2020 (12) TMI 321 - Tri - Insolvency and Bankruptcy

Permission to sale the assets of the CD which were attached by the respondent/ED - section 32A inserted by Insolvency and Bankruptcy Code (Amendment) Act, 2020 - respondent submitted that section 32A is not applicable to the liquidation proceedings and that only in a case where a resolution plan is passed this provision would apply - HELD THAT - The CD is undergoing liquidation and the Liquidator seek permission to sell the assets already under order of attachment by the respondent in view of the application of amended provision of the Code. Considering the first objection our endeavour is to see whether section 32A is not applicable to the sale of assets of the CD which is under order of attachment and the proceedings of the respondent is under challenge and pending before the Appellate Authority, PMLA against confirmation of Provisional Attachment order, of the Adjudicating Authority, PMLA. What is prayed for in the case at hand is not for releasing the attachment. According to the Ld. Liquidator, de-attachment is not at all necessary because section 32A provide immunity against prosecution of the corporate debtor and preventing action against the property of such corporate debtor undergoing CIRP or Liquidation. According to him the effect of attachment of the properties of the CD is to be nullified upon applying section 32A and de-attachment if any is to be asked for by the buyer and not by the liquidator. A reading of sub-section (2) of section 32A with the object behind the introduction we are of the considered opinion that section 32A is also applicable to liquidation proceedings. Under the object as well as under section it is specifically dealt with that the section is applicable to prevent insolvency in case the company goes into CIRP or liquidation. Coming to the objection that the ld. Counsel for the respondent submitted that proceedings are going on before the PMLA Appellate Authority which is attended by the Ld. Liquidator and the challenge against the attachment became final and therefore, even if the provisions of Code are amended, if the right of the parties had already been crystallized then, subsequent change in law would not take away such rights which had attained finality - It is true that the Liquidator who was the then RP preferred an application for de-attachment of the assets of the CD issued by the respondent on the ground of violation of moratorium declared under section 14 of the Code. The CA(IB) No. 399/KB/2018, which was filed by the RP was dismissed for the reason that the attachment was prior to the declaration of moratorium. The properties of a CD under liquidation is also to be exempted from the purview of the commission of such offence. In view of the above said position of law we are of the considered opinion that a liquidator can proceed with the sale of the assets even if it is under attachment by the respondent, to continue the time bound process of liquidation under the provisions of the Code and upon completion of the sale proceedings the buyer can take appropriate steps to release the attachment. It appears to us that the attachment and confiscation of properties of a CD undergoing CIRP or liquidation become void under section 32A of the Code. The liquidator is permitted to sell the assets of the CD as per the provisions of the Code and Regulation which were attached by the respondent/ED subject to the right of the buyer to apply for de-attachment in accordance with section 32A of the Code from the appropriate authority - The respondents are directed to render as much co-operation to the liquidator to proceeds with the sale of the assets.

Summary

Issues Involved:
1. Applicability of Section 32A of the Insolvency & Bankruptcy Code (I&B Code) to liquidation proceedings.
2. Liquidator's authority to sell attached assets under Section 32A.
3. Impact of prior judicial decisions on the attachment of assets.
4. Rights crystallization and subsequent changes in law.

Detailed Analysis:

1. Applicability of Section 32A of the I&B Code to Liquidation Proceedings:
The Liquidator, Mr. Anil Goel, filed an application under Section 32A of the I&B Code seeking permission to sell the assets of the Corporate Debtor (CD), which were attached by the Enforcement Directorate (ED). The respondent's counsel argued that Section 32A is not applicable to liquidation proceedings and is only relevant when a resolution plan is approved. However, the Tribunal clarified that Section 32A applies to both CIRP and liquidation, as stated in the object behind the section's insertion and the wording of subsection (2) of Section 32A. The Tribunal concluded that Section 32A is intended to provide immunity against prosecution and prevent action against the property of the CD during both CIRP and liquidation.

2. Liquidator's Authority to Sell Attached Assets Under Section 32A:
The Liquidator contended that the attachment of assets hampers the sale of the CD as a going concern. The Tribunal examined Section 32A, which provides immunity from prosecution for offences committed prior to the commencement of CIRP and prevents action against the property of the CD. The Tribunal found that the Liquidator has the authority to proceed with the sale of the attached assets under Section 32A, without needing to seek de-attachment. The buyer, upon purchasing the assets, can then seek appropriate relief for de-attachment.

3. Impact of Prior Judicial Decisions on the Attachment of Assets:
The Tribunal acknowledged that previous applications for de-attachment were dismissed by the Adjudicating Authority, NCLAT, and the Supreme Court. However, these decisions were based on the situation before the amendment introducing Section 32A. The Tribunal emphasized that the new provision changes the legal landscape, allowing the Liquidator to sell the attached assets despite prior judicial decisions.

4. Rights Crystallization and Subsequent Changes in Law:
The respondent's counsel argued that the attachment had attained finality and subsequent changes in law (Section 32A) should not affect the crystallized rights. The Tribunal referred to the Supreme Court judgment in Lekh Raj v. Ranjit Singh, which held that subsequent changes in law do not affect rights that have already attained finality. However, the Tribunal distinguished the present case by noting that the Liquidator is not seeking de-attachment but merely permission to sell the attached assets under the new legal provision. The Tribunal concluded that Section 32A's non-obstante clause allows the Liquidator to proceed with the sale, and the buyer can seek de-attachment post-sale.

Conclusion:
The Tribunal allowed the Liquidator to sell the attached assets of the CD under Section 32A of the I&B Code, subject to the buyer's right to apply for de-attachment. The Tribunal directed the respondents to cooperate with the Liquidator in the sale process. The application was disposed of accordingly, with no order as to costs.