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2019 (10) TMI 1282 - AT - Insolvency and BankruptcyJurisdiction - power of 'Directorate of Enforcement' to attach the property of the 'Corporate Debtor' or part thereof - CIRP process undergoing - Operational Creditor or not - Proceeds of crime - HELD THAT - The stand taken by the 'Directorate of Enforcement', is contrary to the stand taken by the Government of India, the order of attachment dated 10th October, 2019 passed by the Deputy Director, 'Directorate of Enforcement' with regard to part property of the 'Corporate Debtor' (Bhushan Power Steel Limited) is stayed. The Director, Deputy Director and other officers of 'Directorate of Enforcement' are prohibited from attachment of any property of the 'Corporate Debtor' (Bhushan Power and Steel Limited) without prior approval of this Appellate Tribunal. The property already attached by them be released in favour of the 'Resolution Professional' immediately. Further, to ensure that the 'resolution plan' is not given effect before deciding the issue, we stay the impugned order dated 5th September, 2019, so far it relates to the payment of the creditors. Post the case 'for orders' on 25th October, 2019 on the top of the list.
Issues:
1. Jurisdiction of Directorate of Enforcement to attach property of Corporate Debtor during insolvency resolution process. 2. Whether Directorate of Enforcement qualifies as an Operational Creditor for money claims generated from attached property of Corporate Debtor. Issue 1: Jurisdiction of Directorate of Enforcement to attach property of Corporate Debtor during insolvency resolution process: The primary question before the National Company Law Appellate Tribunal was whether the Directorate of Enforcement had the authority to attach the property of a Corporate Debtor undergoing insolvency resolution. The Union of India, represented by the Ministry of Corporate Affairs, argued that enforcement agencies like the Directorate of Enforcement should not have jurisdiction to attach assets of a Corporate Debtor once a resolution plan is approved. They emphasized that the Insolvency and Bankruptcy Code (Amendment) Act, 2019 made it clear that a resolution plan is binding on all stakeholders, including government bodies. The government's stance was that investigations by agencies like CBI, SFIO, or ED can proceed independently of the Corporate Insolvency Resolution Process (CIR Process), and the new management post-resolution should not be held liable for the previous management's actions. Issue 2: Whether Directorate of Enforcement qualifies as an Operational Creditor for money claims from attached property: The second issue revolved around whether the Directorate of Enforcement could be considered an Operational Creditor under the Insolvency and Bankruptcy Code for claims arising from attached property of the Corporate Debtor. The Tribunal noted that the stand taken by the Directorate of Enforcement was contradictory to the Government of India's position. Consequently, the Tribunal stayed the attachment order issued by the Directorate of Enforcement regarding the property of the Corporate Debtor. They directed that the attached property be released in favor of the Resolution Professional immediately. Additionally, the Tribunal stayed the order related to creditor payments to ensure the resolution plan's integrity pending further decision. In conclusion, the National Company Law Appellate Tribunal ruled in favor of restricting the Directorate of Enforcement from attaching the property of a Corporate Debtor undergoing insolvency resolution without prior approval. The judgment highlighted the importance of upholding the sanctity of the resolution process and protecting the interests of all stakeholders involved in the insolvency proceedings.
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