal point established in the judgment is that the conditions under Section 32A of the Insolvency and Bankruptcy Code, 2016 must be satisfied for the discharge of the Corporate Debtor from ....
The principle of 'Clean Slate' protects new owners from liabilities of previous management, and banks must adhere to natural justice in fraud classifications.
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.
Upon approval of a resolution plan involving a change in management, a corporate debtor and its assets gain statutory immunity from past criminal liability and property attachment, ensuring the entit....
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