Court quashes FIR under IPC Sections 406/420, finding petitioner acted in good faith

The court quashed the FIR and criminal proceeding under Sections 406/420 IPC, as the allegations did not meet the essential elements of the offenses. It was found that the petitioner, acting as a resolution professional, had acted in good faith under the Insolvency Code, following directions from the NCLT and Committee of Creditors. The court emphasized the importance of material facts in attributing lack of good faith and noted the absence of deception or fraud by the petitioner. The FIR was deemed to have been lodged with a malicious intent, leading to its quashing.

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Issues Involved:
1. Quashing of the FIR and criminal proceeding under Sections 406/420 IPC.
2. Applicability of Sections 217, 233, 236, and 238 of the Insolvency and Bankruptcy Code, 2016.
3. Interpretation of "good faith" and its impact on immunity under Section 233 of the Insolvency Code.
4. Principles for quashing criminal proceedings at the initial stage.

Issue-wise Detailed Analysis:

1. Quashing of the FIR and Criminal Proceeding under Sections 406/420 IPC:
The petitioner sought to quash the FIR dated 27-10-2020 and the criminal proceeding in Paltan Bazar P.S. Case No. 825/2020 registered under Sections 406/420 IPC. The FIR alleged that the petitioner, acting as a resolution professional, colluded with other bidders to finalize a resolution plan at a lower price, despite the highest bid from PPIPL. It was claimed that the petitioner’s actions amounted to dishonest misappropriation and conversion of assets, constituting criminal breach of trust and cheating.

2. Applicability of Sections 217, 233, 236, and 238 of the Insolvency and Bankruptcy Code, 2016:
- Section 217: Allows any aggrieved person to file an application against an insolvency professional.
- Section 233: Provides immunity from prosecution for actions done in good faith under the Insolvency Code.
- Section 236: Offences under the Insolvency Code are to be tried by a Special Court.
- Section 238: The Insolvency Code overrides any inconsistent provisions in other laws.

The petitioner argued that the prosecution was not maintainable under these sections, while the respondent countered that these provisions were not applicable as the offences fell under the Indian Penal Code (IPC).

3. Interpretation of "Good Faith" and Its Impact on Immunity under Section 233 of the Insolvency Code:
The court noted that the immunity under Section 233 applies to acts done in good faith under the Insolvency Code. However, "good faith" is a question of fact, which must be determined based on the circumstances of each case. The court emphasized that allegations in the FIR should provide material facts to attribute an absence of good faith to the petitioner. The court referred to the Apex Court’s decision in General Officer Commanding Rashtriya Rifles and Ors. Vs. CBI, which highlighted the necessity of material facts to impute an unreasonable motive to take away immunity.

4. Principles for Quashing Criminal Proceedings at the Initial Stage:
The court referred to the principles established in State of Haryana Vs. Bhajanlal, which outline categories where criminal proceedings can be quashed to prevent abuse of process or to secure justice. The court found that the allegations in the FIR did not prima facie constitute offences under Sections 406/420 IPC. The petitioner was acting under the directions of the NCLT and the decision to finalize the resolution plan was taken by the Committee of Creditors and approved by the NCLT, Guwahati Bench.

The court concluded that the essential ingredients of entrustment and misappropriation or conversion of property were absent. Additionally, there was no evidence of deception or fraud by the petitioner. The court observed that the FIR appeared to be lodged with an ulterior motive after exhausting other forums, aligning with clauses (i), (ii), (iii), and (vii) of Bhajan Lal’s case.

Conclusion:
The court quashed the FIR dated 27-10-2020 and the consequential proceeding in Paltan Bazar P.S. Case No. 825/2020 registered under Sections 406/420 IPC, stating that the allegations did not disclose the necessary ingredients to constitute the offences and appeared to be motivated by vengeance.

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