Is Order Against Suspended Director Of NCLT On Section 66 and 44 Comes Under Civil or Criminal ?

Is Order Against Suspended Director Of NCLT On Section 66 and 44 Comes Under Civil or Criminal? 

Orders issued by the National Company Law Tribunal (NCLT) against suspended directors under sections 66 and 44 of the Insolvency and Bankruptcy Code (IBC) are generally considered civil matters. These sections pertain to fraudulent or wrongful trading and preferential transactions, and the NCLT's actions primarily focus on recovering assets and liabilities for the benefit of creditors. While the consequences of these orders can be significant for the individuals involved, they do not automatically trigger criminal proceedings.

Here's a more detailed explanation: a

Section 66 of the IBC (Fraudulent Trading or Wrongful Trading):  

This section addresses situations where the business of a corporate debtor has been carried on with the intent to defraud creditors or for any fraudulent purpose.  The NCLT can hold individuals (including suspended directors) liable for the losses incurred by the company due to such fraudulent or wrongful trading.  The relief granted under this section is usually aimed at recovering funds or assets for the benefit of the company and its creditors.

Section 44 of the IBC (Preferential Transactions):  

This section deals with transactions that favor certain creditors or parties over others during the insolvency process.  The NCLT can declare such transactions as preferential and order their reversal or restitution.  Again, the focus is on restoring fairness and equity among creditors.

Civil vs. Criminal: 

Civil Matters: 

These involve disputes between individuals or entities where the primary goal is to resolve the dispute, compensate for damages, or enforce legal rights. 

Criminal Matters: 

These involve offenses against the state or society, where the primary goal is to punish the offender and deter future criminal activity.

Why NCLT actions under these sections are considered civil:  

The primary purpose of the NCLT's actions under Sections 66 and 44 is to recover assets and address the financial consequences of wrongful or preferential transactions.  

• The focus is on restoring the financial health of the company and ensuring fair treatment of creditors.  

• While the consequences for individuals can be significant (e.g., financial liability, potential disqualification from directorship), these are primarily civil consequences. 

• The NCLT's orders under these sections do not automatically trigger criminal proceedings. 

However, it's important to note: 

Independent Criminal Actions: 

The NCLT's orders under Sections 66 and 44 do not preclude or prevent separate criminal investigations or prosecutions if the actions also constitute a criminal offense.

Contempt of Court: 

If an individual fails to comply with an NCLT order, they can be held in contempt of court, which can lead to imprisonment or other penalties, but this is a separate issue from the original civil matter.

Specific Circumstances: 

In some cases, fraudulent or wrongful trading under Section 66 may also be a criminal offense under other laws, and in those cases, criminal proceedings could be initiated.

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