Delhi High Court: A petition was filed by Bhushan Power and Steed Limited under Article 226 read with Section 482 of Criminal Procedure Code (CrPC) seeking quashing of case filed under Section 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA) and all consequential proceedings arising out of or emanating therefrom including the order issuing process dated 17-01-2020 passed by the Special Judge qua the petitioner company. Manmeet Pritam Singh Arora, J., partly allowed the petition and the order dated 17-01-2020, taking cognizance and issuing process against the Petitioner Company, was set aside.
Punjab National Bank (PNB) initiated corporate insolvency resolution proceedings (CIRP) against Bhushan Power and Steel Limited (BPSL) under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, which was admitted by the National Company Law Tribunal (NCLT) on 26-07-2017. During the CIRP, JSW Steel Ltd. emerged as the successful resolution applicant. However, in the interim, the Central Bureau of Investigation (CBI) registered an FIR against BPSL, its Chairman, Directors, and others, alleging offenses under Sections 120-B, 420, 468, 471, and 477-A of IPC along with Section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act). Subsequently, the Enforcement Directorate (ED) initiated money laundering proceedings against BPSL by recording an Enforcement Case Information Report (ECIR) on 25-04-2019. Despite these developments, the NCLT, through its order dated 05-09-2019, approved JSW Steel’s resolution plan under Section 31 of the IBC but did not explicitly shield BPSL from liabilities arising out of alleged offenses committed by the erstwhile management. Aggrieved by this, JSW filed an appeal before the National Company Law Appellate Tribunal (NCLAT), seeking protection from penal and financial liabilities, as well as attachment of assets due to the alleged acts of the previous management.
While proceedings were ongoing, the ED issued a Provisional Attachment Order (PAO) on under the Prevention of Money Laundering Act (PMLA), 2002, attaching the assets of BPSL, deeming them as “proceeds of crime.” The NCLAT, through its interim order dated stayed the ED’s attachment and prohibited further actions against BPSL’s assets without prior approval. The dispute escalated with the Union of India (UoI) filing a divergent affidavit, leading to adjournments for internal resolution. Meanwhile, on 28-12-2019, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, introduced Section 32A, providing immunity to corporate debtors from prosecution for prior offenses once a resolution plan was approved. Despite this, on 17-01-2020, the ED filed a prosecution complaint, implicating BPSL and its former directors in an alleged bank fraud of ₹47,204 crores. Ultimately, on 17-02-2020, the NCLAT ruled the ED’s attachment as illegal in light of Section 32A. The ED challenged this before the Supreme Court which was disposed of by the Court on 11-12-2024. Aggrieved by this entire trajectory, the present petition was filed.
The Court noted that a plain reading of Section 32-A of IBC would reveal that there is no dispute over the legal position that once a resolution plan has been approved by the adjudicating authority under Section 31 of IBC and the conditions specified in Section 32-A of the IBC are fulfilled, the Corporate Debtor shall not be prosecuted for an offence committed prior to the commencement of the CIRP. However, Section 32-A of IBC also clarifies that any erstwhile officer of the Corporate Debtor who was in any manner in charge of, or responsible to the Corporate Debtor for the conduct of its business or associated with the Corporate Debtor in any manner or who was directly or indirectly involved in the commission of such offence prior to the commencement of CIRP as per the complaint filed by the investigating authority, shall continue to be prosecuted and punished for such an offence committed by the Corporate Debtor, notwithstanding that the Corporate Debtor’s liability has ceased.
The Court further noted that the role of the Corporate Debtor, as elaborately stated in the prosecution complaint filed before the Special Court for PMLA cases under the PMLA, will necessarily have to be examined in the trial of the erstwhile promoters/directors of the Petitioner Company as it relates to the commission of the offence by the Petitioner Company in its earlier avatar as it was under the erstwhile management, when the offence was committed, more so when there are allegations under Section 70 of the PMLA.
The Court concluded that the writ petition is being partly allowed, and the impugned order dated 17-01-2020 passed by the Special Judge, CBI, Rouse Avenue District Court taking cognizance and issuing process and the consequential criminal proceedings only to the extent of the petitioner company are being hereby set aside.
The Court further held that in view of the mandate under sub-section (1) of Section 32-A of the IBC, the petitioner company, having undergone a successful resolution process under Section 31 of the IBC, shall not be prosecuted for the offences committed prior to the commencement of the CIRP.
[Bhushan Power and Steed Limited v Union of India, W.P.(CRL) 1261/2024, decided on 30-01-2025]
Advocates who appeared in this case :
Mr. Abhishek Manu Singhvi, Sr. Adv., Mr. Vikas Pahwa, Sr. Adv., Mr. Raunak Dhillon, Ms. Madhavi Khanna, Ms. Isha Malik, Ms. Niharika Shukla, Advocates for petitioner
Mr. Zoheb Hossain, Spl. Counsel with Mr. Manish Jain, SPP with Mr. Vivek Gurnani, SC with Mr. Kartik Sabharwal, Mr. Pranjal Tripathi and Mr. Kaushik Maurya, Advocates. Mr Satya Ranjan Swain (SPC), Advocate for Respondent no. 1/UOI
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