Insolvency resolution plan and attachment disputes: parties must pursue statutory remedies, not seek property release in limited proceedings.
Once a resolution plan is approved, or liquidation has intervened, rights in mortgaged property and disputes over repayment or entitlement are governed by the insolvency framework and cannot be conclusively determined in attachment proceedings of limited jurisdiction. Financial institutions that had settled dues through the resolution process were not entitled to seek release of the attached property in these appeals, and resolution professionals, liquidators, and companies under CIRP or liquidation could not maintain an independent challenge to the attachment. The parties were left to pursue remedies available under the applicable insolvency and money-laundering statutes, including recourse under Section 8(7) of the PMLA where appropriate.
Issues: (i) whether financial institutions could seek release of mortgaged properties from attachment after approval of a resolution plan and in the changed insolvency scenario; (ii) whether resolution professionals, liquidators and companies under liquidation or corporate insolvency resolution process could maintain a challenge to the attachment.
Issue (i): whether financial institutions could seek release of mortgaged properties from attachment after approval of a resolution plan and in the changed insolvency scenario.
Analysis: The Tribunal noted that a resolution plan had been approved and that the insolvency regime under Section 32A of the Insolvency and Bankruptcy Code, 2016 had operative consequences. It held that the financial institutions had already settled their dues at a lower amount under the resolution process and could not insist upon release of the attached property on that basis. The Tribunal also observed that any inter se dispute between the financial institutions and the borrower regarding repayment, settlement or entitlement to the mortgaged property could not be determined in these appeals and that the appropriate statutory remedies remained available, including recourse under Section 8(7) of the Prevention of Money-Laundering Act, 2002 where a case is made out.
Conclusion: The financial institutions were not entitled to obtain release of the attached property in these appeals and were relegated to pursue such remedies as may now be available under law.
Issue (ii): whether resolution professionals, liquidators and companies under liquidation or corporate insolvency resolution process could maintain a challenge to the attachment.
Analysis: The Tribunal recorded that, once the resolution plan had been approved or liquidation had intervened, the rights of the resolution professionals, liquidators and companies would be governed by the consequences of the insolvency order. It found that they could not assert an independent right to question the attachment in the present proceedings and that any relief would have to be pursued through the remedies permissible under the governing statutes.
Conclusion: The challenge to the attachment by the resolution professionals, liquidators and companies was not maintainable in these appeals.
Final Conclusion: The batch of appeals was disposed of by leaving the appellants to work out their remedies under the applicable statutory framework, and the order was kept open to be sought to be recalled if the insolvency order is later set aside with direct effect on the appeals.
Ratio Decidendi: Once a resolution plan is approved or liquidation has taken effect, a tribunal of limited jurisdiction will not decide inter se claims to mortgaged property in attachment proceedings, and the affected parties must pursue the specific remedies provided by the insolvency and money-laundering statutes.
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