Promoters in charge of affairs of a defaulting Co. couldn’t escape from their liability arising due to wilful default

  • News|Blog|Insolvency and Bankruptcy Code|
  • 2 Min Read
  • By Taxmann
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  • Last Updated on 30 October, 2021

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Corporate Insolvency Resolution Process - Moratorium

Case Details: Gouri Prasad Goenka v. State Bank of India - [2021] 131 taxmann.com 212 (Calcutta)

Judiciary and Counsel Details

    • Sabyasachi Bhattacharya, J.
    • Jishnu Saha, Ishaan Saha and Ms. Sananda Ganguli for the Petitoner. 
    • Om Narayan Rai and Saikat Ray Chowdhury for the Respondent.

Facts of the Case

In the instant case, the petitioner was promoter/director and guarantor of the company which had borrowed money from the bank and not repaid it. Consequently, notice had been issued by the bank to the petitioner to show cause as to why he could not be declared a wilful defaulter.

However, the petitioner filed instant writ challenging notice on the ground that Corporate Insolvency Resolution Process (CIRP) was initiated against Borrower Company and a moratorium was declared prohibiting, inter alia, institution or continuation of suits or proceedings against the company or its directors.

High Court Held

The HC noted that promoters and directors who were in charge of affairs of defaulting company during the relevant period, when the default was committed, could not be said to be absolved of their act of wilful default upon initiation of CIRP. Further, the moratorium envisaged in section 14 creates no hindrance to a wilful defaulter declaration proceeding.

In view of aforesaid, no fault could be found with the issuance of impugned show-cause notice to justify judicial interference therewith, and accordingly, instant writ petition challenging said notice was to be dismissed.

List of Cases Referred to

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