IBC overriding State attachment law: Tribunal ordered release of corporate debtor assets and permitted claims through insolvency process.

The Tribunal held that it could entertain an application challenging attachment action under the MPID Act because the real controversy concerned the Insolvency and Bankruptcy Code's overriding effect during CIRP. Applying Section 238 and the moratorium scheme, it found that a prior State-law attachment could not prevail where it conflicted with the insolvency framework and impeded resolution of the corporate debtor. The attached properties were therefore liable to be released and de-attached, and the respondents were directed to cooperate with the resolution professional while pursuing their claims in the insolvency process.

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Issues: (i) Whether the Tribunal had jurisdiction to entertain the application challenging action taken under the MPID Act; (ii) Whether properties attached under the MPID Act prior to commencement of CIRP were liable to be de-attached in view of the overriding effect of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the Tribunal had jurisdiction to entertain the application challenging action taken under the MPID Act

Analysis: The dispute concerned the legality of attachment made under a State enactment and the proper forum for relief. The reasoning distinguished between the Tribunal's insolvency powers and the designated court mechanism under the MPID Act, but concluded that where the real question was repugnancy and overriding effect of the insolvency against a State attachment, the Tribunal could examine the matter in the context of CIRP and the moratorium regime under the Code.

Conclusion: The Tribunal held that it had jurisdiction to entertain the application.

Issue (ii): Whether properties attached under the MPID Act prior to commencement of CIRP were liable to be de-attached in view of the overriding effect of the Insolvency and Bankruptcy Code, 2016

Analysis: The Tribunal applied Section 238 of the Code and relied on the principle that a later Parliamentary enactment with a non obstante clause prevails over an inconsistent State law to the extent of conflict. It treated the MPID attachment as an action that could not defeat the corporate insolvency resolution process, and followed the line of authority recognising the primacy of the Code over inconsistent State measures affecting corporate assets during insolvency. The moratorium and insolvency scheme were held to override the prior attachment.

Conclusion: The Tribunal held that the attached properties were liable to be released and de-attached.

Final Conclusion: The application succeeded and the corporate debtor's attached assets were ordered to be released, while the respondents were required to cooperate with the resolution professional and could lodge their claims in the insolvency process.

Ratio Decidendi: Where a State attachment law conflicts with the insolvency framework governing corporate insolvency resolution, the provisions of the Insolvency and Bankruptcy Code prevail to the extent of inconsistency and the corporate debtor's assets cannot be kept under attachment so as to frustrate the CIRP.

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