Orissa High Court Quashes Criminal Proceedings Against Ferro Alloys Over Pre-CIRP Environmental Law Violations

The Orissa High Court has recently quashed criminal proceedings against Ferro Alloys Corporation Ltd over alleged environmental law violations.

It held that continuation of the prosecution was not sustainable as the violations happened before the insolvency resoulution.

Justice Dr. Sanjeeb K. Panigrahi also noted that offences under Section 15 of the Environment (Protection) Act, 1986 have since been decriminalised. They have been replaced with a regime of civil penalties.

“In the present case, the allegations forming the subject matter of the impugned complaint under Section 15 of the Environment (Protection) Act, 1986 admittedly relate to the period between the years 2002 and 2009, which is substantially prior to the initiation of the Corporate Insolvency Resolution Process and the subsequent approval of the Resolution Plan in respect of the Petitioner Company,” the court held.

The prosecution arose from a complaint filed in 2014. It alleged that the company's mine in Odisha operated without valid environmental clearance. It also alleged that production exceeded permissible limits during the relevant period.

The court noted that the allegations related to a period when the company was under its erstwhile management. It further recorded that the company later underwent insolvency proceedings. Control eventually passed to new management under an approved resolution plan.

The court examined the protection available to corporate debtors after a change in management. It observed that the allegations predated the insolvency process. Continuation of the criminal proceeding against the corporate debtor would therefore run contrary to the legislative object of the Insolvency and Bankruptcy Code, it held.

“Thus, the alleged contraventions are attributable to the erstwhile management and pertain to a period anterior to the change in management and control brought about pursuant to the CIRP. In such circumstances, continuation of the present criminal proceeding against the corporate debtor would run contrary to the express mandate and legislative object underlying Section 32A of the Insolvency and Bankruptcy Code, 2016,” the court observed.

The court found that the company is now managed by persons unconnected with those against whom the allegations were made. That change, it held, was significant while considering the protection available under the insolvency law.

“The corporate entity is now being managed by a new dispensation entirely distinct and independent from the erstwhile management against whom the allegations pertain. Such transformation in the corporate structure and management assumes considerable significance while examining the applicability and effect of the statutory protection contemplated under Section 32A of the Insolvency and Bankruptcy Code, 2016,” the court held.

The court also took note of amendments introduced through the Jan Vishwas (Amendment of Provisions) Act, 2023. It recorded that offences under Section 15 of the Environment (Protection) Act were decriminalised with effect from April 1, 2024.

“In view of the subsequent legislative change brought about by the Jan Vishwas (Amendment of Provisions) Act, 2023, coupled with the object and intent underlying such decriminalization, this Court is of the considered opinion that continuation of the present criminal proceeding under Section 15 of the Environment (Protection) Act, 1986 would no longer subserve the ends of justice,” the court held.

Allowing the petition, the court quashed the criminal proceedings pending before the Judicial Magistrate First Class, Barbil. It also vacated any interim orders.