TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1078
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...."RP") for approval of Resolution Plan to the limited extent to the findings and directions given in paragraphs 60 and 61 of the impugned order observing that 'it would be for the SRA to resort to the appropriate proceedings to seek remedy in this regard'. In paragraph 61, the relief sought regarding directions to the Directorate of Enforcement ("ED") to release property attached by it was rejected. 2. In the Appeal, following prayers have been made by the Appellant: "a. Pass an order setting aside the finding at Para 60 in the Impugned Order dated 04.07.2024 passed in IA No.01 of 2024 in CP (IB) No. 635/PB/2021 by the Ld. Adjudicating Authority, New Delhi Bench II wherein the Adjudicating Authority refused to enlarge the protection of Section 32A of me to uplift the attachment by Enforcement Directorate over the properties; and b. Pass an order for release of properties and accounts seized and attached by Central and State Agencies including Enforcement Directorate, Income Tax, Himachal Pradesh Government/ Authorities etc. to uphold the legislative scheme of Section 32A of IBC; c. Pass any such further or other order(s) as this Hon'ble Appellate Tr....
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....2019, the ED passed a provisional attachment order under Section 5 of the PMLA. The CD filed a Writ Petition (Civil) No.4974 of 2018 challenging the actions of the ED. The learned single Judge allowed the ED to issue order under the PMLA. An LPA was filed by the CD, being LPA No.104/2019, in which an order dated 13.02.2019 was passed by the Division Bench of the Delhi High Court, staying the order of learned single Judge dated 22.01.2019. The Division Bench stayed further proceedings under the PMLA Act and directed that the CD shall not alienate the property in any manner and status qua with regard to the property in question shall be maintained. (iv) The Section 7 application was filed by M/s Technology Parks Limited against the CD being CP(IB) No.635/PB/2021 for initiation of Corporate Insolvency Resolution Process ("CIRP") against the CD. The Adjudicating Authority by its order dated 23.03.2022 commenced the CIRP proceedings against the CD and one Mr. Gaurav Misra was appointed as Interim Resolution Professional ("IRP"). (v) In the CIRP of the CD, publication was made by the IRP. The Committee of Creditors ("CoC") was constituted, which consisted of Financial C....
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....ting Authority, the SRA, who is an unrelated party to the CD, is entitled for the benefit of Section 32A of the IBC. The provisional attachment by the ED, which was made on 24.01.2019 cannot continue after approval of the Resolution Plan. After initiation of the CIRP and the approval of the Resolution Plan, no action can be taken against the property of the CD. No order of confiscation having been made with regard to the assets of the CD prior to initiation of CIRP, no confiscation can now be made after approval of the Resolution Plan. The ownership of the assets still continues with the CD and RP has rightly included the assets of the CD in the Information Memorandum, on which the CD has ownership rights. It is submitted that by mere provisional attachment of the assets, the CD cannot be denied the right to use of the assets, nor its ownership is lost on the assets on mere provisional attachment. It is submitted that legislative scheme as delineated by Section 32A is that once a Resolution Plan is approved and there is change in the management or control of the CD, to a person, who was not the promoter or in the management or control of the CD or a related party or a person, with ....
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.... legislature and thus the embodiment of the extent to which the provisions of the PMLA are to give way to proceedings initiated under the IBC. Through Section 32A, the legislature has authoritatively spoken of the terminal point where the powers under the PMLA would not be exercisable. The legislature being conscious about the relevant provisions of the PMLA, has used negative language in Section 32A(2) of the IBC, which implies a prohibition to take any action against the CD, whether it is by way of attachment or confiscation upon the approval of Resolution Plan. Learned Counsel for the Appellant has placed reliance on judgments of the Hon'ble Supreme Court and this Tribunal in support of his submissions and submits that true import of Section 32A has already been laid down by the Hon'ble Supreme Court in Manish Kumar vs. Union of India - (2021) 5 SCC 1 and judgment of this Tribunal. 9. Shri Krishnendu Datta, learned senior Counsel appearing for the RP supported the submission of the Appellant and contend that by mere provisional attachment of assets of the CD ownership of the CD on the assets are not lost and CD still continues to be the owner and is entitled to use the assets....
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....d attachments made prior to such approval will continue to operate unaffected. Reliance has been placed on paragraph 115 of the above judgment. Shri Zohab Hossain further relied on three Members Bench judgment of this Tribunal in Anil Kohli vs. ED - Company Appeal (AT) (Ins._ No.389 of 2018 where provisional attachment was held to be valid and was held to be not affected by CIRP. In similar facts and circumstances, it was held that Section 32A is not applicable. It is submitted that the above three Members Bench judgment fully convers the present issue and the relief claimed by the Appellant in this Appeal cannot be allowed. The Resolution Plan could not have overridden subsisting statutory attachment and NCLT has rightly rejected the prayer of the Appellant to direct release of provisional attachment. The resolution process cannot be utilized as a device to nullify consequences under criminal law. The legislative intent of the PMLA is to ensure the integrity of investigations and prevent unlawful alienation of attached assets. Learned Counsel for the Respondent has placed reliance in Manish Kumar vs. Union of India - (2021) 5 SCC 1 and submits that the Appellant's argument that 'a....
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....n provided for 100% refund of the admitted claim of the Depositors. Vacation on the charge of property of CD by the ED is necessary for successful implementation of the Resolution Plan. The Intervenors support the submission of the Appellant. The property was only attached by the ED under Section 5 and proceedings under Section 8 of the PMLA have not been started, which is no longer possible. The Depositors are opposing the attachment and confiscation of the property by the ED. 12. Shri Zohab Hossain was also permitted to respond to IA No.1987 of 2025. Learned Counsel for the ED has refuted the plea raised by the Intervenors. It is submitted that SRA has proposed to pay only Rs. 137 crores against the admitted claim of Rs. 557 crores, whereas related party has been proposed to be paid 77% of the admitted amount. The attached property could never have been the subject matter of the Resolution Plan and ED has been receiving complaints from various Investors. 13. We have considered the submissions of learned Counsel for the parties and have perused the record. 14. The present Appeal has been filed by the SRA, whose Resolution Plan has already been approved. No Appeals have be....
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....rding direction to ED to release the property of the CD attached by it is specifically rejected. It would be open to SRA to resort to the remedies available under PMLA for release of the attached properties in accordance with law. As has been noted hereinabove, the SRA has committed that it would implement the plan irrespective of the fact that no relief/concession sought by him is granted by this Tribunal. If the affidavit of SRA under Sec. 29A read with Sec. 30(1) of the Code is not filed within 15 days from the date of uploading of this order, the application for approval of plan would be deemed to be rejected and the security amount deposited by the SRA would stand forfeited." 15. From the submissions which have been made by the parties, following are the issues which need consideration in this Appeal : (1) Whether due to provisional attachment of the assets of the CD vide order dated 24.01.2019, the assets could not have been included in the assets of the CD in the Information Memorandum nor could be part of the Resolution Plan? (2) Whether due to restraint order passed by the Delhi High Court dated 13.02.2019 passed in LPA No.104 of 2019, assets of CD cou....
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....have effect after the expiry of period specified in on the date of order made under sub-Section (3) of Section 8 whichever is earlier. In the present case, no proceeding has been initiated under Section 8, hence, there is no applicability of Section 8(3). Sub-Section (4) of Section 5 provides as follows: "5. Attachment of property involved in money- laundering.- (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment." 18. Sub-Section (4) of Section 5 thus clearly provides that provisional attachment under Section 5 shall not prevent the person interested in the enjoyment of the immovable property attached under sub-Section (1) from such enjoyment, thus, despite the attachment of assets of the corporate debtor, corporate debtor was fully entitled to enjoy the property. The scheme of Section 8 as noted above contemplate that it was only after conclusion of Trial & Special Court finds that offence of money laundering have been committed, it shall order confiscation of the property use in the offence. The present is the case where proceeding under Section 8 has no....
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....uding- (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country; (ii) assets that may or may not be in possession of the corporate debtor; (iii) tangible assets, whether movable or immovable; (iv) intangible assets including intellectual property; (v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority; (g) to perform such other duties as may be specified by the Board." 21. Information memorandum thus was required to mention details of all assets which belong to the corporate debtor. In the present case, there is no case of the respondent that asset do not belong to the corporate debtor, nor it claim that appellant has been divested with its ownership on account of provisional attachment under PMLA. 22. Learned counsel appearing for the RP has placed reliance on the judgment of the Appellate Tribunal SAFEMA, New Delhi in 'Alive Hospitality & Foods (P) Limited' Vs. 'Deputy Director, Directorate of Enforcement, Ahmedabad' rep....
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....r disturbs the ownership title of the appellants, nor deprives them of possession/ enjoyment of the same." 23. In view of the above discussion, we answer Question No. (1) in following manner: Due to provisional attachment of the assets of the corporate debtor vide order dated 24.01.2019, the assets could very well be included in the assets of the corporate debtor in the information memorandum and could be part of the resolution plan. Question No. (2) 24. The submission which has been made by learned counsel for the Enforcement Directorate is that on account of order passed by Delhi High Court dated 13.02.2019 in LPA No.104/2019, assets could not be included in the information memorandum nor could have been part of the resolution process. The Writ Petition was filed by the corporate debtor against the Directorate of Enforcement in the Delhi High Court. Corporate debtor in the Writ Petition had sought an order directing the Directorate of Enforcement not to attach the assets of the corporate debtor. Delhi High Court passed an order on 22.01.2019, which permitted the Directorate of Enforcement to pass a Provisional Attachment Order, aggrieved by the order 22.01.2019 in [LP....
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....ere sought from the Delhi High Court, either by Directorate of Enforcement or by the RP or any clarification has been sought. 26. We are of the view that the order was passed by Delhi High Court on 13.02.2019, and CIRP commenced after 3 years from the said order, and no further order having been obtained by either of the parties from the Delhi High Court, the order dated 13.02.2019 cannot be held to be restraint on the assets to be included in the information memorandum or in the resolution process. 27. We thus answer Question No. (2) in following manner: Due to restraint order passed by the Delhi High Court dated 13.02.2019 passed in LPA No.104/2019, the assets of the corporate debtor could have very well be included in the information memorandum and made part of the resolution process. Question Nos.(3), (4) & (5) 28. What is legislative scheme of Section 32A, which was inserted into IBC by Act 01 of 2020, w.e.f. 28.12.2019, is the question, which has fallen for consideration in this Appeal. Section 32A of the IBC provides as follows: "32A. (1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the ....
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....this Code to a person, who was not - (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation.- For the purposes of this sub-section, it is hereby clarified that,- (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; (ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law as may be appli....
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.... Money Laundering Act, 2002." 30. In paragraph 316, the stand of Union of India while dealing with Section 32A has been noticed. In paragraph 316.1 and 316.2 object and reasons have been extracted, which are as follows: "316.1. Section 32-A provides immunity to the corporate debtor and its property when there is approval of the resolution plan resulting in the change of management of control of corporate debtor. This is subject to the successful resolution applicant being not involved in the commission of the offence. Statutory basis has now been given under Section 32-A to the law laid down by this Court in the decision of Essar Steel India Ltd. Committee of Creditors [Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] . This Court took the view therein that successful resolution applicant cannot be faced with undecided claim after its resolution plan has been accepted. The object is to ensure that a successful resolution applicant starts off on a fresh slate. 316.2. The relevant extracts of the Statement of Objects and Reasons relied upon by the Union of India are as follows: "Statement of ....
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....prosecution, the property of a company, which continues to exist after the resolution or liquidation of a corporate debtor, may have been liable to be attached, seized or confiscated. For instance, the property of a corporate debtor may have been at risk of attachment, seizure or confiscation where there was any suspicion that such property was derived out of proceeds of crime in an offence of money laundering. It was felt that taking actions against such property, after it is acquired by a resolution applicant, or a bidder in liquidation, could be contrary to the interest of value maximisation of the corporate debtor's assets, by substantially reducing the chances of finding a willing resolution applicant or bidder in liquidation, or lowering the price of bids, as discussed above. 17.10. Thus, the Committee agreed that the property of a corporate debtor, when taken over by a successful resolution applicant, or when sold to a bona fide bidder in liquidation under the Code, should be protected from such enforcement action, and the new section discussed in Para 17.7 should provide for the same. Here too, the Committee agreed that the protection given to the corporate deb....
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....d pending complaint or report by the investigating authority filed in relation to the criminal offence. The Committee agrees that this provision is essential to provide the resolution applicant(s) a fair chance to revive the unit which otherwise would directly go into liquidation, which may not be as beneficial to the economy. The Committee believes that this ring-fencing is essential to achieve revival or resolution without imposing additional liabilities on the resolution applicant, arising from mala fide acts of the previous promoter or management."" 33. The Standing Committee of Lok Sabha in paragraph 3.11 has emphasized and laid down its emphasis in following words "...The Committee believes that this ring-fencing is essential to achieve revival or resolution without imposing additional liabilities on the resolution applicant, arising from mala fide acts of the previous promoter or management". In paragraph 317, the Hon'ble Supreme Court after noticing the Reports and object and reasons of the Bill has laid down following: "317. Section 32-A has been divided into three parts consisting of sub-sections (1) to (3). Under sub-section (1), notwithstanding anything cont....
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....on'ble Supreme Court after elaborately considering the ILC Report and the Report of the Parliamentary Committee and other relevant material has laid down following in paragraphs 319 and 320: "319. Thus, the combined reading of the various limbs of sub- section (1) would show that while, on the one hand, the corporate debtor is freed from the liability for any offence committed before the commencement of the CIRP, the statutory immunity from the consequences of the commission of the offence by the corporate debtor is not available and the criminal liability will continue to haunt the persons, who were in charge of the assets of the corporate debtor, or who were responsible for the conduct of its business or those who were associated with the corporate debtor in any manner, and who were directly or indirectly involved in the commission of the offence, and they will continue to be liable. 320. Coming to sub-section (2) of Section 32-A, it declares a bar against taking any action against property of the corporate debtor. This bar also contemplates the connection between the offence committed by the corporate debtor before the commencement of the CIRP and the property ....
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....f the corporate debtor through the CIRP or liquidation process under the Code and who otherwise fulfils the requirement under Section 32-A, action can be taken against the property of such other person. 323. Thus, reading sub-section (1) and sub-section (2) of Section 32-A together, two results emerge: 323.1. Subject to the requirements embedded in sub-section (1) of Section 32-A, the liability of the corporate debtor for the offence committed under the CIRP, will cease. 323.2. The property of the corporate debtor is protected from any legal action again subject to the safeguards, which we have indicated. 323.3. The bar against action against the property, is available, not only to the corporate debtor but also to any person who acquires property of the corporate debtor under the CIRP or the liquidation process. The bar against action against the property of the corporate debtor is also available in the case of a person subject to the same limitation as prescribed in sub-section (1) and also in sub-section (2), if he has purchased the property of the corporate debtor in the proceedings for the liquidation of the corporate debtor." 36. The Hon'....
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....the PMLA Act, 2002. Provisional Attachment Order issued under Section 5 were confirmed by the adjudicating authority giving rise to the appeals. The issue which arose for consideration has been noticed in paragraph 2 of the judgment, which is as follows: "2. The measure of attachment of property involved in "money laundering", it essentially representing "proceeds of crime" (as defined in law), is provided to ensure that the ultimate objective of "confiscation" of such ill- gotten property be not frustrated, the power and jurisdiction to order confiscation being vested in the Special Court. As would be seen at length in later part of this judgment, the provisions for attachment (followed by adjudication) leading to confiscation are sanctions in addition to the criminal sanction rendering the act of "money-laundering" a penal offence (by virtue of section 4). The order of "confiscation" of property attached under PMLA takes away the right and title of its owner and vests it "absolutely in the Central Government free from all encumbrances" (section 9)." 40. In the above case, Hon'ble Delhi High Court had no occasion to consider legislative scheme under Section 32A vis-a-v....
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....annot derive any advantage out of section 14. 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 and B Code", having no overriding effect of one Act over the other including the "I and B Code", we find no merit in this appeal. It is accordingly dismissed. No costs." 41. There can be no dispute to the proposition laid down by this Tribunal in the above case that Section 14 of the IBC has no consequence on proceedings under the PMLA Act, 2002. The present is not a case where appellant is claiming any benefit under Section 14 of the IBC rather the issue which has arisen is scope and ambit of Section 32A of the IBC. The judgment of 'Varrsana Ispat Ltd.' (supra) passed by this Tribunal also came to be affirmed by the Hon'ble Supreme Court by order dated 22.07.2019 in Civil Appeal No. 5546/2019. 42. Learned counsel for the R-2 has further placed reliance on the judgment of this Tribunal in 'Kiran Shah, RP of KSL & Industries Ltd.' Vs. 'Enforcement Directorate Kolkata' in [Comp. App. (AT) (Ins.) No.817/2021] for the proposition that NCLT is not empowered to decide qu....
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....s 'Tribunal' as not maintainable in law. Resultantly, the Appeal fails." 43. It is relevant to notice that in the 'Kiran Shah' judgment itself, this Tribunal has noted that the resolution plan was not approved hence Section 32A cannot be pressed into service. In paragraphs 91 & 97 of the judgment following was observed: "91. It is to be relevantly pointed out that Section 32-A 'Liability for Prior Offences etc.' was inserted by Act 1 of 2020 S. 10 (with effect from 28.12.2019) and in reality, this Section only bars attachment after approval of 'Resolution Plan' by an 'Adjudicating Authority' of course subject to the requirement of certain conditions being satisfied. In the instant case in hand, admittedly, there is no approval of 'Resolution Plan' till date and as such, it is held by this 'Tribunal', that the Appellant cannot press into service the ingredients of Section 32-A(2) of the I & B Code. 97. In the instant case, there is no 'Resolution Plan' as approved by the 'Tribunal' and further no Liquidation Proceedings had ended in the sale of Liquidation Assets of the 'Corporate Debtor'." 44. Thus, there can be no dispute to the proposition laid down by thi....
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....spective, IA 81 of 2020 in CP(IB) No. 397/NCLT/AHM/2018 filed by the Applicant/IRP for KSL & Industries Ltd is held by this 'Tribunal' as not maintainable in law. Resultantly, the Appeal fails." 9. Learned Counsel for the Respondent is also right in submission that against the judgment of this Tribunal dated 02.03.2019 in "Varrsana Ispat Limited", Civil Appeal No. 5546 of 2019 was filed by Varrsana Ispat Ltd. which Civil Appeal was dismissed on 22.07.2019. The judgment of Varrsana has been relied by Three Member Bench in Kiran Shah. 10. We are of the view that the Adjudicating Authority did not commit any error in rejecting the I.A (IB) No. 74/KB/2022 filed by the Resolution Professional challenging the order passed by the PMLA Court, we do not find any merit in the Appeal. The Appeal is dismissed." 45. There can be no dispute to the proposition laid down by this Tribunal in the above case that NCLT has no jurisdiction to sit in appeal over the Order of Provisional Attachment passed under the PMLA Act, 2002. Learned counsel Mr. Zoheb Hussain has placed reliance on the judgment of Delhi High Court in 'Rajiv Chakraborty, RP of EIPL' Vs. 'Directorate of Enforcemen....
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....comes into play only after the approval of the resolution plan under IBC. Section 14 of the IBC does not affect the proceedings under the PMLA Act, 2002. Learned counsel for the respondent is right in his submission that in the present case Provisional Attachment Order having been passed on 24.01.2019, the said order in no manner is affected by initiation of CIRP which took place only on in the year 2022. The question which is up for consideration is as to whether appellant is entitled for the benefit of Section 32A and in event Section 32A is applicable in the facts of the present case, what is its consequence on Provisional Attachment Order dated 24.01.2019. In the judgment of Delhi High Court, the question arose as to impact of moratorium that comes into the effect in terms of Section 14 on the powers of Enforcement Directorate. Paragraph 1 of the judgment noticed the question: "1. This writ petition raises the important question of the impact that a moratorium that comes into effect in terms of section 14 of the Insolvency and Bankruptcy Code, 2006 [ IBC.] would have on the powers of the Enforcement Directorate [ ED.] to enforce an attachment under the provisions of th....
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....ed the Provisional Attachment Order attaching various immovable assets of Lunar Foods. The RP filed an application to quash the Provisional Attachment Order dated 26.12.2017, after hearing both the parties adjudicating authority rejected the application filed by the RP against which order the appeal was filed. This Tribunal in the above case after noticing the submission of the parties framed three questions for consideration which are noticed in paragraph 47 of the judgment, which are as follows: "47. We have heard the detailed submissions advanced by the Learned Counsels for both the Appellant and the Respondents. We have gone through voluminous records and written statements of the parties. Based on the same we frame the following 3 issues for determination: I. Whether the provisional attachment of assets by the Directorate of Enforcement (ED) under the PMLA violates the moratorium imposed under Section 14 of the IBC; II. Whether the IBC, by virtue of Section 238, overrides the PMLA in case of inconsistency, particularly in the context of resolution processes involving tainted assets; and III. Whether the NCLT/NCLAT possess jurisdiction to iss....
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....aka & Ors.' reported in [2019 SCC OnLine SC 1542] as well as 'Kalyani Transco' Vs. 'M/s. Bhusan Power & Steel Ltd. & Ors.' in [Civil Appeal No. 1808/2020]. We have already noticed the judgment of this Tribunal that any challenge to the provisional attachment order before NCLT is not maintainable. Judgment of 'Kiran Shah' (supra) has been relied. Judgment of 'Kalyani' (supra), which has been relied by the 3 Member Bench in 'Anil Kohli' case is no more available for reliance since Hon'ble Supreme Court, in order passed in review application has recalled the said judgment. With regard to Section 32A also observations have been made in paragraph 67 of the judgment by this Tribunal, where this Tribunal held that Section 32A is inapplicable. In paragraph 67, following was observed: "67. The Appellant has also placed reliance on Section 32A of the IBC (introduced in 2020), which grants immunity to the Corporate Debtor and its property post-resolution. Section 32 A has been extracted below: "Section 32A (1) states that once a resolution plan is approved and control passes to a new, unrelated management, the Corporate Debtor shall not be liable for offences committed prior....
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....Section 32A of the 'I&B Code' is prospective in nature and the benefit of such provision cannot be claimed by the Appellant is wrong and misplaced. 43. A plain reading of Section 32A(1) and (2) clearly suggests that the Directorate of Enforcement/ other investigating agencies do not have the powers to attach assets of a 'Corporate Debtor', once the 'Resolution Plan' stands approved and the criminal investigations against the 'Corporate Debtor' stands abated. Section 32A of the 'I&B Code' does not in any manner suggest that the benefit provided thereunder is only for such resolution plans which are yet to be approved. Further, there is no basis to make distinction between a resolution applicant whose plan has been approved post or prior to the promulgation of the Ordinance. 45. The Union of India had unequivocally stated that after the completion of the 'Corporate Insolvency Resolution Process', there cannot be any threat of criminal proceedings against the 'Corporate Debtor', or attachment or confiscation of its assets by any investigating agency, after approval of the 'Resolution Plan'. In any event, by virtue of Section 238 of the 'I&B Code', the 'I&B Code' has ....
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....en noticed in paragraph 11 of the judgment which is as follows: "11. The core issue that falls for our consideration is whether the NCLT had the jurisdiction to direct the ED to release the Attached Properties, invoking Section 32A of the IBC, 2016, since Section 32A provides that all attachments over properties of a corporate debtor would ceased once a resolution plan in respect of the said corporate debtor is approved." 56. In paragraphs 16, 17, 18, 20 & 21, following was laid down: "16. A plain reading of the forgoing would show that Section 32A is a non-obstante provision. Its jurisdiction is attracted only when a resolution plan gets approved under Section 31. Besides, the immunity conferred by Section 32A is available if and only if the approved resolution plan results in a complete change in the character of ownership and control of the corporate debtor. Explicitly, Section 32A (1) stipulates that the liability of the corporate debtor for an offense committed prior to commencement of the CIRP shall ceased. The corporate debtor is explicitly protected from being prosecuted any further for such an offense, with effect from the approval of the resolution pl....
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.... prosecution of proceedings. Clause (i) in the Explanation to Section 32A(2) removes all doubt about what the assets are given immunity from. The provision explicitly stipulates that an "action against the property" of the corporate debtor, from which immunity would be available, "shall include the attachment, seizure, retention or confiscation of such property under such law" as applicable. The reference being to any action against the property under any law would evidently bring within its compass, attachments made under the PMLA, 2002. 20. Therefore, as a matter of law, once the resolution plan is approved with the attendant conditions set out in Section 32A being met, further prosecution against the corporate debtor and its properties, would ceased. Section 32A(3) enjoins the corporate debtor to continue to cooperate with the enforcement agencies in the continued prosecution against the individuals in question. 21. Now, applying this position in law to the facts of the case, it is common ground that under the Approval Order, a resolution plan in respect of the Corporate Debtor was approved under Section 31 of the IBC, 2016. It is also common ground that none o....
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....it case for writ petitions to be considered by a constitutional court to issue an appropriate writ or direction to remedy the situation. 38. We have no hesitation in holding that there is no scope whatsoever for the attachment effected by the ED over the Attached Properties to continue once the Approval Order came to be passed. We are not opining on whether the attachment could have continued after commencement of the CIRP. We find that the NCLT has simply answered the question of law arising in relation to the resolution of the corporate debtor and that too within the limits of the jurisdiction conferred on it. It is Section 32A of the IBC, 2016, on which the NCLT based its declaration that the Attached Properties must be released, and that is entirely correct. Whether the ED was right in continuing the attachment between the commencement of the CIRP and before the Approval Order, is also something that the April 2023 Order deals with, but in our view that issue has been overtaken, as explained earlier in this judgment." 58. Summary of conclusions are noticed in paragraphs 53 & 54 of the judgment where following was held: "53. As a result, we return the follow....
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....l confiscation, the attachment, which is only an interim measure in aid of the final measure of confiscation must necessarily abate and come to an end, since it cannot continue in a vacuum. v. We are not opining on the implications of Section 14 of the IBC, 2016 for continuation of a prior attachment during the course of a CIRP. In the facts at hand, the jurisdiction of Section 14 came to an end, and the jurisdiction of Section 32A commenced, on 17th February, 2023. Therefore, dealing with a conflict between the provisions of the PMLA, 2002 and Section 14 of the IBC, 2016 was rendered irrelevant with effect from 17th February, 2023; vi. As a consequence of Section 32A of the IBC, 2016, the ED must now necessarily release the attachment on the Attached Properties, without being bogged down by the question of how to interpret the continuation of attachment after the commencement of the CIRP and before the Approval Order, and the implications for the same under Section 14 of the IBC, 2016. We are not opining on this facet of the law as it is wholly unnecessary to dispose of the case at hand. It is trite law that no court should rule on questions of law in a vacuum; ....
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....eme Court would bind the quasi-judicial authorities. As required under Article 141 of the Constitution of India, such quasi -judicial authorities must act consistent with the law declared by the Hon'ble Supreme Court rather than disobey the rule of law to give rise to avoidable litigation." 59. The judgment of the Hon'ble Bombay High Court in 'Shiv Charan & Ors.' (supra), supports the submission which has been advanced by the counsel for the appellant in the present appeal. Learned Counsel for the Enforcement Directorate submits that the judgment of Bombay High Court in 'Shiv Charan' case is under consideration in Civil Appeal No.9692-9693/2024, which appeals are still pending. Various orders passed by the Hon'ble Supreme Court have been placed by the appellant in convenience compilation, which indicates that appeal is still under consideration before the Hon'ble Supreme Court. 60. The judgment of the Bombay High Court in 'Shiv Charan' case is still under appeal before the Hon'ble Supreme Court and judgment has not yet become final, hence, we need not base our decision on the law laid down by the Hon'ble Bombay High Court in the above case. 61. Section 32A which was in....
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....ency resolution process shall cease. The liability of the corporate debtor and further sub-Section (1) provides that corporate debtor shall not be prosecuted for such an offence from the date when resolution plan has been approved by the adjudicating authority. Thus, two consequences have been provided, they are (i) liability of corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease; (ii) corporate debtor shall not be prosecuted for such offence from the date of resolution plan has been approved. The above consequence can follow, of course when resolution plan condition stipulated in sub-Section (1) are fulfilled. The present is a case where the new management i.e., appellant is not a person who was covered by sub-clause (a) or sub-clause (b) under Section 32A(1). The proviso to sub-Section (1) of 32A further mentions "provided that even prosecution has been instituted during the corporate insolvency resolution process against such corporate debtor, which shall stand discharged from the date of approval of the resolution plan, subject to requirement of condition having been fulfilled". The present is a case whe....
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....e requirements specified in this section, against whom such an action may be taken under such law as may be applicable." 63. At the stage, we need to look into the scheme of PMLA Act, 2002. Section 5 deals with the attachment of property, which is as follows: "5. Attachment of property involved in money- laundering.- (1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that-- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence,....
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.... (5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority." 64. Section 6 of the PMLA Act, 2002, provides for adjudicating authority. Section 8 deals with adjudication. Section 8 sub-Section (3) deals with confirmation of the provisional attachment. Section 8 sub- Section (5) provides that confiscation of the property dissenting order. Section 8, which is relevant for the present case is as follows: "8. Adjudication.- (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of sect....
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....e Special Court]; Explanation.--For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded. (4) Where the provisional order of attachment made under sub- section (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under section 5 or frozen under sub-section (1A) of section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of a property frozen under sub-section (1A) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of.] (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the moneylaundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Governme....
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....nd to discharge the corporate debtor, we fail to see any purpose and object of continuing the Provisional Attachment affecting the resolution process which has undergone and attained finality under IBC. 66. We thus are of the view that Provisional Attachment Order shall cease to operate after resolution plan is approved, bringing into effect Section 32A. In the present case conditions under Section 32A for extending the benefit to appellant are fulfilled and it is not the case of either of the parties that the SRA does not fulfil the condition contemplated under Section 32A. We thus are of the view that Provisional Attachment Order has to be treated to cease by virtue of legislative scheme under Section 32A and there is no necessity to obtain any order by the SRA from the adjudicating authority under the PMLA. The observation of adjudicating authority in paragraphs 60 & 61 that SRA to approach the authorities under PMLA for release of the provisional attachment were unnecessary and not required. 67. In view of the forgoing discussion, we answer Question No. (3), (4) & (5) in following manner: Question No. (3) The appellant is entitled for the benefit of Section 32A of t....