Section 32A IBC activates on approved resolution plan; provisional ED attachment before CIRP ceases, no separate PMLA release needed

NCLAT (PB) held that assets provisionally attached by ED before CIRP could be included in the information memorandum and resolution plan despite a prior HC interim restraint, and that approval of the resolution plan activates Section 32A IBC. Consequently, the provisional attachment ceased by operation of Section 32A once the plan was approved; the successful resolution applicant satisfies statutory conditions and need not seek separate release of attachment under PMLA. The appeal was allowed and the adjudicating authority's direction to pursue separate proceedings for release was set aside.

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ISSUES PRESENTED AND CONSIDERED

1. Whether assets provisionally attached by an investigating agency under the Prevention of Money Laundering framework prior to commencement of CIRP could be included in the Information Memorandum and form part of a resolution plan.

2. Whether an interim restraint/status-quo order of a High Court passed prior to commencement of CIRP precluded inclusion of provisionally attached assets in the Information Memorandum or their treatment in the resolution process.

3. Whether a successful resolution applicant (SRA) whose plan is approved is entitled to the benefit of Section 32A of the Insolvency and Bankruptcy Code (IBC) when provisional attachment under PMLA was made before commencement of CIRP, and if so, the effect of Section 32A on such prior provisional attachment.

4. Whether directions of the Adjudicating Authority requiring the SRA to seek release of prior provisional attachment from the PMLA adjudicating authority are consistent with the statutory scheme of Section 32A.

5. The relief, if any, available to the SRA in light of the above questions.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Inclusion of provisionally attached assets in Information Memorandum and Resolution Plan

Legal framework: PMLA provisions governing provisional attachment (Section 5) and definition of attachment; IBC provisions requiring preparation of Information Memorandum (Section 29) and CIRP Regulations / Regulation 36(2)(a) (assets and liabilities as on insolvency commencement date); duties of IRP/RP under Section 18(1)(f) (take control/custody of assets over which CD has ownership rights).

Precedent treatment: Tribunal and judicial authorities have held that provisional attachment under the PMLA does not, by itself, divest ownership or enjoyment of immovable property (PMLA s.5(4) and case-law noted by parties). Relevant administrative and appellate decisions confirm that mere attachment is a protective/investigative measure and does not necessarily alter title.

Interpretation and reasoning: Section 5(4) of PMLA explicitly preserves the right of the person interested in enjoyment of immovable property despite provisional attachment. The Information Memorandum must contain assets belonging to the corporate debtor as on the insolvency commencement date; neither the PMLA attachment nor the High Court interim order had, on the record, divested ownership or established that the assets did not belong to the corporate debtor. Thus the RP was entitled to disclose and include such assets in the Information Memorandum.

Ratio vs. Obiter: Ratio - provisional attachment under PMLA does not automatically prevent inclusion of the attached assets in the Information Memorandum or their consideration in the resolution plan when ownership is not shown to have been divested. Obiter - discussion of comparative policy considerations between insolvency value maximization and criminal enforcement schemes.

Conclusion: Assets provisionally attached on 24.01.2019 could lawfully be included in the Information Memorandum and form part of the resolution plan.

Issue 2 - Effect of High Court's interim restraint/status-quo order on resolution treatment of attached assets

Legal framework: The interim order of the High Court stayed certain PMLA proceedings and directed the corporate debtor not to alienate property and to maintain status quo vis-à-vis those properties.

Precedent treatment: Interim restraint orders are binding between the parties and may operate to preserve status quo; but absence of subsequent, specific directions obtained after commencement of CIRP limits their continuing operability vis-à-vis the CIRP participants.

Interpretation and reasoning: The Division Bench order dated 13.02.2019 maintained status quo but was directed at the parties to that writ/appeal. CIRP in this matter began years later; no further or clarificatory orders were obtained from the High Court post-commencement of CIRP. The interim direction therefore did not, on the record, operate as an enduring bar preventing the IRP/RP from recording the asset in the Information Memorandum or dealing with it in the approved resolution plan.

Ratio vs. Obiter: Ratio - an interim High Court restraint, absent further or continuing directions obtained during CIRP, does not ipso facto preclude inclusion of assets in the Information Memorandum or their being part of an approved resolution plan. Obiter - general observations on interplay between interim orders and subsequent insolvency proceedings.

Conclusion: The restraint/status-quo order did not prevent inclusion of the attached assets in the Information Memorandum or their treatment in the resolution process on the facts before the Tribunal.

Issue 3 - Applicability and effect of Section 32A on pre-CIRP provisional attachment

Legal framework: Section 32A IBC (inserted by amendment effective 28.12.2019) - (1) cessation of corporate debtor's liability for pre-CIRP offences upon approval of a qualifying resolution plan effecting a change in management/control to an unrelated person and (2) bar on action against property of the corporate debtor in relation to such offences where property is covered under an approved plan, with an Explanation clarifying that "action" includes attachment, seizure, retention or confiscation under any applicable law; Section 5 & Section 8 PMLA (provisional attachment, adjudication and confiscation mechanism).

Precedent treatment: The Supreme Court in Manish Kumar has authoritatively construed Section 32A's object, scope and conditions; other tribunals and High Courts have reached differing conclusions on interplay between IBC and PMLA (some holding Section 32A protective once plan is approved; other precedents said NCLT/NCLAT cannot adjudicate PMLA attachment validity). Recent decisions (including those of this Tribunal and certain High Courts) differ on whether Section 32A operates to vacate pre-existing attachments upon plan approval; some three-member Bench decisions addressed related but distinct questions (jurisdiction under Section 60(5)).

Interpretation and reasoning: Section 32A's trigger is the approval of a qualifying resolution plan; its language is non-obstante and expressly contemplates cessation of liability and a bar on action against property (including attachment) where the property is covered by the approved plan and the plan effects the requisite change in control to a qualifying person. The legislative history and committee reports show object of providing a "clean slate" to bona fide SRAs to enable revival and value maximization, and to protect assets acquired under resolution from subsequent enforcement action that would nullify the plan. The provision contains no carve-out excluding attachments made prior to CIRP; rather the immunity is expressly structured to operate from the approval of plan. Where conditions of Section 32A are satisfied, continuation of provisional attachment that would frustrate the efficacy of the approved plan is inconsistent with the statutory scheme. The PMLA attachment regime remains competent prior to these trigger events, but cannot be used to defeat the protective wall erected by Section 32A once its conditions are met. The Tribunal therefore read Section 32A and PMLA together: pre-CIRP provisional attachment was valid when made but ceases to have effect in relation to the corporate debtor's property once Section 32A protection is engaged by an approved qualifying plan.

Ratio vs. Obiter: Ratio - upon approval of a qualifying resolution plan satisfying Section 32A(1)/(2) conditions, the corporate debtor (and persons acquiring its property under the plan) are entitled to statutory immunity such that prior provisional attachment of those properties (if covered by the plan) shall cease and no further action (attachment/seizure/retention/confiscation) may be taken in relation to those properties under PMLA; hence there is no requirement for the SRA to separately seek release from the PMLA adjudicating authority. Obiter - commentary on competing precedents and on policy balance between criminal enforcement and insolvency value maximization.

Conclusion: The SRA is entitled to benefit of Section 32A upon approval of a qualifying resolution plan; the provisional attachment dated 24.01.2019 ceased to have effect insofar as it affected the assets covered by the approved plan and the SRA need not resort to separate PMLA proceedings for release.

Issue 4 - Validity of Adjudicating Authority's directions requiring SRA to seek PMLA release

Legal framework: Section 32A IBC and the explanation thereto which expressly includes attachment as an action against property; PMLA adjudicatory process (Section 8) and remedies.

Precedent treatment: Adjudicating Authority had directed SRA to resort to PMLA remedies; some tribunals/High Courts have accepted NCLT/NCLAT jurisdiction to apply Section 32A and direct release; other authorities have held NCLT cannot adjudicate PMLA attachment validity. Manish Kumar and committee reports support statutory operation of Section 32A.

Interpretation and reasoning: Given Section 32A's statutory bar on action against property where the plan qualifies, directing the SRA to initiate separate PMLA proceedings to obtain release is inconsistent with the protective operation of Section 32A and is unnecessary where conditions for immunity are satisfied and plan has been approved. That direction imposed an avoidable procedural burden and failed to give effect to the legislative scheme which makes the bar operate upon plan approval.

Ratio vs. Obiter: Ratio - requiring an SRA to pursue PMLA adjudicatory remedies post-approval where statutory immunity under Section 32A applies is unnecessary and inconsistent with Section 32A's operation. Obiter - analysis of limits of NCLT/NCLAT jurisdiction vis-à-vis PMLA authorities in other factual matrices.

Conclusion: The Adjudicating Authority's directions that the SRA must seek release of attachment from PMLA authorities were unnecessary and not in accordance with Section 32A.

Issue 5 - Reliefs available

Legal framework & reasoning: Where an approved qualifying resolution plan effects change in management/control to an unrelated person and satisfies Section 32A conditions, statutory immunity and protection for property arise automatically upon approval; attached properties covered by the plan cease to be subject to PMLA attachment insofar as they relate to the corporate debtor's liability for pre-CIRP offences.

Conclusion: The SRA is entitled to Section 32A relief on approval of the resolution plan; the provisional attachment dated 24.01.2019 must be treated as having ceased in relation to the covered properties and the SRA need not file a separate application before the PMLA adjudicating authority for release.

OVERALL CONCLUSION

The Tribunal holds that (i) provisional attachment under PMLA does not ipso facto prevent inclusion of the attached assets in the Information Memorandum or their being part of a resolution plan; (ii) the interim High Court restraint did not, on the facts before the Tribunal, preclude inclusion of the assets in the resolution process; (iii) upon approval of a qualifying resolution plan meeting Section 32A conditions, the corporate debtor and property covered by the plan obtain statutory immunity and prior provisional attachment ceases to have effect in relation to those assets; and (iv) the Adjudicating Authority's directions requiring the SRA to pursue PMLA remedies for release were unnecessary and inconsistent with Section 32A, entitling the SRA to relief without further PMLA proceedings.

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