TaxTMI 
TaxTMI 
2026 (3) TMI 1590
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Counsel for the appellant made arguments only in reference to Section 32A of the Insolvency and Bankruptcy Code, 2016 ( in short "IBC 2016'). It was submitted that in the proceedings before the NCLT, the appellant No.2 M/s Asteroid Shelter Homes Private Limited remained successful Resolution applicant in Corporate Insolvency Resolution Process (CIRP) of M/s Dash Exports Pvt. Ltd.. The Resolution Plan was approved by the NCLT on 29.09.2021 and in the light of the approval of the Resolution Plan, there was change of control of the management of the Corporate Debtor. 3. Prior to approval of the Resolution Plan, an order for Provisional Attachment of the property was passed on 25.08.2021 and on account of the said order followed by its confirmation by the Adjudicating Authority vide its impugned order, the appellant could not get the property. The prayer was made for release of the property in light of the Section 32A of the IBC 2016. 4. A reference of Section 32A(1) of the IBC 2016 was given to indicate that the liability of the Corporate Debtor for an offence committed prior to commencement of CIRP shall cease and the Corporate Debtor shall not be prosecuted for a such offence....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e would be accordingly dealing with the limited issues raised by the appellant for our consideration. Analysis/ Findings of the issues raised by the appellant: 8. The brief facts pertaining to the issue raised by the appellant has been given in the opening paras but for clarity it may be referred that the respondent provisionally attached the property of M/s Dash Exports Pvt. Ltd. vide its order dated 25.08.2021 and has been confirmed by the Adjudicating Authority vide its order dated 26.05.2022. The case of the appellant is in reference to the order dated 26.06.2020 passed by the NCLT for initiation of CIRP. The Resolution Plan was then approved vide order dated 29.09.2021. Since the Resolution Plan has been approved resulting in change of control, this appeal has been pressed only in reference to Section 32A of the IBC 2016. It would be relevant to refer Section 32A of the IBC 2016 and is quoted hereunder: 32A. Liability for prior offences, etc.--(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate inso....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 applicable. (3) Subject to the provisions contained in sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d every aspect of the matter and for that even analyzed the Section 32A of the IBC by dividing it in three parts. It would be relevant to reproduce the relevant paras of the judgment in the case supra and for that para 252 to 254 are quoted, thus:- 252. Section 32A has been divided into three parts consisting of sub-Sections (1) to (3). Under sub-Section (1), notwithstanding anything contained, either in the Code or in any other law, liability of a corporate debtor, for an offence committed prior to the commencement of the CIRP, shall cease. Further, the corporate debtor shall not be liable to be prosecuted for such an offence. Both, these immunities are subject to the following conditions: i. A Resolution Plan, in regard to the corporate debtor, must be approved by the Adjudicating Authority under Section 31 of the Code; ii. The Resolution Plan, so approved, must result in the change in the management or control of the corporate debtor; iii. The change in the management or control, under the approved Resolution Plan, must not be in favour of a person, who was a promoter, or in the management and control of the corporate debtor, or in favour of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (1), however, the designated partner in respect of the liability partnership or the Officer in default, as defined under Section 2(60) of the Companies Act, 2013, or every person, who was, in any manner, in- charge or responsible to the corporate debtor for the conduct of its business, will continue to be liable to be prosecuted and punished for the offence committed by the corporate debtor. This is despite the extinguishment of the criminal liability of the corporate debtor under sub-Section (1). Still further, every person, who was associated with the corporate debtor in any manner, and, who was directly or indirectly involved in the commission of such offence, in terms of the Report submitted and Report filed by the Investigating Authority, will continue to be liable to be prosecuted and punished for the offence committed by the corporate debtor. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
...." against the property of the corporate debtor is intended to have the widest possible amplitude. There is a clear nexus with the object of the Code. The other part of the clarification, under the Explanation, is found in the second sub- clause of the Explanation(ii). Under the second limb of the Explanation, the Law Giver has clearly articulated the point that as far as the property of any person, other than the corporate debtor or any person who had acquired the property of the corporate debtor through the CIRP or liquidation process under the Code and who otherwise fulfil the requirement under Section 32A, action can be taken against the property of such other person. Thus, reading sub-Section (1) and sub- Section(2) together, two results emerge - (i) subject to the requirements embedded in sub-Section (1), the liability of the corporate, debtor for the offence committed under the CIRP, will cease; (ii) The property of the corporate debtor is protected from any legal action again subject to the safeguards, which we have indicated. 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 corpor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... effect. It must consequently be held that the power to attach as conferred by Section 5 of the PMLA would cease to be exercisable once any one of the measures specified in Regulation 32 of the Liquidation Regulations 2016 comes to be adopted and approved by the Adjudicating Authority. The expression ―sale of liquidation assets‖ must be construed accordingly. The power otherwise vested in the respondent under the PMLA to provisionally attach or move against the properties of the corporate debtor would stand foreclosed once the Adjudicating Authority comes to approve the mode selected in the course of liquidation. To this extent and upon the Adjudicating Authority approving the particular measure to be implemented, the PMLA must yield. The Court also bears in mind that the bar that stands created under Section 32A operates and extends only insofar as the properties of the corporate debtor are concerned. That statutory injunct does not apply or extend to the persons in charge of the corporate debtor or the rights otherwise recognised to exist and vested in the respondent to proceed against other properties as was explained by the learned Judge in Axis Bank. 101. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hi, we are unable to accept the argument of the appellant that once Resolution Plan has been approved then PAO, even if it was caused prior to approval of the Resolution Plan, should go. It may be true that subsequent to the approval of the Resolution Plan under Section 31 of the IBC, the proceedings for provisional attachment of the property cannot be taken because Section 32A(2) of the IBC imposes a bar on the aforesaid. 15. At this stage, an argument may be made that by virtue of Section 32A(1) of the IBC when the prosecution would cease and would not be caused then how the attachment of property may continue once prosecution cannot proceeds rather come to an end. The PAO can be continued as consequence of it. The argument aforesaid has been raised in ignorance of Section 32A(1) of the IBC and the judgment of the Apex Court in the case of Manish Kumar (supra). Section 32A(1) ceases the criminal case against the corporate debtor and even prosecution cannot be continued once Resolution Plan is approved under Section 31 of IBC. It is, however, subject to other conditions, as has been referred. by the Apex Court in the case of Manish Kumar (supra). The benefit of Section 32A(1) o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....over its control. In the case of Nitin Jain Liquidator of PSL Limited (supra) the issue aforesaid was taken up and we have quoted the relevant paras of the said judgment. In the case of Rajiv Chakraborty Resolution Professional of EIEL (supra), the issue was reiterated in paras 105 and 109 of the said judgment and are quoted thus:- 105. The introduction of Section 32A constitutes an event of vital import since it embodies a provision which effectively shut out criminal proceedings including those under the PMLA upon the CIRP reaching the defining moment specified therein. However, when the Legislature introduced the said provision, it was conscious and aware of the fact that the provisions of the PMLA could be enforced against the properties of a corporate debtor notwithstanding the pendency of the CIRP..... 109. The Court has independently come to the conclusion that the power to attach under the PMLA would not fall within the ken of Section 14(1)(a) of the IBC. Through Section 32A, the Legislature has authoritatively spoken of the terminal point whereafter the powers under the PMLA would not be exercisable. The events which trigger its application when reached w....