IRP’s Right to Represent Corporate Debtor in Criminal Proceedings: Supreme Court Bars Parallel Criminal Proceedings and Protects Accused from Custody
- REEDLAW
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The REEDLAW Legal News Network reports: In a landmark ruling at the intersection of insolvency law and criminal jurisprudence, the Supreme Court clarified that once a Corporate Debtor enters the insolvency process, its representation in all legal proceedings vests exclusively in the Interim Resolution Professional. The Court further held that parallel criminal proceedings arising from the same cause of action are impermissible, and that personal liberty of the accused must be safeguarded after completion of the investigation and filing of the charge sheet. This judgment significantly strengthens procedural discipline under the Insolvency and Bankruptcy Code while reaffirming constitutional protections against unnecessary custodial detention.
The Supreme Court, comprising Justice Ahsanuddin Amanullah and Justice K. Vinod Chandran, while adjudicating a Special Leave Petition (Criminal), held that once a Corporate Debtor enters insolvency, its representation in criminal proceedings vests exclusively in the Interim Resolution Professional. The Bench ruled that parallel criminal proceedings based on the same cause of action are legally impermissible and observed that after completion of investigation and filing of the charge sheet, the accused is entitled to protection from custodial detention and grant of bail as a matter of personal liberty.
The Petitioners had challenged the continuation of criminal proceedings arising out of multiple complaints instituted on the same set of facts, after the High Court had declined to quash the FIR and had directed their appearance before the Trial Court with liberty to seek bail. It was contended that the dispute was essentially civil in nature and that parallel criminal proceedings amounted to abuse of process. The Respondent asserted that the acts complained of disclosed cheating and conspiracy, causing loss to the Corporate Debtor, which was undergoing insolvency proceedings before the NCLT, and sought recognition of the Interim Resolution Professional as the lawful representative of the Corporate Debtor in the criminal prosecution.
The Court allowed the impleadment of the Interim Resolution Professional, affirming that once a Corporate Debtor was admitted into insolvency, its representation in all legal proceedings, including criminal prosecution, vested in the Interim Resolution Professional as the statutory custodian of its affairs. It was held that the complainant entity could validly act only through the Interim Resolution Professional and that such representation was essential to preserve the interests of the Corporate Debtor under the IBC framework. This recognition harmonised the criminal process with the insolvency regime and ensured that prosecution was conducted by a legally authorised person.
The Court noted that three separate criminal proceedings had been initiated on the same factual matrix, out of which one had been stayed and another had been withdrawn as not pressed, the magistrate having observed that the dispute appeared to be civil in nature. It was further recorded that in the surviving FIR, the investigation had culminated in the submission of a final report which concluded that the allegations had not been substantiated. In this backdrop, the Court held that parallel criminal proceedings on the same cause of action were impermissible and directed closure of the remaining ancillary proceedings, confining the dispute to a single surviving criminal case.
Taking into account that the investigation had already concluded and that a charge sheet had been filed without substantiation of allegations, the Court found no justification for custodial detention of the Petitioners. It directed that upon their appearance before the jurisdictional court, they shall be granted bail on appropriate conditions, reaffirming that arrest was not to be used as a punitive tool after completion of the investigation. The Court emphasised that protection of personal liberty under Article 21 required that custody be ordered only when demonstrably necessary for the administration of justice.
The Court further clarified that the Interim Resolution Professional would be entitled to represent the Corporate Debtor in the prosecution and could seek the summoning of former officials, directors or responsible persons conversant with the subject matter of the offence. The Special Leave Petition was accordingly disposed of by integrating the principles governing criminal procedure with the statutory scheme of the Insolvency and Bankruptcy Code, ensuring avoidance of multiplicity of proceedings, protection of liberty, and preservation of the Corporate Debtor’s prosecutorial rights through its legally recognised representative.
Mr. Ashish Pandey, Advocate, represented the Petitioners.
Mr. Ardhendumauli Kumar Prasad, Senior Advocate, appeared for the Respondent No. 3.
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