2020 (6) TMI 283 - HC - Money Laundering

NCLT lacks jurisdiction over PMLA matters

Deputy Director, Office of the Joint Director Versus Asset Reconstruction Company (India) Ltd.

The court held that the National Company Law Tribunal (NCLT) lacked jurisdiction to adjudicate matters falling under the Prevention of Money-Laundering ... Jurisdiction of the National Company Law Tribunal, Hyderabad Bench-I, Hyderabad, to entertain the appeal - Money Laundering - diversion of money - Section 60(5) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The issue sought to be raised including the power under Article 226 of the Constitution of India is no longer res integra. In a recent pronouncement, the Apex Court in M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. VERSUS STATE OF KARNATAKA & OTHERS [2019 (12) TMI 188 - SUPREME COURT] has dealt with the same, which states that the jurisdiction of the NCLT delineated in Section 60(5) cannot be stretched so far as to bring absurd results. Thus, the NCLT has got no jurisdiction to go into the matters governed under the PMLA - the proceedings have been initiated before the jurisdictional Court by the petitioner pursuant to the Final Report filed by the Central Bureau of Investigation within the territorial jurisdiction of this Court. A mere fact that NCLT has been established now at Chennai would not be a ground to drive the petitioner to go on an appeal before it especially when arguments have been heard at length. Considering the facts of the case and invoking Section 14 of the Limitation Act, 1963, we grant a further period of six weeks to respondents 1 and 3 to take appropriate action in accordance with law under the PMLA by exhausting the remedy provided therein - Petition allowed. Issues Involved:1. Jurisdiction of the National Company Law Tribunal (NCLT) to adjudicate matters under the Insolvency and Bankruptcy Code (IBC) versus the Prevention of Money-Laundering Act (PMLA).2. Applicability of moratorium under Section 14 of the IBC to proceedings under the PMLA.3. Interpretation of Section 32-A of the IBC concerning liability for prior offences.4. Scope and jurisdiction of NCLT under Section 60 of the IBC.5. Exercise of power under Article 226 of the Constitution of India.Issue-wise Detailed Analysis:1. Jurisdiction of NCLT under IBC vs. PMLA:The central issue was whether the NCLT had the jurisdiction to adjudicate matters that fall under the purview of the PMLA. The court concluded that the NCLT did not have jurisdiction over matters governed by the PMLA. The PMLA is a special enactment with its own objectives, including preventing money laundering and recovering proceeds of crime. The court emphasized that the PMLA and IBC are distinct enactments with different scopes and objectives, and thus, the NCLT cannot usurp powers not available to it under the PMLA.2. Applicability of Moratorium under Section 14 of the IBC:The court examined whether the moratorium declared under Section 14 of the IBC would apply to proceedings under the PMLA. It concluded that Section 14 of the IBC, which provides for a moratorium on certain proceedings against the corporate debtor, does not automatically extend to attachment proceedings under the PMLA. The court noted that Section 14 is specific to the IBC and does not bar proceedings under a special enactment like the PMLA.3. Interpretation of Section 32-A of the IBC:Section 32-A of the IBC, which deals with the liability for prior offences, was interpreted to apply only after the resolution plan has been approved by the Adjudicating Authority under Section 31 of the IBC. Since no such approval had taken place in the present case, the court held that Section 32-A did not apply. The court also noted that this provision was inserted with effect from 28.12.2019 and is prospective in nature.4. Scope and Jurisdiction of NCLT under Section 60 of the IBC:The court analyzed Section 60 of the IBC, which deals with the adjudicating authority for corporate persons. It concluded that the NCLT's jurisdiction under Section 60(5)(c) of the IBC does not extend to decisions taken by the government or statutory authorities under other enactments like the PMLA. The court emphasized that the NCLT can only exercise powers within the contours of the jurisdiction prescribed by the IBC.5. Exercise of Power under Article 226 of the Constitution of India:The court discussed the scope of its power under Article 226, highlighting that it can issue directions, orders, or writs to any person or authority, including the government, for the enforcement of rights or for any other purpose. The court reiterated that the exercise of power under Article 226 is restricted by territorial jurisdiction and the nature of the power exercised. It emphasized that the NCLT, being a creature of a special statute, cannot be elevated to the status of a superior court with the power of judicial review over administrative actions.Conclusion:The court set aside the order of the NCLT, holding that it lacked jurisdiction to adjudicate matters governed by the PMLA. It granted respondents a further period of six weeks to take appropriate action under the PMLA, considering the facts of the case and invoking Section 14 of the Limitation Act, 1963. The court allowed the writ petition, leaving all factual issues except the question of law decided open, and closed the connected writ miscellaneous petitions.