The counsel, representing PCHF, on Friday argued before a bench headed by Chief Justice of India D.Y. Chandrachud that when the new management takes over a corporate debtor arising out of insolvency regime then according to the apex court judgment in P. Mohanraj and others, the new management may make a clean break with the past and start on a clean slate. The counsel further argued that if FIRs were registered against the name of the new management, then how it will be a clean break.
PCHF raised an important question of law that Section 32A of the Insolvency & Bankruptcy Code, 2016, prohibits the existence of an FIR and the criminal proceeding arising out of it against the new management, after successful completion of the corporate insolvency resolution process (CIRP).
The PCHF contended that it cannot be saddled with the offences allegedly committed by the previous management prior to the initiation of the insolvency proceedings.
The bench, also comprising Justices P.S. Narasimha and J.B. Pardiwala, orally observed that as per the mandate of section 32-A, PCHF had the protection against the prosecution. It further stressed that PCHF would have to cooperate with the investigations that can help the CBI in its probe against the erstwhile promoters of DHFL.
The PCHF counsel argued that some in the public sector seek an undertaking in connection with pending FIRs and pressed that clear break from the past will be undermined, if the new management is named in the FIR.
The company’s counsel further pressed that extinguishment of the criminal liability of the corporate debtor is apparently important to the new management to make a clean break with the past and start on a clean slate.
After hearing arguments, the top court agreed to issue notice on an appeal by PCHF. “Issue notice returnable on 17 March 2023”, said the bench, in its order.
The PCHF in September 2021, had completed the acquisition of bankrupt DHFL for Rs 34,250 crore, which includes a cash component and non-convertible debentures.
PCHF was represented by advocates Mohit Rohatgi, Aayush Mitruka, Kaustub Narendran, Lisa Mishra, and Lzafeer Ahmad B. F.
–IANS