Contractual Dispute Cloaked as Cheating: Orissa HC Grants Anticipatory Bail to Liquidator Citing Pending IBC Proceedings [Read Order]

In a recent ruling, the Orissa High Court held that a contractual dispute cannot be treated as cheating and granted anticipatory bail to a company liquidator and other officials, taking note of pending insolvency proceedings before the NCLT.

Ashwini Mehra, the liquidator of Punj Lloyd Ltd., along with other company officials, faced allegations of cheating under Sections 418 and 420 of the IPC based on a subcontractor’s complaint in connection with a pipeline project awarded by GAIL.

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The subcontractor claimed that despite completing 90 percent of the work, payments of about Rs. 3.28 crores remained unpaid and GST credit of Rs. 35.95 lakh was wrongfully availed. An FIR was registered against the liquidator and the company’s senior officers in Kamakhya Nagar P.S. Case No. 644 of 2024.

The petitioners’ counsel argued that the dispute was contractual in nature and had been wrongly given a criminal colour. It was further argued that insolvency proceedings against Punj Lloyd Ltd. were already pending before the NCLT, and the liquidator was protected under the provisions of the Insolvency and Bankruptcy Code, 2016. They also pointed out that the petitioners had joined the investigation and could not be compelled to incriminate themselves.

The State’s counsel argued that the petitioners had not given necessary clarifications during the investigation and that from the outset they intended to cheat. The informant’s counsel also opposed the plea for anticipatory bail, stating that the case involved dishonest conduct and that the petitioners were not cooperating with the investigation.

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The bench comprising Justice V. Narasingh observed that the allegations arose from contractual obligations and that the FIR was an offshoot of a financial dispute already pending before the NCLT. The Court explained that the investigating agency had ignored the statutory scheme of the Insolvency and Bankruptcy Code.

Referring to the Supreme Court’s rulings in Gurbaksh Singh Sibbia v. State of Punjab and Satender Kumar Antil v. CBI, the Court pointed out that anticipatory bail can be granted when civil disputes are dressed up as criminal cases.

The court held that the petitioners had made out a case for protection and directed that in the event of arrest, they shall be released on anticipatory bail subject to conditions. It clarified that these observations were only for deciding bail and not an expression of opinion on their complicity, which must be examined independently during investigation. The applications were accordingly disposed of.

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