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.

ORDER :

G. JAYACHANDRAN, J.

1. The petitioner company is accused in the complaints initiated by the respondent under section 138 of Negotiable Instruments Act. For dishonouring the cheques issued to discharge the liability, the petitioner company is facing prosecution.

2. Brief facts of the case leading to the petition to quash the complaints:-

For purchase of medical equipments, the petitioner company namely, M/s.Vasan Health Care (P) Ltd., borrowed loan from the respondent company, namely, M/s.India Infoline Finance Ltd (IIFL) which is a financial Institution. To discharge the liability, the Managing Director/Authorised Signatory of the petitioner company issued the cheques which are subject matter of the complaints. The cheques, on presentation for collection, returned stating reason “Funds insufficient”. After causing statutory notice, complaints filed against i) the Company ii) A.M.Arun, the Managing Director and iii) Mrs.Meera, the Director. Pending trial, yet another creditor of the petitioner company by name M/s.Alcon Laboratories filed application under Section 9 of Insolvency and Bankruptcy Code, 2016 (in short “IBC”) before the National Company Law Tribunal, Chennai Branch (in short NCLT, Chennai). By an order dated 21/04/2017, the 1^st accused company was admitted into the Corporate Insolvency Resolution Process (in short “CIRP”) and one V.Mahesh was appointed as Interim Resolution Professional (IRP). While so, the second accused A.M.Arun, the representative of the first accused company and the Signatory of the cheques died on 16/11/2020. Later, by an order dated 23/04/2021 NCLT, Chennai appointed Mr.S.Rajendran as Resolution Professional of the 1^st accused company.

3. According to the petitioner, as per the resolution plan approved by the NCLT, vide order dated 03/02/2023 the Company has been taken over by the successful resolution applicant M/s.ASG Hospital (P) Ltd. The claims of the creditors verified by the RP and settled on condition that all the civil and criminal litigations, investigations, enquires, proceedings causes of action, claims, disputes or other judicial, regulatory proceedings against the corporate debtor or the affairs of the corporate debtor, pending, present or future shall stand extinguished. The respondent Company is one of the creditor whose claim has been admitted by RP and settled as per the resolution plan. Therefore, the prosecution against the petitioner which is the Corporate debtor cannot proceed in view of Section 32A of IBC.

4. Relying upon the judgement of the Supreme Court in Ajay Kumar Radheshyam Goenka vs. Tourism Finance Corporation of India Ltd. ,2023 SCC OnLine SC 266, the Learned Counsel for the petitioner Company submit that after the order passed by NCLT on 21/04/2017 in the application filed under Section 9 of IBC, the erstwhile Directors of the Company cease to be the Directors and they cannot represent the company after its Management vested with the IPR. Further, the claim of the creditor been settled under the resolution plan approved by the NCLT and therefore, no prosecution can sustain in view of the terms of resolution plan as approved by NCLT vide order dated 03/02/2023.

5. The respondent Company though received notice on 12/02/2024 sent through RPAD, had not participated in the proceedings.

6. The point for consideration is whether, the existing criminal liability of the Company and its erstwhile Directors will get extinguished in view of the resolution plan approved by NCLT ?

7. The petitioner Company is facing trial in the following nine criminal complain