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2019 (5) TMI 1468 - AT - Insolvency and BankruptcyAttachment of properties - release of attached assets of the Corporate Debtor - overriding effect of IBC over PMLA - declaration of Moratorium for prohibiting some of the action - HELD THAT - 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. The object of the Prevention of Money Laundering Act, 2002 is to prevent the money laundering and to provide confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. 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 or incidental thereto. Thus, as the Prevention of Money Laundering Act, 2002 or provisions therein relates to proceeds of crime , Section 14 of the I B Code is not applicable to such proceeding. Imposition of penalty - HELD THAT - The offence of money-laundering is punishable with rigorous imprisonment which is not less than three years and has nothing to do with the Corporate Debtor . It will be applicable to the individual which may include the Ex-Directors and Shareholders of the Corporate Debtor and they cannot be given protection from the Prevention of Money Laundering Act, 2002 and such individual cannot take any advantage of Section 14 of the I B Code - This apart, the attachments were made by the Deputy Director of Directorate of Enforcement much prior to initiation of the Corporate Insolvency Resolution Process , therefore, the Resolution Professional cannot derive any advantage out of Section 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 , there are no merits in this appeal. Appeal dismissed.
Issues:
1. Release of attachment of assets by Directorate of Enforcement during the moratorium period. 2. Applicability of Section 14 of the Insolvency and Bankruptcy Code, 2016. 3. Conflict between the Insolvency and Bankruptcy Code and the Prevention of Money Laundering Act, 2002. Issue 1: Release of attachment of assets by Directorate of Enforcement during the moratorium period The case involved the Directorate of Enforcement attaching properties of a corporate debtor. The Resolution Professional sought the release of the attachment by the Deputy Director of Enforcement during the moratorium period. The Adjudicating Authority noted that the attachment order was issued before the declaration of the moratorium. The appeal challenged the order releasing the attachment dated 12th July, 2018. Issue 2: Applicability of Section 14 of the Insolvency and Bankruptcy Code, 2016 The Resolution Professional argued that Section 14 of the Insolvency and Bankruptcy Code, 2016, has an overriding effect on the Prevention of Money Laundering Act, 2002. Section 14 imposes a moratorium on certain actions during the insolvency process, prohibiting suits, asset transfers, and enforcement of security interests. The Directorate of Enforcement contended that actions under the Prevention of Money Laundering Act, 2002, can proceed during the moratorium period. Issue 3: Conflict between the Insolvency and Bankruptcy Code and the Prevention of Money Laundering Act, 2002 The judgment clarified that Section 14 of the Insolvency and Bankruptcy Code, 2016, does not apply to criminal proceedings or actions related to crime proceeds. The Prevention of Money Laundering Act, 2002, deals with proceeds of crime and money laundering offenses. The court held that the Prevention of Money Laundering Act, 2002, operates concurrently with the Insolvency and Bankruptcy Code, without one act overriding the other. The court emphasized that individuals, including ex-directors and shareholders, involved in money laundering offenses cannot seek protection under the Insolvency and Bankruptcy Code. Additionally, since the attachments were made before the initiation of the Corporate Insolvency Resolution Process, the Resolution Professional could not benefit from Section 14. This detailed analysis of the judgment highlights the key issues of the case, the arguments presented by both parties, and the court's interpretation of the relevant legal provisions, providing a comprehensive understanding of the decision.
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