Section 32-A protection bars cheque dishonour prosecution against a resolved corporate debtor after approval of the resolution plan.

Section 32-A of the Insolvency and Bankruptcy Code protects a corporate debtor from prosecution for offences committed before commencement of CIRP once a resolution plan is approved and new management takes over. Applied to cheque dishonour proceedings under Section 138 of the Negotiable Instruments Act, this meant the criminal case against the company for pre-CIRP cheques could not continue after approval of the plan. The protection operates only in favour of the corporate debtor; the approval of the resolution plan does not wipe out the personal liability of natural persons such as signatories or directors. The prosecution against the company alone was therefore unsustainable and was quashed.

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Issues: Whether the criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881 against the corporate debtor could be quashed after approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016, and whether the protection under Section 32-A extended to the company in respect of its prior liability.

Analysis: The proceedings arose from dishonour of cheques issued by the company before commencement of the corporate insolvency resolution process. The company was admitted to CIRP, a resolution plan was later approved, and the Court applied the legal position that Section 32-A protects the corporate debtor from prosecution for offences committed prior to commencement of CIRP once a resolution plan is approved and a new management takes over. The Court relied on the governing principle that the bar under Section 32-A operates in relation to the corporate debtor, while the personal liability of natural persons such as signatories and directors is not extinguished by the approval of the plan.

Conclusion: The prosecution against the corporate debtor alone was held to be unsustainable and was quashed.

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