Provisional attachment of insolvency debtor's assets post-resolution plan u/s32A IBC; protection limited, challenge closed
SC determined the extent to which provisional attachment under the PMLA could survive approval of a corporate insolvency resolution plan. Applying s.32A IBC, it held that the resolution applicant obtains protection from enforcement actions against the corporate debtor's property only if the applicant is unconnected with the former management and is not a beneficiary of proceeds of crime; if ongoing investigation later undermines this foundation, the enforcement agency may proceed in accordance with law, including questioning the plan. SC further held that amounts paid by remaining homebuyers, if traced to proceeds of crime, may be proceeded against individually under the PMLA. Consequently, the enforcement agency's challenge to NCLT approval stood closed and it had no right or lien over attached properties/units, save specified flats.
1. ISSUES PRESENTED AND CONSIDERED
(i) Whether, based on the parties' settlement and the Directorate of Enforcement's affidavit, the Court should grant restitution by partially setting aside the existing provisional attachment and directing restoration of attached properties to the successful resolution applicant for the benefit of genuine and innocent home-buyers.
(ii) Whether the Court should preserve attachment and related entitlements in respect of 11 identified units alleged to be connected with proceeds of crime, and limit any proposed confiscation to those units while permitting prosecution to continue against persons other than the corporate debtor.
(iii) Whether, in view of Section 32A of the Insolvency and Bankruptcy Code, 2016, the corporate debtor should be deleted from the array of accused and the enforcement challenge to the approved resolution plan should be treated as closed, subject to safeguards regarding the successful resolution applicant's independence and non-involvement with proceeds of crime.
2. ISSUE-WISE DETAILED ANALYSIS
Issue (i): Partial setting aside of provisional attachment and restoration (restitution) to enable implementation of the resolution plan for genuine home-buyers
Legal framework: The Court treated the restitution direction as having been made under the second proviso to Section 8(8) of the Prevention of Money Laundering Act, 2002.
Interpretation and reasoning: The Court recorded that, pursuant to earlier directions, the parties reached an amicable settlement in the interest of genuine and innocent home-buyers. Acting on the enforcement agency's affidavit, the Court ordered that the provisional attachment be partially set aside and the attached properties be restored to the successful resolution applicant, who had stepped into the shoes of the corporate debtor solely for the benefit of such home-buyers who subsequently acquired the attached units. The Court expressly clarified that it was not entering into the merits or rival contentions.
Conclusion: The provisional attachment order was partially set aside and restoration of the attached properties to the successful resolution applicant was directed as restitution deemed to be under the second proviso to Section 8(8) PMLA, to facilitate implementation of the resolution plan for the benefit of genuine and innocent home-buyers.
Issue (ii): Continuation of attachment and limiting confiscation/proceedings to 11 identified units while allowing prosecution against other persons to continue
Legal framework: The Court directed continuation of attachment and future steps subject to the provisions of the PMLA.
Interpretation and reasoning: While granting restitution for the remaining attached properties, the Court ordered that the provisional attachment would continue in respect of 11 units specifically identified by the enforcement agency. The Court further directed that the rights of concerned home-buyers under their "Agreements to Sell" (to the extent linked to amounts alleged to be connected with proceeds of crime) would also remain attached, subject to PMLA. Correspondingly, the proposed confiscation of attached properties was to be substituted with a prayer for confiscation limited to those 11 units, while continuing prosecution of erstwhile directors/persons in control/conspirators/abettors and confiscation of their attached properties/entitlements, if any. The Court also provided that, if ongoing investigation finds amounts paid by other home-buyers to be connected with proceeds of crime, the enforcement agency may take appropriate steps against such home-buyers and their property/entitlements according to law.
Conclusion: Attachment and potential confiscation were preserved only for the 11 identified units (and related entitlements), with liberty to proceed under PMLA against other home-buyers if subsequent investigation reveals proceeds-of-crime linkage; prosecution and confiscation actions were expressly allowed to continue against individuals other than the corporate debtor.
Issue (iii): Effect of Section 32A IBC-deletion of the corporate debtor from accused array and closure of enforcement challenge to the approved resolution plan, subject to safeguards
Legal framework: The Court acted "in view of Section 32A of the IBC" and imposed conditions tied to its benefit.
Interpretation and reasoning: The Court directed deletion of the corporate debtor's name from the array of accused in the relevant prosecution complaint. It further ordered that the enforcement agency's challenge to the approval of the resolution plan would stand closed, and that the enforcement agency would have no right or lien on the corporate debtor's properties attached under the provisional attachment order (except the 11 units), or on further units to be constructed under the approved resolution plan, subject to the contingencies stated regarding ongoing investigation and the successful resolution applicant's status. The Court emphasized that the benefit of Section 32A is conditional: the successful resolution applicant must not be connected with erstwhile directors and must not be a beneficiary of proceeds of crime; if this foundation is eroded during investigation, the enforcement agency may take steps in accordance with law, including questioning the resolution plan. The Court also directed prompt intimation by the enforcement agency to facilitate registration of sale deeds and permitted implementation of the resolution plan in accordance with law.
Conclusion: Applying Section 32A IBC, the corporate debtor was directed to be removed from the accused array; the enforcement agency's challenge to the approved resolution plan was closed; enforcement liens/claims over attached and future project units were negated except for the 11 units, with safeguards allowing lawful action if later investigation undermines the conditions underpinning Section 32A protection.
Note on decisional limits: The Court expressly stated that the order was passed on peculiar facts, with parties' consent under the second proviso to Section 8(8) PMLA, without precedent value, and leaving questions of law open for an appropriate case.
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