Post-liquidation, the new management of a company is insulated from prosecution for prior management violations, as the liquidation operates as a clean slate.

ORDER :

N. ANAND VENKATESH, J.

1. These writ petitions have been filed challenging the show cause notices issued by the first respondent alleging violation of certain provisions of the COMPANIES ACT , 2013 (hereinafter called the Act) and the intended prosecution that was sought to be launched against the petitioner.

2. Heard the respective learned counsel appearing on either side.

3. The case of the petitioner is as follows :

(i) The petitioner company is incorporated in the year 2007 under the COMPANIES ACT , 1956. It underwent corporate insolvency resolution process (CIRP) and liquidation process under the Insolvency and Bankruptcy Code, 2016 (for short, the IBC) and came to be taken over as a going concern by one M/s.Agniti Industrial Parks Private Limited (for brevity, the new management) during the liquidation process under Regulation 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (hereinafter called the Regulations).

(ii) The petitioner company was originally engaged in the business of manufacturing wind turbine generators and had availed several financial facilities from banks and financial institutions. It underwent rough weather and pursuant to that, it defaulted in repayment obligations. Further, one of its operational creditors filed a petition before the National Company Law Tribunal (NCLT), Chennai for initiating CIRP against the petitioner company. In spite of best efforts, the petitioner company was not able to be revived under the CIRP and hence, it was ordered to be liquidated by the NCLT, Chennai vide order dated 08.8.2019 in M.A.No.695 of 2019 and a liquidator came to be appointed to complete the said process.

(iii) The petitioner company was brought to sale as a going concern post liquidation under Regulation 32A of the Regulations vide sale process memorandum dated 12.10.2019. A public auction was conducted on 22.1.2020 and the new management was declared as the successful bidder at the auction. On payment of the entire sale consideration, a sale deed dated 14.10.2020 was executed in favour of the successful bidder. Thereafter, the new management came to be appointed and became the new shareholder of the petitioner company and respondents 4 and 5 were appointed as the directors of the petitioner company.

(iv) The entire sale process was placed before the NCLT, Chennai for approval and by order dated 08.2.2021 in I.A.No.852 of 2020, the approval was granted. The new management also took office and the entire affairs of the petitioner company were handed over to them.

(v) The specific case of the petitioner is that the liquidator had no books with him, that no books were handed over to the new management also, that the liquidator informed the new management by letter dated 15.2.2021 that he had not received the books of accounts or any other documents of the petitioner company and that the Interim Resolution Professional (IRP), during the CIRP, did not have the records of the petitioner company.

(vi) On 18.8.2022, the Joint Director, Office of the Regional Director, Southern Region, Ministry of Corporate Affairs, Government of India, Chennai-6 issued an inspection notice under Section 206(5) of the Act and on receipt of this letter, the petitioner company sent a reply to the said notice clarifying that