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2021 (2) TMI 390 - HC - Money LaunderingProvisional attachment of the properties - while the implementation of the resolution plan was in process, the impugned order has been passed by the Directorate of Enforcement attaching the properties of Respondent No.4, including three properties already mortgaged to the Bank. It is the case of the Petitioner that this has had a negative impact on the CIRP and realization of the debt of the Petitioner from the Respondent No.4 - HELD THAT - The ED s order of provisional attachment of the properties of Respondent No. 4 has been passed after the approval of the resolution plan by the NCLT, the said provisional attachment would prima facie be contrary to Section 32A of the IBC. The recent judgment of the Supreme Court in MANISH KUMAR VERSUS UNION OF INDIA AND ANOTHER 2021 (1) TMI 802 - SUPREME COURT has extensively dealt with this issue in context of Section 32A of the IBC and held that S ignificantly every person who was associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of the offence in terms of the report submitted continues to be liable to be prosecuted and punished for the offence committed by the corporate debtor. The corporate debtor and its property in the context of the scheme of the code constitute a distinct subject matter justifying the special treatment accorded to them. Creation of a criminal offence as also abolishing criminal liability must ordinarily be left to the judgement of the legislature. Erecting a bar against action against the property of the corporate debtor when viewed in the larger context of the objectives sought to be achieved at the forefront of which is maximisation of the value of the assets which again is to be achieved at the earliest point of time cannot become the subject of judicial veto on the ground of violation of Article 14. Let copy of the resolution plan be placed on record by the Petitioner Bank. Counter affidavit be filed within four weeks. Rejoinder thereto, if any, be filed within four weeks thereafter. The ED is permitted to take the above objections, with respect to the jurisdiction of this court, in its counter affidavit. The same shall be heard as a preliminary objection - List for hearing on 18th May, 2021.
Issues Involved:
1. Jurisdiction of the Court 2. Conflict between Provisional Attachment under PMLA and CIRP under IBC 3. Impact of ED’s Provisional Attachment on CIRP and Resolution Plan 4. Validity of Provisional Attachment Post-Approval of Resolution Plan Detailed Analysis: 1. Jurisdiction of the Court: The respondent's counsel argued that the Delhi High Court does not have jurisdiction to entertain the writ petition, citing the judgment in Aasma Mohammed Farooq v. UOI & Ors. The appropriate court would be the High Court of Andhra Pradesh. This objection will be addressed as a preliminary issue in the counter affidavit. 2. Conflict between Provisional Attachment under PMLA and CIRP under IBC: The petitioner, Union Bank of India, challenged the provisional attachment order passed by the Directorate of Enforcement (ED) under the PMLA. The petitioner argued that such intervention by the ED negatively impacts the CIRP and the realization of the debt. The Ministry of Corporate Affairs had previously recognized that the rights of secured financial creditors should be protected during the resolution process and that the resolution plan, once approved, is binding on all stakeholders, including government agencies. 3. Impact of ED’s Provisional Attachment on CIRP and Resolution Plan: The petitioner highlighted a similar case (JSW Steel Ltd. v. Mahender Kumar Khandelwal and Ors.), where it was established that the intervention by the ED would have a negative effect on the CIRP. The Ministry of Corporate Affairs had stated that after the approval of the resolution plan, there should be no attachment or confiscation of the corporate debtor's assets by enforcement agencies. The rationale is to protect the new management and ensure the revival of the company. 4. Validity of Provisional Attachment Post-Approval of Resolution Plan: The court noted that the ED's provisional attachment order, passed after the approval of the resolution plan by the NCLT, prima facie, contravenes Section 32A of the IBC. The Supreme Court in Manish Kumar v. Union of India upheld the validity of Section 32A, emphasizing that once a resolution plan is approved, it is binding, and the new management cannot be held liable for past crimes. The provision aims to attract resolution applicants by ensuring that the corporate debtor and its assets are not subject to attachment post-resolution plan approval. Interim Relief and Directions: The court granted an interim stay on the proceedings arising from the provisional attachment order, subject to the petitioner providing details of steps taken to monetize the assets and any recovery made. The ED was directed to file a detailed counter affidavit, and the Ministry of Finance was asked to state its position on the issue. The petitioner was also instructed to submit a copy of the resolution plan. Next Hearing: The matter was listed for hearing on 18th May 2021, with directions for the filing of counter affidavits and rejoinders within specified timelines.
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