[This article is authored by Arnav Maru, student at the Maharashtra National Law University, Mumbai. This article attempts to evaluate the implications of the addition of section 32A in the Insolvency and Bankruptcy Code.]
The Insolvency and Bankruptcy Code was introduced at a time when the non-performing asset crisis was at an unimaginable peak. Solving this crisis topped the priority list of a desperate government trying to rescue the banking sector as well as the debt market. The Insolvency and Bankruptcy Code was a game-changer. It has been largely successful in improving the recovery rates through its time-bound and creditor-in-control approach. The regime is still in its nascent stage and found itself amended for the fourth time in 2020. The amendment introduced Section 32A, which added another accelerant to the corporate insolvency resolution process. The Section, however, due to its sweeping reach and mandate, has raised some eyebrows. The Section alters established principles of corporate law that may have effects that cannot be comprehensively pictured-presently. The existing literature on the amendment and the Section has focused on the overriding clause, the interpretation and conflict with other laws, and the benefits to resolution applicants. The discourse has failed to cover and question the theoretical foundations of what could be one of the biggest disruptions to the principle of independent corporate personality in recent times. This paper focuses on the evolution of the principle of independent corporate personality and its recognized exceptions and compares how they fit within the scope of the Section and its implications. It also addresses the concept of corporate criminal liability and its reduction to a mere exemplary status as a consequence of the provision. As a whole, the argument weighs economic efficiency against the body of common law and the need for stability therein to suggest that one must not necessarily overrule the other.