Delhi Court discharges Monet Ispat from CBI's coal scam case following amalgamation with JSW Steel

A Delhi court on Tuesday discharged Monet Ispat - now amalgamated with JSW Steels - from an ongoing investigation by the Central Bureau of Investigation (CBI) related to allegations of irregularities in the allocation and operation of coal blocks..The CBI had accused the company of criminal conspiracy and criminal breach of trust under the Indian Penal Code (IPC). However, the company, which had undergone a successful insolvency resolution under the Insolvency and Bankruptcy Code (IBC) and was now helmed by a new management, later filed a discharge application..Jude Arun Bhardwaj, Special Judge (PC Act) CBI, Coal Block cases, sitting at the Rouse Avenue Courts in Delhi took note of the development and discharged the company from the CBI case.“Approval of the Resolution Plan by the Adjudicating Authority shows that the the requirements of Section 32 A of IBC, 2016 were fulfilled. Therefore, the Accused No. 1 company stands discharged under Section 32 A of IBC, 2016," the trial court observed. .The court's decision emphasized the "fresh start" principle intended by the IBC, which aims to enable companies to recover from financial distress and resume operations without the burden of pre-existing criminal liabilities.Section 32A of the IBC, 2016, provides immunity to corporate debtors from prosecution for offences committed prior to the commencement of the Corporate Insolvency Resolution Process (CIRP). This immunity is granted if the resolution plan results in a change in the management or control of the corporate debtor to a person who was not involved in the commission of the offence..Section 32A was introduced via an amendment on December 28, 2019, but its retrospective application has been upheld in key judgments. Referring to the Essar India Ltd. case, the Rouse Avenue Court noted:"By introducing Section 32A, a statutory basis has been given to the fresh slate theory propounded by the Hon’ble Supreme Court.".The Court also analysed a series of judgments on Section 32A of IBC."The intention of the provision is to discover in such cases as to who are the real individuals or entities who are acting jointly or in concert and who have set up such a corporate vehicle for the purpose of submission of a resolution plan,” the Court stated. It further highlighted the relevance of this principle in the Tata Steel BSL Ltd case where the corporate debtor was discharged even though the resolution plan was approved before Section 32A’s introduction.The Court clarified the exceptions to such discharge under Section 32A, including when it comes to cases involving Micro, Small, and Medium Enterprises (MSMEs) or where resolution applicants fail to meet stipulated financial requirements. It also addressed concerns raised by the CBI about alleged lack of clarity on whether the new management of Monet Ispat (now JSW Steel) included related parties (persons related to Monet Ispat). The Court observed that these aspects were sufficiently examined by the National Company Law Tribunal (NCLT)."The recording in the (NCLT) judgement that 'This plan is not in contravention to any of the provisions of law for the time being in force' shall mean that there is no related party in relation to an individual," the Court said. .The CBI was represented by Senior Advocate RS Cheema along with advocates NP Srivastava, AP Singh, Sanjay Kumar and Akshay Nagarajan.Monnet Ispat was represented by Senior Advocate Vikas Pahwa and advocates Himanshu Gupta, Rohan S Nandy, Nancy Shamim and Amit Badisra.Other respondents (accused) were represented by advocates Ashish Hira and Mayank Tripathi..[Read Judgment]