2026 (3) TMI 1590 - AT - Money Laundering

Section 32A of the Insolvency Code does not retrospectively void a pre-approval provisional attachment order.

Section 32A of the Insolvency and Bankruptcy Code was interpreted as creating a distinction between immunity from prosecution and protection of the ... Provisional attachment - seeking for release of the property in light of the Section 32A - liability of the Corporate Debtor for an offence committed prior to commencement of CIRP - distinction between immunity from prosecution under sub-section (1) and the bar against action against the property of the corporate debtor under sub-section (2) - Change in management or control - Statutory bar on action against corporate debtor property. Prior attachment and approved resolution plan - Section 32A(2) of the IBC - Continuation of provisional attachment - HELD THAT: - The Tribunal held that the appellant's reliance on Section 32A(1) was misplaced because the appeal did not concern prosecution of the corporate debtor, but attachment of its property. On Section 32A(2), the Tribunal read the provision, in the light of the law declared in Manish Kumar [2021 (1) TMI 802 - SUPREME COURT], as creating a bar against taking action against the property of the corporate debtor once the resolution plan approved under Section 31 results in a qualifying change of control. That bar, however, was held not to operate retrospectively so as to wipe out a provisional attachment already made before approval of the resolution plan. The Tribunal further held that the immunity under Section 32A(1) is not automatic on approval of the resolution plan, but depends on fulfilment of the statutory conditions, including that the incoming person is not one who had abetted or conspired in the offence; hence continuance of the prior attachment could not be rejected on the assumption that prosecution had necessarily come to an end. The conflict between the IBC protection and the power of attachment under the PMLA was thus resolved by holding that the PMLA power must yield only from the stage specified in Section 32A, and not so as to invalidate action validly taken earlier. Any contrary interpretation would amount to rewriting the statute. [Paras 13, 14, 15, 16, 18] The challenge to the provisional attachment order and its confirmation was rejected, with liberty to the appellant to pursue any other remedy available in law, including in relation to prosecution if pending. Final Conclusion: The Tribunal dismissed the appeal and held that approval of the resolution plan did not erase the provisional attachment made prior to such approval. It clarified that Section 32A of the IBC bars further action only from the statutory trigger point and does not automatically extinguish earlier attachment or prosecution without fulfilment of the prescribed conditions. Issues: Whether, after approval of a resolution plan and change in control of the corporate debtor, a provisional attachment order passed under the money laundering law prior to such approval ceases to operate by virtue of Section 32A of the Insolvency and Bankruptcy Code, 2016.Analysis: Section 32A was read as drawing a distinction between immunity from prosecution under sub-section (1) and the bar against action against the property of the corporate debtor under sub-section (2). The protection in sub-section (1) was held to operate only subject to the statutory conditions, including approval of the resolution plan and the absence of abetment or conspiracy by the incoming management. Sub-section (2) was understood to bar fresh action against the corporate debtor's property after approval of the resolution plan, but not to nullify a provisional attachment already passed before such approval. The statutory language was treated as clear, and it was held impermissible to rewrite the provision to retrospectively erase a valid pre-approval attachment order.Conclusion: The challenge to the provisional attachment order and its confirmation was rejected. The prior attachment was held to remain unaffected, and Section 32A(2) was held not to invalidate it merely because the resolution plan was approved later.