Corporate Debtor’s Past Offences cannot Haunt Successful Resolution Applicant: Delhi HC directs NTPC to Apprise Trial Court of Orders and Immunities [Read Order]

The Delhi High Court has confirmed the “clean slate” doctrine under the Insolvency and Bankruptcy Code (IBC) by holding that a successful resolution applicant cannot be burdened with the criminal liabilities of a corporate debtor’s past management.

Justice Neena Bansal Krishna observed that “The proceedings undertaking by the learned Special Judge is contrary to the judicially and legislatively sanctified ‘Clean Slate’ Doctrine, which is the bedrock of IBC. This doctrine ensures that a successful Resolution Applicant takes over the Corporate Debtor free from all past encumbrances. The continuation of criminal proceedings and directing the present petitioner to represent Jabua Power Ltd., is expressly and unequivocally barred by law under Section 32A IBC. Further, the Order of NCLT fortifies the immunity of the Petitioner.”

A petition was filed by NTPC Ltd., which had been served notice by a Special Judge in proceedings arising out of alleged offences involving Jhabua Power Ltd. (JPL), a corporate debtor taken over by NTPC under a resolution plan.

NTPC, India’s largest public sector power producer, had acquired 50% shareholding in JPL under a resolution plan approved by the NCLT, Kolkata Bench on 06.07.2022. The plan explicitly incorporated the statutory immunity under Section 32A of IBC, shielding the new management from past offences committed by the erstwhile promoters and officers.

Despite this, the Special Judge in July 2025 issued notice to NTPC, seeking its appearance in proceedings relating to an Enforcement Directorate case against JPL.

NTPC challenged the order, contending that the continuation of criminal proceedings against the revived corporate debtor undermines the finality of the insolvency process and violates Section 32A, which overrides all other statutes including the Prevention of Money Laundering Act (PMLA).

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It argued that compelling NTPC to face prosecution for the misdeeds of JPL’s former promoters amounts to double jeopardy and frustrates the legislative intent of reviving stressed assets free from past encumbrances.

The Court observed that while the Special Judge’s order was not in the nature of summoning NTPC as an accused, it required the company to clarify the factual position regarding JPL’s existence post-resolution.

According to the bench “All the pre-conditions for the applicability of the immunity under IBC have been fulfilled, namely a Resolution Plan submitted by the Petitioner has been approved by the NCT and it had resulted in a complete change in management and control of JPL to a person, who was not a promoter, related party or a person implicated by the Investigating Agency in the commission of the alleged offence. The NCLT approved Resolution Plan is binding on all stakeholders, which expressly includes the Central Government and any statutory authority there under, such as the Respondent.”

“Directing Petitioner to represent JPL in a criminal trial for a liability that has been statutorily extinguished is a futile, vexatious and oppressive exercise’, said the court.

The High Court, noting the binding force of NCLT’s order and the immunity granted under Section 32A IBC directed NTPC to appear before the trial court and apprise it of the resolution plan, the change in management, and the immunities flowing therefrom.

The trial court was asked to pass a reasoned order clarifying NTPC’s status, and to ensure that no unwarranted criminal liability is foisted upon the resolution applicant.

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