TaxTMI 
TaxTMI 
2026 (7) TMI 107
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....7.2022 passed by the Adjudicating Authority (NCLT, Ahmedabad) dismissing his applications in IA No. 453 of 2019 and IA No. 773 of 2021 in CP (IB) No. 89 of 2017. 2. To provide a brief overview of this case, the issue involved in these appeals relates to the authority of the Enforcement Directorate to withdraw the amount from a bank account of the CD which the former had attached earlier prior to the commencement of CIRP of the CD, but transferred it during the subsistence of moratorium. Liquidator contends that this sum must be part of the liquidation asset of the CD, but it was negated by the Adjudicating Authority principally on the ground of perceived lack of jurisdiction in the Adjudicating Authority. Facts: 3. The genesis of the dispute lies in the investigation which the Directorate of Enforcement has commenced pursuant to the FIRs registered against the Corporate Debtor, alleging bank-fraud and diversion of loan funds by the Corporate Debtor and its promoters. In furtherance thereof, vide communications dated 24.04.2017 the ED issued a notice under Section 50 of the Prevention of Money Laundering Act (PMLA, for short) to various debtors/customers of the Corporate De....
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....ccount of the Corporate Debtor. b) I.A No. 773 of 2021, for quashing and setting aside the communications of the ED, dated 24.04.2017 issued under Sec.50 of the PMLA and consequential directions to the debtors/customers of the Corporate Debtor, including Ashok Leyland Ltd., Haldia Petrochemicals Ltd., Sonalika International Tractors Ltd. and Hindustan Coca Cola Beverage Pvt. Ltd. to release the admitted outstanding dues payable to the Corporate Debtor. The ground on which the liquidator rested his plea is that the actions of ED were in direct violation of the moratorium under Section 14 of the IBC and that they had the effect of frustrating CIRP/liquidation by depriving the Corporate Debtor of its receivables and assets. 5. The ED opposed these applications and contended that the proceeding under the PMLA are independent criminal proceedings relating to "proceeds of crime", that the PMLA is a special statute with overriding effect on the IBC and that the tribunals constituted under the IBC lacked jurisdiction to interfere with the attachment proceedings or actions undertaken under the PMLA. 6. The defence of the ED prevailed with the Adjudicating Authority and acc....
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....e proceedings had already been considered by the Appellate Tribunal under the PMLA. f) so far as that the communications issued under Section 50 of the PMLA had the effect of preventing debtors/customers of the Corporate Debtor from releasing admitted dues payable to the Corporate Debtor and thereby frustrated the CIRP/liquidation process. g) that despite repeated requests and representations made by the Liquidator, the Respondent failed to withdraw the restraint communications issued to the debtors/customers of the Corporate Debtor. h) the conduct of the Respondent defeated the object of the IBC by depriving the Corporate Debtor of its receivables and diminishing the value of the insolvency estate; i) At any rate, the appellant has not sought adjudication upon attachment proceedings under the PMLA but only enforcement of the statutory consequences flowing from Section 14 of the IBC, which falls within the jurisdiction of the Adjudicating Authority. 8. Learned Counsel for the Respondent Contended: a) that the proceedings initiated by the Directorate of Enforcement arose out of serious allegations of bank fraud, forgery, criminal consp....
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....e character of proceedings concerning proceeds of crime and therefore attachment proceedings under the PMLA remain unaffected by moratorium. Reliance was placed on Embassy Property Developers case, Directorate of Enforcement Delhi V. Axis Bank [2019 SCC Online Delhi 7854], Kiran Shah, R.P. of KSL Industries Vs Enforcement Directorate, Kolkata, [Com. Appeal (AT)(Ins) 817 of 2021]. f) Section 41 of the PMLA expressly bars jurisdiction of civil courts and other authorities in matters falling within the competence of authorities constituted under the PMLA. Discussion & Decision 9. The facts and the arguments being what they are (as stated above), the critical aspect of the controversy relates to the legality of attaching the assets of the corporate debtor by the Enforcement Directorate either during the moratorium clamped under Sec.14 of the Code, or during liquidation process in the context of Sec.33(5) thereof. In short, the dispute is not appellant Vs the Enforcement Directorate, but IBC Vs PMLA, when both the legislations are in action. 10. The facts in controversy give rise to three issues: a) Whether the Order of attachment and physical removal of certa....
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....d during the distribution of the proceeds of a successful CIRP, or liquidation, which every creditor of a CD knows, accepts, and is prepared for, national interest at all times remains uncompromisable. 12. This apart, the PMLA in its working neither differentiates nor discriminates the companies that are drawn into a CIRP and those which are considered financially safe by its creditors. It must be emphasised that Parliament did not legislate IBC with an intent to create a holy Ganges out of the IBC to wash the corporate debtor of its sin of criminality under the PMLA, or as a mechanism for legitimizing any ill-gotten wealth of the CD. There is nothing in the code, that enables accommodating the wealth which is sourced by and out of a crime, in the resolution or liquidation process of a corporate debtor. The legislative intent behind the scheme of IBC only aims to deal with the issue of corporate insolvency, either in a CIRP or in a liquidation process, and to pay off the creditors of the corporate debtor through the sale proceeds of the legitimate assets of the corporate debtor either as a going concern or as liquidated assets, as the case may be, and not out of the ill-gotten w....
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....O Bank, [(2026) ibclaw.in 402 SC], and the issue has now been referred to a larger bench. 14. It now on the above plane, the controversy on jurisdiction of the tribunals constituted under the IBC to travel into the working of other statutes, more particularly the PMLA, to be tested. This is no more res integra as the issue now stands settled in the celebrated authority of the Supreme Court in Embassy Property Developments Private Limited Vs State of Karnataka and Others [(2020)13 SCC 308], where it was held that the jurisdiction of the Adjudicating Authority is limited by the extent to which it is required to be exercised for the purposes of working of the IBC and no more. After all, both IBC and the PMLA, are legislations of the Parliament and as shown earlier, they operate in different domains with different objectives to achieve, and do not overlap in their respective operations. Indeed, the IBBI has also taken note of the issue on jurisdiction, and hence in paragraph 2 of its Circular No. IBBI/CIRP/87/2025, dated 04th November, 2025, it has advised the resolution professionals that "where the assets of the corporate debtor are attached by the ED under the provisions under PM....