Depositor-protection attachment prevails over insolvency moratorium where corporate debtor assets are linked to alleged fraud and no resolution plan exists

Attachment of a corporate debtor's property was upheld where the assets were treated as linked to alleged fraudulent deposit transactions and not immune merely because the debtor was not a financial establishment in the narrow sense. The Calcutta High Court's order was read as requiring disclosure of attached assets, not as directing that the debtor's assets be excluded from sale. Sections 14 and 33(5) of the Insolvency and Bankruptcy Code did not override Section 3 of the West Bengal Protection of Interest of Depositors in Financial Establishments Act on these facts, because the moratorium under the Code does not displace depositor-protection attachment and no approved resolution plan had triggered the protective bar.

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Issues: (i) Whether the property of a corporate debtor who is not a financial establishment within the meaning of Section 2(e) of the West Bengal Protection of Interest of Depositors in Financial Establishments Act, 2013 can be attached; (ii) Whether the High Court of Calcutta, by order dated 23.04.2019, directed that the assets of the corporate debtor should be kept outside the purview of sale; (iii) Whether Section 3 of the West Bengal Protection of Interest of Depositors in Financial Establishments Act, 2013 is inconsistent with Sections 14 and 33(5) of the Insolvency and Bankruptcy Code, 2016 and therefore yields to those provisions.

Issue (i): Whether the property of a corporate debtor who is not a financial establishment within the meaning of Section 2(e) of the West Bengal Protection of Interest of Depositors in Financial Establishments Act, 2013 can be attached.

Analysis: The attachment under the West Bengal Act was examined in the context of the statutory scheme permitting attachment not only of property standing in the name of a financial establishment, but also of property held on its behalf or acquired from depositors' money. The materials considered showed that the corporate debtor's properties were treated as connected with the alleged fraudulent deposit transactions of the Pincon group, and the Designated Court's findings were relied upon to establish that the property had nexus with the alleged offences. The Tribunal rejected the contention that the corporate debtor could claim immunity merely because it was not itself a financial establishment in the narrow sense urged by the respondents.

Conclusion: The property of the corporate debtor could be attached.

Issue (ii): Whether the High Court of Calcutta, by order dated 23.04.2019, directed that the assets of the corporate debtor should be kept outside the purview of sale.

Analysis: The order of the High Court was read as requiring disclosure of attached assets other than those of the named companies; it was not construed as a direction to de-attach the corporate debtor's assets or to place them outside the sale process. The Tribunal also noted that earlier High Court directions could not be expanded into an exclusion of the corporate debtor's assets from lawful proceedings, particularly when no objection had been shown to have been raised under the special statute.

Conclusion: The High Court had not directed that the corporate debtor's assets be kept outside the purview of sale.

Issue (iii): Whether Section 3 of the West Bengal Protection of Interest of Depositors in Financial Establishments Act, 2013 is inconsistent with Sections 14 and 33(5) of the Insolvency and Bankruptcy Code, 2016 and therefore yields to those provisions.

Analysis: Section 14 of the Insolvency and Bankruptcy Code was held to operate in the field of civil moratorium and not to displace criminal or penal proceedings or statutory attachment meant to protect depositors. The Tribunal further applied the principle laid down in the decision on Section 32-A of the Insolvency and Bankruptcy Code, noting that immunity against action on the property of the corporate debtor depends on an approved resolution plan and change in control. Since no resolution plan had been approved and the properties had been attached before the insolvency process was effectively advanced, the protective bar was unavailable. The West Bengal Act and the Insolvency and Bankruptcy Code were treated as operating in distinct fields, and no overriding effect in favour of the Code was found on the facts.

Conclusion: Section 3 of the West Bengal Protection of Interest of Depositors in Financial Establishments Act, 2013 was not overridden by Sections 14 and 33(5) of the Insolvency and Bankruptcy Code, 2016 on these facts.

Final Conclusion: The impugned direction for de-attachment was unsustainable, and the attachment and confiscatory process under the special deposit-protection statute was permitted to stand.

Ratio Decidendi: Statutory protection under the Insolvency and Bankruptcy Code against action on a corporate debtor's property is unavailable in the absence of an approved resolution plan and does not displace a special penal statute operating in a distinct field to protect depositors.

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