The Orissa High Court has quashed criminal proceedings against Tata Steel Limited over alleged air pollution violations committed by the erstwhile Bhushan Steel Limited (BSL), before Tata Steel took over the company through the insolvency resolution process [Tata Steel Vs SPCB].
Justice Sibo Sankar Mishra held that the protection under Section 32A of the Insolvency and Bankruptcy Code (IBC) prevented civil or criminal liability for acts attributable to the earlier management from being fastened on Tata Steel, after the resolution plan resulted in a change in management and control.
“Any civil or criminal liability arising from acts or omissions attributable to the erstwhile BSL cannot be fastened upon the present petitioner-company (Tata Steel),” the Court said.
The Court consequently quashed the criminal proceedings against Tata Steel, while clarifying that it had expressed no opinion on the case against the remaining accused persons.
The proceedings arose from a complaint filed by the Odisha State Pollution Control Board against Bhushan Steel and three of its then officials over alleged violations of the Air (Prevention and Control of Pollution) Act, 1981.
Tata Steel, which became the successor-in-interest of Bhushan Steel, approached the High Court seeking to quash the proceedings against it.
Bhushan Steel had undergone a Corporate Insolvency Resolution Process (CIRP), during which Tata Steel's resolution plan was approved by 99.80 per cent of the Committee of Creditors. The National Company Law Tribunal (NCLT) subsequently approved the plan. Tata Steel acquired 72.65 per cent of Bhushan Steel's equity through its wholly-owned subsidiary Bamnipal Steel Limited, resulting in a complete change in the company's management and control.
Tata Steel argued that Section 32A of the IBC grants statutory immunity to a corporate debtor from prosecution for offences committed before commencement of the CIRP when the approved resolution plan results in a qualifying change in management or control. The alleged pollution offences, it said, related to the period when Bhushan Steel was controlled by its former management.
The Pollution Control Board opposed the plea, arguing that Tata Steel could raise its objections before the trial court and that the High Court should not use its inherent powers to halt an ongoing criminal proceeding.
The High Court rejected this objection.
It also noted that Tata Steel's approved resolution plan specifically provided that the new management would not incur civil or criminal liability for breaches or non-compliance with law relating to the period before approval of the plan.
The Court further relied on a 2020 Delhi High Court ruling involving Tata Steel BSL, where criminal proceedings against the erstwhile Bhushan Steel had similarly been quashed on the basis of the statutory immunity under Section 32A of the IBC.
Senior Advocate Ashok Parija appeared for Tata Steel.
Advocate Bikram Pratap Das represented the Odisha State Pollution Control Board.
[Read Judgment]