Special Court Grants DHFL Discharge in ED Money Laundering Case Under IBC Immunity
A special court in Mumbai has discharged Dewan Housing Finance Corporation Ltd (DHFL) from one of the money laundering cases filed by the Enforcement Directorate (ED), citing immunity provisions under the Insolvency and Bankruptcy Code (IBC). The court ruled that DHFL, as a corporate debtor, cannot be prosecuted for offences allegedly committed prior to the commencement of its resolution process and change of management.
Court's Rationale Based on IBC Section 32A
In its order passed on February 2, 2026, special judge R B Rote emphasized that the extinguishment of criminal liability for the corporate debtor is crucial for the new management to make a clean break from the past. DHFL had sought discharge under Section 32A of the IBC, arguing that its resolution plan was approved and a monitoring committee was constituted in 2021, which now oversees the company's affairs.
The court noted that Piramal Finance Limited underwent the Corporate Insolvency Resolution Process following an order from the National Company Law Tribunal, resulting in the merger of DHFL with its entity. This legal restructuring formed the basis for granting immunity to DHFL from prosecution for pre-resolution offences.
ED's Opposition and Allegations
The ED had strongly opposed DHFL's discharge plea, alleging that proceeds of crime amounting to Rs 5,050 crore were involved, with Rs 4,450 crore traced to DHFL. The agency contended that DHFL falls under the definition of a 'person' under the Prevention of Money Laundering Act (PMLA) and should be held liable.
The case, filed by the ED in 2020 under the PMLA, is linked to loans provided to DHFL by Yes Bank in 2018 during the tenure of DHFL's former promoters, Kapil and Dheeraj Wadhawan. The ED alleged that DHFL received undue financial benefits as part of a conspiracy with then Yes Bank CEO Rana Kapoor.
Continuation of Prosecution Against Former Officials
While discharging DHFL as a corporate entity, the court clarified that former officers and directors of the company who were directly or indirectly involved in the alleged offences shall continue to face prosecution. This distinction ensures that individual accountability is maintained even as the corporate debtor benefits from IBC protections.
The ruling highlights the interplay between insolvency laws and criminal proceedings, setting a precedent for how corporate debtors under resolution can navigate legal challenges related to past misconduct.
