Orissa High Court quashes pre-CIRP air-pollution case against Tata Steel, citing IBC immunity

The State Pollution Control Board filed Complaint Case No. 2(c) C.C.47 of 2013 against erstwhile Bhushan Steel Limited (BSL) and three former officials, alleging contraventions of Sections 21 and 23 of the Air (Prevention and Control of Pollution) Act, 1981, punishable under Sections 37 and 39.

During the proceedings, BSL underwent CIRP. The NCLT approved Tata Steel Limited’s resolution plan, following which management and control of BSL changed and BSL was renamed Tata Steel BSL Limited.

Tata Steel sought, under Section 482 CrPC, to quash the proceedings and cognizance order insofar as they concerned the company, relying on Section 32A of the Insolvency and Bankruptcy Code, 2016.

The Board opposed the application, arguing that the grounds could be raised before the trial court and that the High Court should not interrupt the pending proceeding.

1. Whether Section 32A of the IBC barred continuation of the prosecution against the corporate debtor following approval of a resolution plan that resulted in a change in its management or control.

2. Whether the High Court should exercise its inherent jurisdiction under Section 482 CrPC to quash the proceeding and cognizance order insofar as they concerned Tata Steel.

Section 32A(1) of the IBC provides, subject to its conditions, that a corporate debtor shall not be prosecuted for an offence committed before approval of a resolution plan where the plan results in a qualifying change in its management or control; the provision preserves the liability of persons directly or indirectly involved in the offence.

The Court also considered the resolution plan’s Clauses 8.6.9 and 8.2.6, which addressed liabilities relating to the former promoter group and pre-approval non-compliance.

It relied on the Delhi High Court’s decision in Tata Steel BSL Ltd. v. Union of India, W.P.(CRL.) No. 3037 of 2019, decided 16 March 2020, which quashed proceedings against erstwhile BSL on the basis of Section 32A immunity.

Section 482 CrPC supplied the High Court’s inherent jurisdiction to prevent abuse of process.

The Court found that the resolution plan had been approved and that Tata Steel’s acquisition resulted in a change in management and control of the corporate debtor.

It concluded that, subject to Section 32A, liability for the alleged pre-resolution offences could not be imposed on the present company, and that the Delhi High Court decision supported that conclusion.

The Court therefore rejected the objection that the matter should await determination by the trial court and exercised its inherent jurisdiction to terminate the proceeding against Tata Steel, while expressly leaving the case against the former officials undecided.

The judgment refers to the cognizance order as dated 21 November 2023 in its conclusion, although the application’s description identifies it as dated 21 November 2013.

The judgment also gives different dates for approval of the resolution plan—15 May 2018 and 22 February 2021—which are not reconciled in its reasoning.