IBC clean-slate protection and later decriminalisation barred continuation of prosecution for pre-CIRP environmental violations.

Section 32A of the IBC protects a corporate debtor from prosecution for offences committed before commencement of CIRP once a resolution plan is approved and management changes to persons unconnected with the former control. On that basis, prosecution for alleged pre-CIRP environmental violations was treated as unsustainable. The later decriminalisation of offences under Section 15 of the Environment (Protection) Act, 1986 by the Jan Vishwas (Amendment of Provisions) Act, 2023 was also held to support quashing of the pending criminal case, because the alleged contravention had been shifted from a penal to a civil penalty regime. The proceedings were found incapable of being sustained in law.

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Issues: (i) Whether continuation of the criminal proceeding for alleged environmental violations committed prior to commencement of the corporate insolvency resolution process was barred by Section 32A of the Insolvency and Bankruptcy Code, 2016 after approval of the resolution plan and change in management. (ii) Whether the subsequent decriminalisation of offences under Section 15 of the Environment (Protection) Act, 1986 by the Jan Vishwas (Amendment of Provisions) Act, 2023 rendered the pending prosecution unsustainable.

Issue (i): Whether continuation of the criminal proceeding for alleged environmental violations committed prior to commencement of the corporate insolvency resolution process was barred by Section 32A of the Insolvency and Bankruptcy Code, 2016 after approval of the resolution plan and change in management.

Analysis: Section 32A grants immunity to the corporate debtor for offences committed before commencement of the corporate insolvency resolution process once the resolution plan is approved and control shifts to a person unconnected with the erstwhile management. The allegations in the complaint related to a period long before the insolvency resolution process and arose from the acts of the former management. In such circumstances, continuation of prosecution against the corporate debtor was treated as inconsistent with the statutory clean-slate protection.

Conclusion: The criminal proceeding was held unsustainable to the extent it was founded on pre-CIRP allegations and was barred by operation of Section 32A of the Insolvency and Bankruptcy Code, 2016.

Issue (ii): Whether the subsequent decriminalisation of offences under Section 15 of the Environment (Protection) Act, 1986 by the Jan Vishwas (Amendment of Provisions) Act, 2023 rendered the pending prosecution unsustainable.

Analysis: The judgment treated the later legislative change as materially affecting the continuance of the prosecution, since the penal character of the alleged contravention stood replaced by a civil penalty regime. Applying the principle of beneficial construction, the Court held that insisting on continuation of a criminal prosecution after decriminalisation would not subserve the ends of justice.

Conclusion: The pending prosecution was held liable to be quashed in view of the changed statutory regime.

Final Conclusion: The proceedings were found incapable of being sustained in law and the petition was allowed.

Ratio Decidendi: Where a corporate debtor undergoes a successful resolution process with a genuine change in management, prosecution for pre-CIRP offences cannot continue against it, and a subsequent statutory decriminalisation may independently justify quashing of the pending criminal case.

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