Insolvency Code Overrides Money Laundering Law: Tribunal Rules on Moratorium Conflict

The Tribunal held that the Insolvency and Bankruptcy Code (IBC) prevails over the Prevention of Money Laundering Act (PMLA) due to a non-obstante clause in the IBC. It determined that proceedings before the Adjudicating Authority under PMLA are civil, not criminal. The moratorium under IBC applies to PMLA proceedings, and attachment of properties under PMLA conflicting with the IBC moratorium is invalid. The Tribunal allowed the appeals, setting aside the Adjudicating Authority's order and attachment orders, directing the release of properties and emphasizing the IBC's overriding effect.

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Issues Involved:
1. Overriding effect of the Insolvency and Bankruptcy Code (IBC), 2016 over the Prevention of Money Laundering Act (PMLA), 2002.
2. Nature of proceedings before the Adjudicating Authority under PMLA (civil or criminal).
3. Applicability of moratorium under IBC to proceedings under PMLA.
4. Validity of the attachment of properties under PMLA when the properties are already under the moratorium declared by the National Company Law Tribunal (NCLT).

Detailed Analysis:

1. Overriding Effect of IBC, 2016 Over PMLA, 2002:
The Tribunal held that the IBC, 2016, being a subsequent legislation, overrides the PMLA, 2002. This is because Section 238 of the IBC contains a non-obstante clause that gives it precedence over other laws. The Tribunal cited various judgments, including the Supreme Court’s decision in "Allahabad Bank vs. Canara Bank" and "Ashoka Marketing Limited & Anr. vs. Punjab National Bank & Anr." to support this view. The Tribunal emphasized that the IBC was enacted to consolidate and amend laws relating to reorganization and insolvency resolution, and its provisions should prevail over earlier legislation like the PMLA.

2. Nature of Proceedings Before the Adjudicating Authority Under PMLA:
The Tribunal determined that proceedings before the Adjudicating Authority under PMLA are quasi-judicial and civil in nature, not criminal. This conclusion was supported by the Gujarat High Court in "Foziya Samir Godil vs. UOI & Ors." and the Kerala High Court in "Kavitha G. Pillai vs. Joint Director, Directorate of Enforcement." The Tribunal noted that the Adjudicating Authority under PMLA does not levy penalties or impose punishments; instead, it deals with the attachment and confiscation of properties, which are civil matters.

3. Applicability of Moratorium Under IBC to Proceedings Under PMLA:
The Tribunal found that the moratorium declared under Section 14 of the IBC applies to proceedings under PMLA. The moratorium prohibits the institution or continuation of suits or proceedings against the corporate debtor, including those under PMLA. The Tribunal referred to the NCLT order, which declared a moratorium on proceedings against the corporate debtor but allowed criminal proceedings under PMLA and CBI to continue. However, the Tribunal clarified that proceedings before the Adjudicating Authority under PMLA are civil and should be stayed during the moratorium.

4. Validity of Attachment of Properties Under PMLA:
The Tribunal concluded that the attachment of properties under PMLA is invalid if it conflicts with the moratorium declared by NCLT under IBC. The properties in question were mortgaged to banks before the alleged commission of the crime, and the banks had a legitimate claim over them. The Tribunal emphasized that the rights of secured creditors under IBC take precedence over the attachment orders under PMLA. The Tribunal cited the amendment to SARFAESI Act and RDDB Act, which provided priority to secured creditors over government dues, including those under PMLA.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order of the Adjudicating Authority under PMLA and the provisional attachment orders. The Tribunal directed that the properties be released from attachment and emphasized the overriding effect of IBC over PMLA, the civil nature of proceedings before the Adjudicating Authority under PMLA, and the applicability of the IBC moratorium to such proceedings.

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