2020 (12) TMI 816 - AT - Money Laundering

Money Laundering - continuation of attachment order passed under PMLA Act - section 32A(2) of the IBC - HELD THAT - Since in the present case there was no resolution plan covering the assets of the Corporate Debtor as attached by the ED vide Provisional Attachment Order ED cannot be precluded from proceeding against the assets of the Corporate Debtor in accordance with law, merely because the CIRP has been initiated against the accused/Corporate Debtor. That, it is well settled law that the Legislature is presumed to know all existing laws as well as the needs of the society, while enacting a legislation. Therefore, it will be presumed that after considering all possible scenarios when the Ordinance has dealt with only one situation where the powers of ED under PMLA are being curtailed then it will be presumed in law that the powers of ED under PMLA qua all other situations remain untouched and are to be governed by the extant law under PMLA. Therefore, prior to approval of a resolution plan, the ED s power to attach property under Section 5 cannot sought to be trammelled upon merely because CIRP process is underway or because moratorium has been imposed. That, once the amended IBC has expressly laid down that only after the approval of a resolution plan under section 31 of the IBC, would the ED be precluded from proceeding against the assets of the Corporate Debtor for the commission of offences prior to the CIRP, it cannot be argued that merely because a moratorium period under section 14 of the IBC is active, the ED is precluded from proceeding against the assets of the Corporate Debtor. If the Applicant s arguments are accepted, it would lead to whittling down the provision of section 32A as well as reading into section 32A which is not there. Whether, after the appointment of the Liquidator, without hearing him any order could be passed in the appeal/application? - HELD THAT - On being asked by this Tribunal as to whether the Liquidator appointed by the NCLT is a necessary party, it is replied by the learned counsel for the appellant that no relief has been sought against the Liquidator and that the present appellant/applicant is not going to sale the attached properties mortgaged with it, if released from attachment and that the present application has been filed only to decide the question of law raised in the application i.e. applicability of amended provisions as incorporated as Section 32A(2) in the I BC by the Insolvency and Bankruptcy Code (Amendment) Act, 2020 dated 13.03.2020 enforced with effect from 28.12.2019. The Liquidator has no role to play in deciding the present application and that liquidator is not a necessary party. Admittedly, the Corporate Debtor is not made a party to the proceedings when the properties in the present proceedings are involved, so the Liquidator who has been appointed by the NCLT is necessary to be heard before passing any order. Not impleading the Liquidator as a party to the present proceeding to decide the present question of law is detrimental to the proper adjudication to the present application particulars when the question of law which has bearing on disposal of the appeal then all the necessary parties to be heard. List the appeal on 26th February, 2021.

Summary

Issues Involved:
1. Continuation of attachment order under PMLA during liquidation under IBC.
2. Applicability of Section 32A(2) of IBC (Amendment) Act, 2020.
3. Rights of secured creditors versus the provisions of PMLA.
4. Necessity of involving the Liquidator in the proceedings.

Detailed Analysis:

1. Continuation of Attachment Order under PMLA During Liquidation under IBC:
The appellant argued that once the corporate debtor proceeds for liquidation, the attachment order under PMLA cannot continue. They cited Section 32A(2) of the IBC (Amendment) Act, 2020, which states that no action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process if such property is covered under a resolution plan approved by the Adjudicating Authority or sale of liquidation assets. The appellant contended that the properties mortgaged should be released from attachment to aid the liquidation process.

2. Applicability of Section 32A(2) of IBC (Amendment) Act, 2020:
The appellant emphasized that the properties of the corporate debtor forming part of the resolution/liquidation process, subject to attachment under any other prevailing law, are liable to be released from attachment forthwith due to the amendments in IBC. They argued that the provisions of Section 32A(2) should be applied as the properties were mortgaged before the registration of any FIR or initiation of proceedings under PMLA.

3. Rights of Secured Creditors Versus Provisions of PMLA:
The appellant claimed that their rights as secured creditors under SARFAESI Act, Recovery of Debts and Bankruptcy Act, 1993, and IBC should not be superseded by the attachment under PMLA. They argued that the attachment under PMLA scuttles the procedure established by law regarding the rights of secured creditors and that the properties should be released from attachment to be dealt with in accordance with the provisions of the IBC.

4. Necessity of Involving the Liquidator in the Proceedings:
The respondent argued that the Liquidator appointed by NCLT should be a necessary party in the proceedings as the Liquidator steps into the shoes of the corporate debtor. The Tribunal agreed, stating that the Liquidator is necessary to be heard before passing any order, particularly when the question of law has a bearing on the disposal of the appeal. The Tribunal rejected the application on the ground of non-joinder of the necessary party, giving liberty to the appellant to file an appropriate application to implead the Liquidator in the appeal.

Conclusion:
The Tribunal concluded that the application to release the properties on the ground of the amended provision in IBC is rejected due to non-joinder of the necessary party, i.e., the Liquidator. The appellant was given liberty to file an appropriate application to implead the Liquidator and raise the present question of law at the time of hearing the appeal on merit. The appeal was listed for hearing on 26th February 2021.