Matter: Dewan Housing Finance Corporation Ltd. v. Union of India
Order dated: 16 November 2021
Summary:
In the present case, Dewan Housing Finance Corporation Ltd. (DHFL), the corporate debtor, was a co-accused, along with its erstwhile directors and promoters, in certain criminal proceedings. Concurrently, CIRP proceedings were going on against DHFL before NCLT and the resolution plan submitted by Piramal Capital and Housing Finance Limited (Successful Resolution Applicant) was approved by the NCLT. This order was challenged before the NCLAT, which refused to grant an interim stay against the NCLT order during the pendency of the appeal.
The Code provides that a corporate debtor ought not to be prosecuted for an offence committed prior to commencement of CIRP once a resolution plan, which results in change in management of the corporate debtor, has been approved by the NCLT. Therefore, DHFL made an application before the court seeking its discharge from the criminal proceedings which were on alleged acts committed by DHFL prior to initiation of CIRP. The order of the court rejecting this application was challenged before the Bombay HC
The main issue under consideration of the Bombay HC was whether, DHFL would be absolved of all criminal offences committed prior to commencement of CIRP, from the date of approval of the resolution plan by NCLT, although an appeal against NCLT’s order was pending before the NCLAT. The Bombay HC noted that the resolution plan has been approved by the NCLT and such a resolution plan has resulted in change in management of DHFL in favour of persons who were not related to the erstwhile management of DHFL. Therefore, immunities under the Code cannot be denied to DHFL. The Bombay HC also opined that mere filing of an appeal by itself does not operate as a stay, unless a specific prayer is made in this regard and orders are passed. Therefore, the Bombay HC set aside the order of the court and discharged all criminal proceedings against DHFL.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
al@acuitylaw.co.in
