Tribunal Orders Release of Corporate Debtor Assets to Liquidator under Insolvency Law

The Tribunal allowed the Liquidator's application under section 35(1)(n) of the Insolvency & Bankruptcy Code, 2016, directing the Directorate of Enforcement to release assets of the Corporate Debtor attached under the Prevention of Money Laundering Act. The Tribunal asserted its authority over the distribution of assets in liquidation, distinguishing its role from the criminal court under the PMLA Act. Emphasizing equitable distribution among stakeholders, the Tribunal ordered the Enforcement Directorate to transfer possession of the attached properties to the Liquidator for the smooth progress of the liquidation process.

---

---

Issues involved:
Liquidator seeking release of assets from Directorate of Enforcement under I&B Code due to attachment under PMLA Act.

Analysis:
The Liquidator filed an application under section 35(1)(n) of the Insolvency & Bankruptcy Code, 2016, requesting the release of assets of the Corporate Debtor from the Directorate of Enforcement, New Delhi, which were attached during an investigation under the Prevention of Money Laundering Act. The Liquidator argued that without the release of the attachment, the liquidation process could not proceed effectively. The Enforcement Director confirmed that the properties were indeed attached as proceeds of the crime under the orders of the PMLA Court, New Delhi, and stated that the attachment could not be removed.

During the hearing, the Ld. Pr.CS for the Liquidator and the Ld. Counsel for the Enforcement Directorate presented their arguments. Reference was made to Section 238 of the Insolvency & Bankruptcy Code, emphasizing that the provisions of the Code prevail over any other law. A precedent from a previous case was cited where the Apex Court held that the properties of a company in liquidation cannot be sold to benefit only certain creditors to the exclusion of others as it would contradict the Companies Act. The Tribunal noted that the current dispute involved assets attached under the PMLA Act, as opposed to the MPID Act in the referenced case, but the underlying issue remained the same regarding the distribution of assets in liquidation.

The Tribunal concluded that it had the authority to consider the matter concerning the distribution of assets of the Corporate Debtor under liquidation. It was highlighted that while the criminal Court under the PMLA Act could determine if the attached properties were acquired using proceeds of crime, the Tribunal was responsible for deciding how the assets of the Corporate Debtor could be appropriated. Consequently, the Tribunal allowed the application and ordered the Enforcement Directorate to hand over the possession of the attached properties to the Liquidator for the effective continuation of the liquidation process.

In summary, the Tribunal's decision clarified the jurisdictional aspects between the criminal Court under the PMLA Act and the Tribunal under the I&B Code regarding the distribution of assets in liquidation, emphasizing the need for a balanced and fair distribution among all stakeholders involved in the insolvency process.

---