M/s. Agarwal Textiles Ltd., a company based in Surat, Gujarat, faced significant financial distress due to a downturn in the textile industry and accumulated debts of ₹500 crore. Investigations revealed that during the p

The central issue here is whether Section 32A of the IBC provides immunity to Agarwal Textiles Ltd. under the new management of M/s. Khanna Ventures Pvt. Ltd. from actions taken by the ED concerning offences committed by the previous management before the CIRP commencement date. Section 32A of the IBC provides immunity to the corporate debtor from prosecution for offences committed prior to the commencement of the CIRP, provided that: The resolution plan has been approved by the NCLT. The resolution plan results in a change in the management or control of the corporate debtor. The new management or control was not a related party of the previous offenders. The new management has not abetted or conspired in the commission of the offence. In this case: Resolution Plan Approval: The resolution plan was approved by the NCLT on January 15, 2025. Change in Management: M/s. Khanna Ventures Pvt. Ltd. has taken over the management, representing a complete change in control. Independence of New Management: Mr. Sanjay Khanna and his team are not related to the previous management (Mr. Rajesh Agarwal) and had no prior involvement with Agarwal Textiles Ltd. No Abetment: There is no indication that the new management abetted or conspired in the commission of the offences. Based on these facts, Agarwal Textiles Ltd., under the new management of M/s. Khanna Ventures Pvt. Ltd., can claim immunity under Section 32A of the IBC and the NCLT should consider to grant immunity to Agarwal Textiles Ltd. under the new management from the attachment of assets by the ED, as it meets the criteria specified under Section 32A of the IBC. The purpose of Section 32A is to encourage genuine resolution applicants to take over distressed companies without fear of being penalized for the misdeeds of the previous management. Denying immunity in this case would defeat the purpose of the IBC, as it would deter potential resolution applicants. However, it is important to note that the immunity under Section 32A is not absolute. The ED could still pursue action against the former MD, Mr. Rajesh Agarwal, for his alleged fraudulent activities. The immunity applies to the corporate debtor itself, provided the conditions of Section 32A are met.