The Insolvency and Bankruptcy Amendment Ordinance 2019, Promulgated
The new law viz. the Insolvency and Bankruptcy Code Ordinance (IBC 2019) has been amended recently and brought into effect from 2020 to protect the Corporate Debtor and its assets from liabilities for offences committed prior to the commencement of Corporate Insolvency Resolution Process (CIRP), the President of India has on 28th of December 2019 promulgated an Ordinance – Insolvency and Bankruptcy (Amendment) Ordinance, 2019.
The Ordinance also provides for many other amendments in the Insolvency and Bankruptcy Code (IBC), as earlier proposed in the Insolvency and Bankruptcy (Second Amendment) Bill, 2019 . It was necessitated because the Bill which was introduced in the Parliament on 12th of December could not be taken up for consideration before the end of the Parliament’s winter session.
As per new Section 32A inserted in IBC, the liability of a corporate debtor for an offence committed under any law prior to the commencement of CIRP shall cease and the corporate debtor will not be prosecuted for such an offence from the date the resolution plan is approved by the adjudicating authority.
There are, however, conditions attached to this benevolent provision. This benefit is available only if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not, a promotor, or in the management or control of the corporate debtor or a related party of such person, or a person who abetted or conspired for the commission of the offence according to the relevant investigating authority, and where the investigating authority has submitted a report or filed a complaint to the relevant statutory authority or Court.
The provision also provides that if prosecution has been initiated during CIRP, Corporate Debtor shall stand discharged from the date of approval of the resolution plan.It may be however be noted that no immunity will be provided to certain officers of the corporate debtor even if the corporate debtor’s liability ceases according to the new provisions.
Further, as per provisions of Section 32A(2) of the IBC, no action including attachment, seizure, retention or confiscation of property of the corporate debtor can be taken in relation to an offence committed prior to the commencement of CIRP, in case such property is covered by the resolution plan approved by NCLT.
Further, conditions relating to change in control or management, as present for the liabilities against the corporate debtor, are also relevant for the action against property of the corporate debtor. It may however be noted that action against the properties of any person other than the corporate debtor or the person who acquired such properties through CIRP or liquidation process, is not barred, and action may be taken under the relevant law.