The Delhi High Court recently quashed criminal proceedings against Bhushan Power & Steel Limited (BPSL) in relation to a complaint filed by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA) in view of Section 32A of the Insolvency and Bankruptcy Code (IBC).

Noting that BPSL underwent a successful resolution under the IBC, Justice Manmeet Pritam Singh Arora held that the company could not have been prosecuted for offences committed before the commencement of the Corporate Insolvency Resolution Process (CIRP).

“A plain reading of the above provision would reveal that there is no dispute over the legal position that once a resolution plan has been approved by the adjudicating authority under Section 31 of IBC and the conditions specified in Section 32A of the IBC are fulfilled, the Corporate Debtor shall not be prosecuted for an offence committed prior to the commencement of the CIRP” the Court said.

BPSL (petitioner) sought quashing of the process order issued by the Special Court, CBI (PC Act) and other proceedings under the PMLA in relation to a complaint filed by the ED.

The brief facts of the case are that the National Company Law Tribunal (NCLT) had admitted CIRP against BPSL. During the CIRP, JSW Steel Ltd emerged as the successful resolution applicant.

Subsequently, the CBI registered a case against BPSL, its chairman, director and others under Section 13(2) r/w 13(1) (d) Prevention of Corruption Act and Sections 120-B r/w 420, 468, 471 and 477A of IPC.

Based on the FIR registered by the CBI, the ED registered an Enforcement Case Information Report (ECIR) against BPSL for the offence of money laundering. The ED's complaint alleged that BPSL and its officers were involved in bank fraud of around Rs 47,000 Crores.