TaxTMI 
TaxTMI 
2020 (5) TMI 666
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....abad at Bommaraspet Village. The resort has facilities, such as, leisure, health, business, entertainment, recreation, etc. consisting of 4 hotels and villa resorts of 462 keys, a 3,00,000 sq ft international convention and sporting facility with a capacity of over 6000 guests, over 50 indoor and outdoor banqueting venues. It has various other amenities as mentioned in paras 2 and 3 of the application. 2.2 The corporate debtor is under CIRP vide order dated 09.04.2019 (ANNEXURE-1) passed by the Tribunal and moratorium is in effect as on date of application. Shri B. Naga Bhushan has been appointed as Interim Resolution Professional, who filed report dated 02.05.2019, stating that the claims against the corporate debtor had been collated and that the Committee of Creditors (COC) constituted on 01.05.2019 in compliance of section 18 of the I&B Code. In its first meeting held on 08.05.2019 the CoC recommended replacement of Interim Resolution Professional and appointment of Resolution Professional under section 24 of I&B Code. In its second meeting dated 22.05.2019, CoC approved appointment of Shri Raj Kumar Ralhan as Resolution Professional under section 22(2) of the I&B Code and t....
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.... I&B Code. (v) The moratorium is the mechanism to safeguard, protect and preserve the assets of the corporate debtor and it further sees to revive the corporate debtor through resolution. 3. DECISIONS RELIED ON BY THE APPLICANT : 3.1 The applicant relied on the following decisions: (i) SWISS RIBBONS PVT LTD AND OTHERS Vs. UNION OF INDIA AND OTHERS, MANU/SC/0079/2019, wherein the Hon'ble Supreme Court has held that one of the primary objectives of the corporate insolvency process is resolution by way of value maximization of the assets of the corporate debtor. (ii) BINANI INDUSTRIES LIMITED Vs. BANK OF BARODA & ANOTHER, AT INSOLVENCY No. 82 of 2018, wherein the Hon'ble NCLAT has reiterated the objectives of the I&B Code. (iii) REI AGRO, CA (IB) No. 453/KB/2018 in CP (IB) No. 73/KB/2017 (NCLT, KOLKATA), wherein it is held that "the properties and assets of the relevant corporate debtor have to be set free from the attachment order of the Enforcement Directorate to enable the liquidation of the said corporate debtor." (iv) PUNJAB NATIONAL BANK Vs. DIRECTOR, DIRECTORATE OF ENFORCEMENT, RAIPUR, FPA-PMLA-2633/RP/2018, wherein the....
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.... of IBC shall prevail over section 71 of the PMLA. (ix) INNOVENTIVE INDUSTRIES LTD Vs. ICICI BANK AND ANOTHER, AIR 2017 SC 4084, wherein the Hon'ble Supreme Court has upheld that the provisions of IBC will prevail over other laws and that conflicting laws cannot impede the functioning of the CIRP in the following words: "It is clear that the later non-obstante clause of the Parliamentary enactment will also prevail over the limited non-obstante clause contained in Section 4 of the Maharashtra Act. For these reasons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code." (x) KSL AND INDUSTRIES LIMITED Vs. ARIHANT THREADS LIMITED, (2008) 9 SCC 763. 3.2 In light of the above laws it is contended that the I&B Code will prevail over PMLA. 3.3 The applicant has also relied on newly enacted section 32-A of The Insolvency and Bankruptcy Code by way of Ordinance dated 24.12.2019, which seeks to provide a regime where liability of corporate debtor for an offence committed during pre-CIRP period shall cease. 4. REPLY DATED 20.01.2020 ON BEHALF OF RESPONDENTS No. 1 & 2. 4.1 B....
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....NCLAT. (ANNEXURE R-5). (vi) RAI FOUNDATION THROUGH ITS TRUSTEE Vs. DIRECTOR, DIRECTORATE OF ENFORCEMENT, Writ Petition (Criminal) No. 100/2005 decided on 20.02.2015, by DELHI HIGH COURT. (vii) THE VERA CRUZ (1884) 10 AC 59 at page 68. Also see MAXWELL on the Interpretation of Statutes, 12th Edition. Page 196-7. (viii) UPSEB Vs. HARI SHANKAR JAIIN, MANU/SC/0500/1978 : (1978) 4 SCC 16. (ix) ROTOMAC GLOBAL PRIVATE LTD Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, order dated 02.07.2019 (sic) NCLAT in Company Appeal (AT) (sic) (Insolvency) No. 140 of 2019. (ANNEXURE R-7), as averred in para 37 of the Reply. 6. In para 20 of the Reply, the respondents relied on newly enacted section 32-A of The Insolvency and Bankruptcy Code by way of Ordinance dated 24.12.2019 (ANNEXURE R-6) to contend that it is only after a resolution plan covering such assets has been approved by the Tribunal under section 31 of the IBC that the Enforcement Directorate is precluded from proceeding against the assets of corporate debtor, for commission of offence prior to commencement of CIRP. Whereas in the present case there is no Resolution Plan covering the assets of the ....
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....PATNAM DISTRICT. 10.1 Respondent no. 4 relied on S.O. 219(b) of Registration Manual issued vide G.O. M.S. No. 620, Revenue (Registration-I) Department dated 28.09.2020 and G.O. M.S. No. 497, Revenue (Registration-I) Department dated 07.04.2003, which reads as under: "If Andhra Pradesh High Court or any other Civil Court restrains a person from alienating a property and if such orders are brought to the notice of the Registering officers or served on the Registering Officer, the Registering Office is estopped from going ahead with the Registration." 10.2 It is averred in para 3 of the Counter that the applicant has neither sought any relief nor levelled any allegation against respondent no. 4. It is also averred that the applicant has not submitted any documents for registration of the properties in question. Apparently respondent no. 4 learnt about issuance of the Provisional Attachment Order No. 05/2019 in Ref. No. ECIR/05/HYZO/2015 dated 30.12.2019. Respondent no. 4, adopts the Reply filed by respondents no. 1 and 2-Enforcement Directorate. 10.3 Respondent no. 4 sought exemption from personal appearance and also from submission of statement as regards the conten....
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....ct, 2013 an I&B Code, 2016 and nothing beyond that. 11.5 It is averred in para B, page 7 of the Written Submissions that the process of attachment is a quasi-criminal process, the ultimate object of which is confiscation after criminal trial. Thus, the attachment is merely a step-in-aid. 11.6 The respondents in para 3 (page 8) onwards of the Written Submissions relied on the following decisions and the ratio decidendi therein. Para no. Page no. Citation Ratio decidendi 3 8 Hon'ble Supreme Court's decision in Rohit Tandon Vs. Enforcement Directorate and Y.S. Jagan Mohan Reddy Vs. CBI, MANU/SC/1403/2017 : . (para 15). Economic offices constitute a class apart and need to be visited with different approach in the matter of bail. C 8 Hon'ble NCLAT decision in Andhra Bank Vs. Sterling Biotech, (para 15) "....if it is based on the proceeds of crime, it is always open to the 'Enforcement Directorate' to seize the assets of the 'Corporate Debtor' and act in accordance with PMLA." 2 8 Hon'ble Delhi High Court's decision in Deputy Director Vs. Axis Bank, (para 146) Role of the corporate debtor and risk ....
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....7 of the application are reiterated in para 1 of the Written Submissions. 12.2 It is averred in paras 3 to 5 of the Written Submissions that the Hon'ble Appellate Tribunal has reiterated in many cases that proceedings before NCLT under I&B Code take primacy over proceedings under PMLA, as has been reaffirmed by the PMLA Appellate Tribunal in PUNJAB NATIONAL BANK Vs. DEPUTY DIRECTOR. DIRECTORAE OF (sic) ENFORCEMENT, RAIPUR, FPA-PMLA-2633/RP/2018, wherein it was reaffirmed by the PMLA Appellate Tribunal that the proceedings before the Adjudicating Authority under PMLA are civil in nature. The same view is reaffirmed by the PMLA Appellate Tribunal in BANK OF INDIA Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, MUMBAI, FPA-PMLA-2173/MUM/2018. 12.3 It is thus submitted that it is of paramount significance to consider that the moratorium so declared strictly prohibits and bars any transfer, encumbrance, alienation or disposition of any corporate debtor's assets. 12.4 In paras 6 and 7 of the Written Submissions it is averred that section 238 of I&B Code shall have overriding effect over other laws. The Hon'ble Supreme Court in PR. COMMISSIONER OF INCOME TAX Vs. MONN....
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.... 12.9 In para 16 of the Written Submission the applicant averred that respondent no. 1 has relied on EMBASSY DEVELOPERS PVT LTD Vs. STATE OF KARNATAKA & ORS. It is contended that the said case too has neither application nor bearing to the facts of the case. 12.10 In para 17 of the Written Submissions as regards the case rendered by the Hon'ble NCLAT in JSW Steel Vs. Mahender Kumar Khandelwal and others, (para 44) emphasis is laid on two issues : (i) there is an approved resolution plan in JSW, which is not so in the present case, (ii) the Hon'ble NCLAT in the said case has held that: "151. However, the judgment passed by the Adjudicating Authority and this Appellate Tribunal will not come in the way of the Directorate of Enforcement or the 'Serious Fraud Investigation Office' or the Central Bureau of Investigation' to proceed with investigation or to take any action in accordance with law against erstwhile promoters, officers and other of the 'corporate debtor'. No costs." It is contended that in view of the above decision of the Hon'ble NCLAT the provisional attachment in question be removed with immediate effect. 12.10 In para 18 of....
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....IMITED Vs. BANK OF BARODA & ANOTHER, (AT) (INSOLVENCY) No. 82 of 2018, and contended that the object of the Code is resolution. The purpose of resolution is for maximization of value of the assets of the Corporate Debtor. The learned counsel contended that respondent no. 1 cannot pass order of attachment, which is against moratorium declared by the Tribunal. The learned counsel contended that the proceedings before the NCLT take precedence over the proceedings commenced by the authorities under the PMLA. In this connection the learned counsel relied on decision of the Appellate Tribunal under the PMLA in the case of PUNJAB NATIONAL BANK Vs. DIRECTOR, DIRECTORATE OF ENFORCEMENT, RAIPUR, FPA-PMLA-2633/RP/2018. The same view was also reaffirmed by the Appellate Tribunal under the PMLA in the case of BANK OF INDIA Vs. THE DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, MUMBAI, FPA-PMLA- 2173/MUM/2018. The learned counsel contended that the proceedings under the PMLA are of civil in nature. Therefore, such proceedings initiated against the Corporate Debtor are barred by moratorium order. In this connection, the learned counsel for Resolution Professional relied on the order passed by the N....
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....e learned counsel contended that the Hon'ble Apex Court held that a decision taken by the Government or the Statutory Authority in relation to a matter which is in the realm of public law cannot, by any stretch of imagination, be brought resolution" appearing in Clause (c) of subsection (5) of section 60. The learned counsel thus, contended that the NCLT is having jurisdiction to decide the disputes coming under the I&B Code and not any dispute arising under the PML Act. The learned counsel contended that process of attachment is not completely of civil nature, but it is quasi criminal process. The learned counsel contended that the PML Act is a special enactment intended to prevent laundering of illegal money which is an economic offence. The learned counsel has relied on the decision of the Hon'ble Apex Court in the matter of ROHIT TANDON VS. THE ED AND Y.S. JAGAN MOHAN REDDY VS. CBI, MANU/SC/1403/2017 : (supra) and contended that the economic offence is to be viewed seriously and to be considered as a grave offence, thus, affecting the economy of the country. 19. The learned counsel for the Enforcement Directorate would contend that section 14 of the I&B Code will not....
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....with or incidental thereto. Thus, as the 'Prevention of Money Laundering Act, 2002' or provisions therein relates to 'proceeds of crime', we hold that Section 14 of the 'I&B Code' is not applicable to such proceeding." 22. The learned counsel further relied on the decision of the Hon'ble NCLAT in the matter of VARRSANA ISPAT LIMITED Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, judgment dated 02.05.2019 in COMPANY APPEAL (AT) (INSOLVENCY) No. 493 of 2018, rendered by NCLAT (surpa) and contended that the Hon'ble NCLAT has ruled that PML Act relates to 'proceeds of crime' and the offence relates to money-laundering resulting in confiscation of property derived therefrom and therefore, section 14 of the I&B Code is not applicable to such proceeding. The learned counsel has relied on relevant para which is as follows: "12. From the aforesaid provisions, it is clear that the 'Prevention of Money-Laundering Act, 2002' relates to 'proceeds of crime' and the offence relates to 'money-laundering' resulting confiscation of property derived from, or involved in, money-laundering and for matters connected therewith ....
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....the attachment is not hit by section 14 of the I&B Code. 25. The learned counsel further relied on the decision of the Hon'ble NCLAT in JSW STEEL VS. MAHENDER KUMAR KHANDELWAL AND OTHERS. Relevant para thereof is as follows: "44(6) In so far as the corporate debtor or its assets are concerned, after the completion of the CIR Process, i.e. a statutory process under the IBC, there cannot be any attachment or confiscation of the assets of the Corporate Debtor by any enforcement agencies after approval of the Resolution Plan." 26. The learned counsel contended that the NCLAT also held that there cannot be attachment after approval of the Resolution Plan. 27. The learned counsel further relied on para 14 of the decision of the Hon'ble NCLAT in the matter of ROTOMAC GLOBAL PRIVATE LTD Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT (supra), which is as follows: "14. As the 'Prevention of Money Laundering Act, 2002' relates to different fields of penal action of proceeds of crime', it invokes simultaneously with the 'I&B Code', having no overriding effect of one Act over the other including the 'I&B Code', we find no merit in ....
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....s against this it is the contention of the learned counsel for the ED that the proceedings under the PML Act are different than the proceedings under the I&B Code. Proceedings are initiated under the PML Act in connection with involvement of proceeds of crime. Therefore, moratorium has no application. 33. The learned counsel for the ED has relied on several decisions. The important decision for our consideration is the judgment dated 02.05.2019 passed by the Hon'ble NCLAT in the matter of VARRSANA ISPAT LIMITED Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT (supra), in COMPANY APPEAL (AT) (INSOLVENCY) No. 493 of 2018 (supra). The above order cited by the learned counsel is at pages 191-199 of Volume-2 of the Reply Affidavit filed by respondents no. 1 and 2. It is also the case of the learned counsel for respondent no. 1 that the order of the Hon'ble NCLAT was also confirmed by the Hon'ble Apex Court. The order of the Hon'ble Apex Court in Civil Appeal No. 5546 of 2019 is cited at pages 200-203 of Volume-2 of the Reply Affidavit. 34. It is an undisputed fact that when CIRP is pending against the Corporate Debtor the respondent no. 1 has issued Provisional Atta....
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....n the order that the issue involved in the appeal squarely falls within the issue decided in the case of VARRSANA ISPAT LIMITED Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT (supra) by the Hon'ble NCLAT. In the case of ROTOMAC GLOBAL PRIVATE LTD Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT (supra), the Hon'ble NCLAT held as follows: "8. Section 14 is not applicable to the criminal proceeding or any penal action taken pursuant to the criminal proceeding or any act having essence of crime or crime proceeds....." Thus, the Appellate Tribunal dismissed the appeal preferred by the Liquidator applying the principle laid down in the case of VARRSANA ISPAT LIMITED (supra). Thus, the PML Act relates to different fields of penal action of 'proceeds of crime', it invokes simultaneously with the 'I&B Code', having no overriding effect of one Act over other laws including the I&B Code. So, there is no question of overriding effect. As such the present application filed by the Provisional Attachment Order is not maintainable and is liable to be dismissed. 38. Section 32A of the I&B Code was introduced in the I&B Code by virtue of Amending Ordinance dat....