Section 32A of the IBC

Section 32A of the Insolvency and Bankruptcy Code, 2016 gives a corporate debtor conditional protection from liability for offences committed before its insolvency resolution process began. Following approval of a resolution plan under Section 31, this protection applies only when the plan produces a qualifying change in management or control.

Immunity granted to the corporate debtor

Under Section 32A(1), the corporate debtor's liability for offences committed before commencement of the corporate insolvency resolution process ceases from the date the resolution plan is approved.

• The corporate debtor cannot be prosecuted for those offences once the statutory conditions are satisfied.
• If prosecution was instituted against it during the insolvency resolution process, it stands discharged from that prosecution upon approval of the qualifying plan.

Conditions for protection

Approval alone is insufficient: the plan must result in a change in management or control to an eligible person.

• The incoming person must not have been a promoter, part of the corporate debtor's management or control, or a related party of such a person.
• The incoming person must not be someone whom the investigating authority, on material in its possession, has reason to believe abetted or conspired in the offence and against whom it has submitted or filed a report or complaint with the relevant statutory authority or court.

Property protection and continuing accountability

Under Section 32A(2), property covered by the approved plan is protected against action relating to prior offences, subject to the qualifying change in control. Such action includes attachment, seizure, retention and confiscation.

• Individuals involved in the offence remain liable to prosecution and punishment; the corporate debtor's immunity does not protect them.
• Under Section 32A(3), the corporate debtor and persons required to assist must continue cooperating with investigating authorities.