Calcutta HC dismisses plea challenging inaction by police on criminal complaint in view of corporate insolvency proceedings [Read Order]

The Calcutta High Court recently observed that the police may not be able to carry forward criminal proceedings initiated for activities linked to a company whose transactions are subject to the Corporate Insolvency Resolution Process process (CIRP) under the Insolvency and Bankruptcy Code (IBC)..Justice Sabyasachi Bhattacharyya was dealing with a writ petition filed challenging the inaction of the police authorities on an FIR lodged by the petitioner. As per the petitioner, the police authorities had taken the defense of the pending CIRP with respect to the company in question to explain the decision to stall the investigation..The Court was informed that a notice as per Section 41A of the Code of Criminal Procedure, 1973 was served upon the accused-respondents and subsequently, an FIR had been lodged under Sections 120B, 420, 406 and 24 of the Indian Penal Code, in connection with certain loans take by them..The petitioners argued that the declaration of a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) during the CIRP has no manner of application to the criminal proceedings. In this regard, reliance was placed on an unreported judgment dated April 16, 2019 passed in 2018 by a co-ordinate Bench of the Calcutta High Court..Justice Bhattacharyya, however, noted that while the moratorium may not directly affect criminal proceedings, there may be practice reasons for stalling the criminal investigation. In this regard, the judgment records,.“…although a moratorium under Section 14 may directly not affect a criminal proceeding, the same covers all aspects and components of the loans and transactions made in respect of the company, which is the subject matter of the CIRP and consequential proceedings.”.The Court further observed,.“Since any action of the police will have to be based on investigation on the subject matter of the transaction, which is directly within the purview of the CIRP, it is to be deemed that the police cannot take further steps in the matter unless and until the CIRP culminates, in a resolution or otherwise."Calcutta High Court.In this backdrop, the Court also noted that in the instant case, the police had taken all sufficient steps possible until the initiation of the CIRP. However, it was pointed out,.“…since the intervening commencement of the CIRP and the moratorium following therefrom, to which effect an order has also been passed by the National Company Law Tribunal, Kolkata Bench, whatever action the police may take, will ultimately lead to an investigation as to the transactions of the company, which are the subject matter of the CIRP.”.In view of these observations, the Court dismissed the writ petition, while also observing that,."In such view of the matter, the allegation, that the police are not taking sufficient steps on the complaint of the petitioners, cannot be accepted by this court.”.The petitioners in the case were represented by Advocates Rahul Karmakar and Rituparna Sanyal. Advocates Dilawar Khan and Ankita Baid appeared for respondent no. 7 in the case. The State of West Bengal was represented by Advocates Ashim Kumar Ganguly and Shukla Das Chandra..[Read the Judgment]