Section 32A of The Insolvency and Bankruptcy Code, 2016. in hindi
1[32A. Liability for prior offences, etc.--(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not--
- (a)a promoter or in the management or control of the corporate debtor or a related party of such a person; or
- (b)a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled: Provided further that every person who was a designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or an officer who is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor's liability has ceased under this sub-section.
- (2)No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not--
- (i)a promoter or in the management or control of the corporate debtor or a related party of such a person; or
- (ii)a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation.--For the purposes of this sub-section, it is hereby clarified that,--
- (i)an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor;
- (ii)nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law as may be applicable.
- (3)Subject to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity given in this section, the corporate debtor and any person who may be required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process.]
Summary
- Shields an insolvent company from liability or prosecution for criminal offences committed before the insolvency process began, once a resolution plan is approved.
- Conditions this immunity on a complete change of management or control to persons who were not promoters, in management, related parties, or suspected of abetting the offence.
- Holds individual wrongdoers, like designated partners or officers in default, personally liable and open to prosecution, even if the company itself is let off the hook.
- Protects the company's property from attachment, seizure, or confiscation for past offences if the property is part of an approved plan or sold in liquidation to a clean buyer.
- Requires the company to fully cooperate with and assist any authority investigating past criminal activities, despite the immunity granted.
Practical examples
FAQ
1. Does a new buyer of an insolvent company become liable for the company's past crimes under the Insolvency and Bankruptcy Code, 2016?
No, under Section 32A of the Insolvency and Bankruptcy Code, 2016, the company's liability for prior crimes ceases upon plan approval, provided there is a change in management to independent, unrelated persons.
2. What happens to the directors who committed crimes before the company went into insolvency under the bankruptcy code?
Under Section 32A of the Insolvency and Bankruptcy Code, 2016, while the company's liability ceases, the individual officers in default or designated partners who were involved in the crime continue to be liable for prosecution.
3. Can the police seize a property sold during liquidation for a prior offence under the Insolvency and Bankruptcy Code, 2016?
No, Section 32A of the Insolvency and Bankruptcy Code, 2016 bars action like attachment or seizure against property covered under an approved resolution plan or sold in liquidation to an unrelated, clean buyer.
4. Is an insolvent company excused from helping police investigations under Section 32A of the Insolvency and Bankruptcy Code, 2016?
No, despite the immunity from liability, Section 32A of the Insolvency and Bankruptcy Code, 2016 requires the corporate debtor and its staff to extend all assistance and cooperation to any authority investigating past crimes.
Test yourself
Q1.Under Section 32A of the Insolvency and Bankruptcy Code, 2016, the liability of a corporate debtor for a prior offence ceases if control of the company shifts to a person who was NOT:
Q2.Under Section 32A of the Insolvency and Bankruptcy Code, 2016, what happens to a prosecution against a corporate debtor if a resolution plan is approved under Section 31 of the Insolvency and Bankruptcy Code, 2016 and management changes?
Q3.Under Section 32A of the Insolvency and Bankruptcy Code, 2016, what does "action against the property" of the corporate debtor include?
Q4.Under Section 32A of the Insolvency and Bankruptcy Code, 2016, who remains personally liable for criminal offenses committed by the company before insolvency?