Insolvency and Bankruptcy Code 2016 Section 32a: Liability for Prior Offences (2026)

Explainer · Insolvency Law · IBC

Updated for 2026 · Claw Editorial

Section 32A of the Insolvency and Bankruptcy Code, 2016 gives a company a clean slate after a successful resolution. The problem it solves is simple. A new owner buys a company out of insolvency, pays the agreed money to creditors, and then faces prosecution and asset attachment for crimes the old management committed. No sensible buyer would take that risk. Section 32A says that once a resolution plan is approved and a genuinely new, unconnected management takes over, the company is no longer liable for offences committed before the insolvency, and its assets cannot be attached for those past offences. This explainer sets out what the section says, who is still liable, the leading case, and a practical note. Last verified October 2026.

01The problem Section 32A solves

In the early years of the Code, buyers of distressed companies faced a hidden danger. After taking over, the company could still be prosecuted, and its property attached, for frauds and offences of the earlier promoters. In some high-profile cases, investigating agencies attached the very assets that the resolution plan handed to the new owner. That made the plan worthless and scared off serious bidders.

Section 32A, added by the 2020 amendment with effect from the end of 2019, fixed this. It separates the sins of the old management from the company in its new, clean hands.

02What Section 32A says

Section 32A(1) provides that the corporate debtor shall not be prosecuted for an offence committed before the start of the insolvency process, from the date the resolution plan is approved by the Tribunal, if the plan results in a change in management or control to a person who was not a promoter or in control of the company, and was not a related party, and against whom the investigating authority has no material to show involvement in the offence.

In short, the immunity is tied to a clean break. The new management must be genuinely unconnected to the people who committed the offence.

03Protection of the company's assets

Section 32A(2) protects the property of the company. Once the plan is approved, the assets covered by the plan cannot be attached, seized, retained or confiscated in connection with an offence committed before the insolvency, where there is the same clean change of control.

This is what gives the buyer real comfort. The money paid to creditors, and the assets acquired, are safe from action tied to the old wrongdoing. Section 32A also requires the company and its new management to extend all assistance to the investigating agencies looking into the old offences.

04Who is still liable

The immunity protects the company and its clean new owner. It does not protect the wrongdoers. Section 32A makes clear that every person who was a designated partner, officer, or person in management or control of the company at the time the offence was committed, and who is responsible for it, continues to be liable to be prosecuted and punished.

So the old promoter who committed the fraud is not let off. The law lifts the burden from the company and the new owner, and keeps it on the individuals who actually did wrong.

05Key case law

The leading ruling is Manish Kumar v. Union of India (2021). The Supreme Court upheld Section 32A. It held that the immunity is a considered policy choice that is essential to make the resolution process work, because without it no clean buyer would come forward. The Court noted the safeguards built into the section: the immunity applies only where control passes to an unconnected person, and the individual wrongdoers remain liable.

Courts have since applied Section 32A to lift attachments and stay prosecutions against resolved companies, while allowing proceedings against the former promoters to go on.

06Practical note

For a resolution applicant, Section 32A is a key part of the comfort a plan provides, but it is not automatic. The buyer must be genuinely unconnected to the old promoters, and must be ready to show investigating agencies there is nothing linking it to the offence. Plans are usually drafted to record the clean change of control clearly, and to seek protection of the plan assets under Section 32A. The moratorium that protects the company during the process is explained in the moratorium under Section 14, and the plan itself in the resolution plan under the IBC.

For investigating agencies and victims, the section does not close every door. The individuals responsible can still be tried, and the company must assist the investigation. The immunity is for the fresh start of the business, not for the people who caused the harm.

07Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

Whether a resolved company gets the benefit of Section 32A, or whether an attachment survives, often turns on how the NCLT, the NCLAT and the High Courts have read the clean change of control test. Claw lets you search more than 30 crore judgments and orders on Section 32A, with results in under 5 seconds, and lets you follow a live insolvency or attachment matter by company name across 9,102 courts, benches and forums, including the NCLT and the NCLAT. Reported authority runs from Supreme Court rulings of 1950 and High Court rulings of 1990 to the latest orders. Claw does not use the documents you upload to train its AI models.

Create a FREE Claw account to see how Section 32A has been applied and to track a pending NCLT, NCLAT or High Court matter, and use case search across Indian courts to find orders in similar cases.

08Sources and further reading

• India Code (IBC, 2016 bare text): indiacode.nic.in
• Insolvency and Bankruptcy Board of India (Code, regulations and circulars): ibbi.gov.in
• Claw: clawlaw.in

This explainer is general information, not legal advice. The Code and its interpretation change through amendments and rulings, so check the current text and take advice from counsel before you act.

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