Writ petition challenging Wilful Defaulter notice dismissed; Directors' liability affirmed.

The court dismissed the writ petition challenging the Wilful Defaulter notice, affirming Directors' liability as guarantors despite the moratorium under Section 14 of the IBC. The judgment clarified the scope of immunity for Directors and the application of RBI guidelines in cases of Wilful Defaulters during CIRP.

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Issues:
1. Application of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) on proceedings for declaration of Wilful Defaulter against a company and its Directors.
2. Authority of the Wilful Defaulter Identification Committee to issue show-cause notices during the Corporate Insolvency Resolution Process (CIRP).
3. Exclusion of Directors from management of corporate debtor during CIRP and their liability as guarantors.

Analysis:
1. The petitioners, former Directors of a company, challenged the Wilful Defaulter notice issued during CIRP, claiming immunity under Section 14 of the IBC. The court examined the conflict between RBI guidelines and IBC provisions, concluding that the moratorium extends to the company but not its Directors. The Directors' dissociation from company affairs during CIRP allows proceedings against them as Wilful Defaulters.

2. The court considered the authority of the Identification Committee to issue show-cause notices during CIRP. It held that Directors, excluded from managing the company during CIRP, can be prosecuted as guarantors despite the moratorium, emphasizing the need to lift the corporate veil to examine their roles.

3. The judgment highlighted the distinct positions of Directors and the company during CIRP. While the company benefits from the moratorium, Directors, including guarantors, are not covered. The doctrine of piercing the corporate veil was applied to justify prosecuting Directors as Wilful Defaulters, emphasizing public policy and interest over Director-company parity.

In conclusion, the writ petition challenging the Wilful Defaulter notice was dismissed, affirming the liability of the Directors as guarantors despite the moratorium under Section 14 of the IBC. The judgment clarifies the scope of immunity for Directors and the application of RBI guidelines in cases of Wilful Defaulters during CIRP.

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