Resolution plan approval changing company control: Section 32A ends pre-CIRP criminal cases and lifts property attachment; petition allowed

After approval of a resolution plan under s.31 IBC, the HC held that s.32A (a non-obstante provision) extinguishes the corporate debtor's criminal liability for pre-CIRP offences and bars continuation of prosecution, provided the plan effects a complete change in ownership and control and the erstwhile promoters/management or related parties do not retain control; consequently, immunity is denied where such persons continue in management or control. The HC further held that s.32A(2) immunises the corporate debtor's property from attachment or restraint in proceedings connected to pre-CIRP offences once the plan and change in control take effect, as clarified by the Explanation, and therefore the enforcement agency's provisional attachment could not continue after such approval. Petition allowed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, upon approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code, 2016, the immunity under Section 32A bars continuation of attachment proceedings and requires lifting of a provisional attachment of the corporate debtor's property (including "attachment, seizure, retention or confiscation") in relation to pre-CIRP offences.

(ii) Whether the writ jurisdiction should be declined on the ground of availability of alternate statutory remedies under the Prevention of Money-Laundering Act, 2002, when the impugned attachment is asserted to be contrary to the mandate of Section 32A of the Insolvency and Bankruptcy Code, 2016.

(iii) Whether an order confirming a provisional attachment is unsustainable where the enforcement agency's own complaint asserts modification/lifting of attachment on immovable assets and seeks attachment of a different form of alleged proceeds, yet the adjudicating authority confirms the original provisional attachment "in its original form".

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Effect of Section 32A (IBC) on attachment under PMLA after approval of resolution plan

Legal framework (as discussed by the Court): The Court analysed Section 32A of the Insolvency and Bankruptcy Code, 2016 as a non-obstante provision triggered upon approval of a resolution plan under Section 31. Section 32A(1) provides that the liability of the corporate debtor for offences committed prior to commencement of CIRP shall cease and the corporate debtor shall not be prosecuted from the date of plan approval, subject to the plan resulting in change in management/control to a person not falling within the disqualifying categories. Section 32A(2) bars action against the property of the corporate debtor in relation to pre-CIRP offences where the property is covered under the approved plan, and its Explanation clarifies that "action" includes attachment.

Interpretation and reasoning: The Court held that the immunity under Section 32A is conditioned on a successful resolution plan resulting in a complete change in the character of ownership and control. Once the ingredients of Section 32A are met, the corporate debtor obtains statutory immunity from prosecution for pre-CIRP offences, while persons responsible for the offence (other than the corporate debtor) remain liable. Consistently, Section 32A(2) extends protection to the corporate debtor's property covered under the approved plan, expressly including protection from attachment. The Court reasoned that, after plan approval meeting Section 32A parameters, attachment "either provisionally or otherwise" cannot continue "even for a day longer".

Conclusion: The provisional attachment and its confirmation were held unsustainable because, after approval of the resolution plan under Section 31 satisfying Section 32A's conditions, the attachment of the corporate debtor's property could not lawfully continue.

Issue (ii): Maintainability of writ petition despite alternate remedy under PMLA

Legal framework (as discussed by the Court): The Court noted the contention that statutory remedies (including appeal provisions and other relief mechanisms) were available under the Prevention of Money-Laundering Act, 2002, but reiterated the settled position that existence of an alternate remedy does not, by itself, bar exercise of writ jurisdiction, and that recognised exceptions permit writ intervention.

Interpretation and reasoning: The Court found the case fit for writ interference because the authorities had not lifted the attachment despite the "clear mandate" of Section 32A of the Insolvency and Bankruptcy Code, 2016. This failure rendered the alternate-remedy objection unsuitable for relegating the petitioner to statutory forums in the circumstances.

Conclusion: The Court rejected the alternate remedy objection and entertained the writ petition, holding the objection "stated only to be rejected" on the facts.

Issue (iii): Unsustainability of confirmation order when the complaint asserts modification of attachment but confirmation is in original form

Legal framework (as discussed by the Court): The Court examined the scheme where a provisional attachment under Section 5 of the Prevention of Money-Laundering Act, 2002 is followed by a complaint under Section 5(5) for confirmation by the adjudicating authority.

Interpretation and reasoning: The Court noted that, in the complaint filed for confirmation, the enforcement agency itself asserted that the alleged proceeds had "changed form" and stated that the earlier attachment on land/property stood lifted and that a monetary amount (sale proceeds under the approved resolution plan) was to be treated as provisionally attached. Despite this, the adjudicating authority confirmed the provisional attachment order "in its original form". The Court held that this inconsistency independently rendered the confirmation order unsustainable.

Conclusion: The confirmation order was quashed as unsustainable, inter alia because it confirmed an attachment in a form inconsistent with the enforcement agency's own stated modification in the confirmation complaint.

Final dispositive outcome (as decided): The Court allowed the writ petition and set aside/quashed (insofar as they pertained to the corporate debtor and its assets) the enforcement case information record, the provisional attachment order (including as modified), the show cause notice, the original complaint, and the adjudicating authority's confirmation order.

---