In one of the recent judgment, the Calcutta High Court observed that the Police may not be able to carry forward criminal proceedings initiated for activities linked to a company whose transactions are subject to the Corporate Insolvency Resolution Process process (CIRP) under the Insolvency and Bankruptcy Code (IBC).

The judgement came out in India Infoline Finance Limited & Anr. v/s The State of West Bengal & Ors.

CASE BACKGROUND

In the present case, a writ petition had been filed that challenged the inaction of the Police authorities on an FIR lodged by the petitioner. According to the petition, the Police authorities had taken the defense of the pending CIRP with respect to the company in question to explain the decision to stall the investigation.

It was contended before the Court that notice as per Section 41A of the Code of Criminal Procedure, 1973 was issued to the accused-respondents and subsequently, an FIR had been lodged under Section 120B, Section 420, Section 406 and Section 24 of the Indian Penal Code, in connection with certain loans taken by them.

The petitioners submitted before the Court that the declaration of a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) during the CIRP has no manner of application to the criminal proceedings.

Reliance placed on an unreported judgment dated April 16, 2019, passed in 2018 by a co-ordinate Bench of the Calcutta High Court to make the point.

After hearing the submissions, the Court noted that while the moratorium may not directly affect criminal proceedings, there may be practice reasons for stalling the criminal investigation. In this regard, the judgment records.

It said:

“…although a moratorium under Section 14 may directly not affect a criminal proceeding, the same covers all aspects and components of the loans and transactions made in respect of the company, which is the subject matter of the CIRP and consequential proceedings. Since any action of the police will have to be based on investigation on the subject matter of the transaction, which is directly within the purview of the CIRP, it is to be deemed that the police cannot take further steps in the matter unless and until the CIRP culminates, in a resolution or otherwise."

The Court duly noted that in the instant case, the Police had taken all sufficient steps possible until the initiation of the CIRP.

It also, however, pointed out while dismissing the writ petition :

“…since the intervening commencement of the CIRP and the moratorium following therefrom, to which effect an order has also been passed by the National Company Law Tribunal, Kolkata Bench, whatever action the police may take, will ultimately lead to an investigation as to the transactions of the company, which are the subject matter of the CIRP. In such view of the matter, the allegation, that the police are not taking sufficient steps on the complaint of the petitioners, cannot be accepted by this court.”

The judgement has been delivered by Justice Sabyasachi Bhattacharyya on 24-01-2020:

Read Judgement Here:

 

 

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