Resolution applicant immunity under insolvency law limits past liability, but appearance notice was not quashed

Section 32A of the Insolvency and Bankruptcy Code, 2016 was treated as protecting a successful resolution applicant from past liabilities of the erstwhile management after approval of the resolution plan and change in control. The petitioner, as a 50% shareholder under the plan, could not be proceeded against merely as the successor to prior management for antecedent liabilities. However, the impugned process was only a notice to appear, not a summoning order as an accused, so the notice was not quashed. The petitioner was directed to place the resolution plan and immunity claim before the trial court, which would decide whether arraying the petitioner as an accused was warranted.

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Issues: Whether the notice issued to the petitioner to appear in proceedings against the corporate debtor was liable to be quashed in view of the approved resolution plan, the change in management, and the statutory immunity under the insolvency regime.

Analysis: The approved resolution plan had resulted in the petitioner becoming a successful resolution applicant and a 50% shareholder in the corporate debtor. The protection under Section 32A of the Insolvency and Bankruptcy Code, 2016 was recognised, and the petitioner could not be treated as the successor of the erstwhile management for past liabilities. At the same time, the order under challenge was only a notice for appearance and not a summoning order as an accused. In these circumstances, the proper course was for the petitioner to place the relevant facts and the resolution-plan protection before the trial court, which would then determine whether the petitioner was at all required to be arrayed as an accused.

Conclusion: The notice was not quashed, and the petitioner was directed to appear before the trial court and place the resolution-plan and immunity facts on record for appropriate consideration.

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