Introduction
The Insolvency and Bankruptcy law was introduced in the Indian legal regime to promote investments and resolution of insolvency of corporate persons, firms and individuals in a time-bound manner. The aim of insolvency laws was astray until the introduction of Section 32A of the Insolvency and bankruptcy law, 2016 ( hereinafter referred to as “Act”) as there arise issues during the time of Corporate Insolvency resolution Process. Before the enactment of this provision, there arose a problem during the time of corporate insolvency resolution process that tied the Corporate Debtor in a gordian knot of prosecution and liabilities before courts and tribunals for acts prior to the Resolution Plan. These were paradigm issues before the Adjudication Authority which made the Corporate Insolvency Resolution Process (“CIRP”) complicated thus there arise a clamant need to protect resolution applicants for timely settlement of resolution plan. To absolve this issue, the legislatures introduced Section 32A that made all the previous prosecutions and liabilities of the corporate debtor unenforceable after the CIRP gets approved by the Adjudicating Authority.
Section 32A analysis
According to this provision, only those liabilities and offences of Corporate Debtor would be unenforced which were approved by the Adjudicating Authority in the Resolution Plan. This Section also includes in its scope that no action can be taken against the properties of the corporate debtor. This gave great relief to the resolution applicants as the CIRP process started taking in a time-bound manner nurturing the aim and objective of this Act. Further, this Section provides that in case any prosecution has been started against the Corporate Debtor then such prosecution stand abated with the approval of resolution approval by the Adjudicating Authority.
Section 32A also tried to make a balance between the wrong and right by creating a line between the offence which can be exonerated and the offences which cannot be exonerated by the courts. This provision continues to hold liable the persons who were “designated partner” or “officer who is in default” or “any person who is in charge of or responsible to Corporate Debtor” who were either involved in the commission of such offence or were directly or indirectly associated with the offence or committed such offence.
The same designated partner and officer who were in default are also liable for the attachment of the property of Corporate Debtor if they are directly or indirectly related to the commission of offence or were directly or indirectly involved in the commission of such offence.
Conclusion
Moreover, the introduction of Section 32A has brought into the picture a means to complete the CIRP in a time-bound manner thus standing out to the needs of the resolution applicant. Section 32A has retrospective effect and abates even the criminal investigations against the Corporate Debtor as established in the case of JSW Steel Ltd. v. Mahendra Kumar Khandelwal. With the introduction of this provision, the resolution applicants are looking forward towards other remedies to the loopholes of the law.
“Article by Ms Harshita Agarwal under internship of Adv Shankarlal Raheja
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