Once Resolution Plan is approved by NCLT and Corporate debtor gets into hands of new management, all the past liabilities including Criminal Liability of Corporate debtor gets wiped off and New Management takes over the company with clean slate, however, old management will be liable to face all offence committed prior to CIRP commencement – Vasan Healthcare Pvt. Ltd. Vs. The Deputy Director of Income Tax (Investigation) – Madras High Court
February 1, 2024
Hon’ble High Court of Madras holds that: (i) The company has been taken over by a new management and the criminal liability cannot be passed on to the new management. (ii) The new management takes over the Corporate Debtor as a clean slate and the criminal liability can no longer be mulcted as against Corporate Debtor. Therefore, the continuation of criminal proceedings as against Corporate Debtor can no longer subsist. (iii) The criminal liability of a company cannot be transferred to another company or the new management ipso facto. (iv) It is left open to the respondent to identify the persons who were in-charge of running the company and were involved in the day today affairs of the company during the relevant point of time and it will be left open to the respondent to continue the criminal prosecution as against those officers.