TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1710
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....sary in the interest of justice. 2. FACTS OF THE CASE: a. This Tribunal admitted a Section 7 petition against the Corporate Debtor on 16.07.2018 and appointed the Applicant herein as the Interim Resolution Professional who was subsequently confirmed as Resolution Professional. b. The office of the Enforcement Directorate has provisionally attached the assets belonging to the Corporate Debtor vide order/notice dated 29.05.2018 and corrigendum dated 14.06.2018 as part of certain proceedings initiated by the office of the Enforcement Directorate against the Corporate Debtor. c. On 05.09.2018, the Applicant intimated the Directorate of Enforcement about the initiation of CIRP and imposition of moratorium as mentioned in this Tribunal's order. The Applicant also requested the Directorate of Enforcement to withdraw the attachment, if any, on the properties and assets of the company as the IRP is required to take charge and custody of the same under the provisions of the Code. Now the applicant came before this Tribunal for the above said reliefs. 3. THE APPLICANT RAISED THE FOLLOWING ARGUMENTS: a. As per the provisions of the Code, the ....
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....ended that the Tribunal established under the Prevention of Money Laundering Act, 2002 (PMLA) being a criminal court can only decide whether the properties attached during investigation from the possession of the Corporate Debtor could be said to be the properties acquired by them by using the proceeds of crime. It is for the NCLT to decide how the properties and assets of the Corporate Debtor under liquidation can be appropriated and held that the liquidator must get possession of the properties attached by the Enforcement Directorate. f. The Applicant further contended that the properties attached cannot be said to be acquired by using proceeds of crime or by diversion of funds. All the properties which were attached were in the name of the company and they should be available for legitimate distribution to the various creditors for settlement, resolution or recovery of their claims. g. The Applicant submits that unless the attachment is withdrawn and properties are set free, he cannot proceed with the CIRP process. 4. THE ENFORCEMENT DIRECTORATE IN ITS DEFENSE RAISED THE FOLLOWING ARGUMENTS: a. That Sterling Biotech Limited (SBL) is a Baroda based public l....
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....of such proceeds of crimes) can be attached. i. The properties provisionally attached constitute the value of such proceeds of crime. The PMLA is a special act and have overriding effects in terms of section 71 of the PMLA. The main object of Insolvency and Bankruptcy Code, 2016 (Code) and PMLA are different from each other. The Code being a civil law cannot be given precedence over PMLA, 2002 and hence NCLT lacks jurisdiction in the matter. j. The moratorium declared by this adjudicating authority is not applicable to the criminal case initiated under the PMLA by the enforcement directorate and to the criminal case initiated by the CBI. 5. SUBMISSIONS OF AMICUS-CURIAE: The learned amicus-curiae filed his written submissions highlighting the following:- a. Writ Petition no. 1238/2018 was filed on behalf of the Corporate Debtor challenging the virus of the PMLA as well as provisional attachment and the corrigendum dated 29th and 14th June, 2018. The Writ Petition appears to have been filed and affirmed by the erstwhile directors and does not indicate any authority, either of the RP or the CoC, to institute any such Petition for and on behalf of the Co....
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..... It is pertinent to note that the order dated 20.11.2018 passed by the Adjudicating Authority (under PMLA) has been passed after the order of admission of the Petition against the Corporate Debtor and during CIRP as well as moratorium. The issue as to whether the proceedings before the Adjudicating Authority under the PMLA would be stayed by virtue of Section 14 of the IBC has already been considered by the Appellate Tribunal under the PMLA Act in two recent judgments, one in the case of "Bank of India Vs Deputy Director, Enforcement Directorate" and another in the case of "Punjab National Bank Vs Deputy Director, Directorate of Enforcement, Raipur". Hon'ble Justice Manmohan Singh speaking for the Appellate Tribunal in both the above cases has held as below: i. In view of the non-obstante clause contained in Section 238 of IBC, the Adjudicating Authority under the PMLA could not have continued with the attachment after declaration of moratorium. ii. The non-obstante clause contained in IBC, which is a later statute shall prevail over the non-obstante clause contained in Section 71 of PMLA. iii. The proceedings before the Adjudi....
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.... appearance of the Defendant and (2) to cease and hold his property for the payment of debt. The Hon'ble High Court of Andhra Pradesh in W.P. No. 8560 of 2018 by an order dated 26.07.2018 held that a prior attachment under the Income tax Act long before the commencement of proceedings under IBC before NCLT would yield to the provisions of IBC. Under the provisions of PMLA, there are three stages of attachment. Initially a provisional attachment is levied under Section 5(1), which is then confirmed after enquiry under Section 8(3). However, this attachment attains finality only after proceedings before Special Court are proved as per Section 8(5) thereof. Furthermore, Section 4 of PMLA provides for punishment of imprisonment and fine for money laundering. If charges of ED are proved, then, the Corporate Debtor being an artificial person would be awarded an appropriate fine, whereas Directors of the Corporate Debtor would be liable for imprisonment as well as fine. Assuming any such fine is imposed on the Corporate Debtor, the same can be recovered in accordance with Section 69 of PMLA which contemplates recovery in the manner as prescribed under Schedule 2 of the Income Tax....
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....f decisions of the Hon'ble Supreme Court and various High Courts has delivered orders. Unless each and every judgment is distinguished or are on different facts and legal issues are almost same and the Adjudicating Authority has incorrectly passed by impugned order by saying that "it cannot "Concur" with the law laid down by this Tribunal. The appellate is a public Sector Bank. The money must come to the public forthwith not after the trial of criminal case against the borrowers which may take may years. The banks are in crisis, no attempt should be made to block the loan amount in order to avoid worsen positions in the commercial market. The trial may continue against the borrowers. One is failed to understand why the Bank loan amount be blocked in view of settled law." 6. It is to be noted that the Appellate Tribunal for PMLA in the case of Bank of India v. The Deputy Directorate of Enforcement of Mumbai MANU/ML/0040/2018 held in Para 43 and 44 as below: "43. The proceedings under PML Act before the Adjudicating Authority are civil in nature and not criminal. The provisions of Section 11 and Section 42 of the PMLA specifically confirms the said positi....
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.... 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside. The NCLT proceedings will now continue from the stage at which they have been left off. Obviously, the company petition pending before the High Court cannot be proceeded with further in view of Section 238 of the Code. The writ petitions that are pending before the High Court have also to be disposed of in light of the fact that proceedings under the Code must run their entire course. We, therefore, allow the appeal and set aside the High Court's judgment". 8. This Bench has given serious consideration to the submissions made by the applicant, respondent and amicus curiae and gone through the pleadings and the judgements and is of the considered view that:- a. The purpose and object of IBC is for resolution of the Corporate Debtor by maximizing the value that can be received by the Creditors and st....