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2021 (5) TMI 185 - AT - Insolvency and BankruptcySeeking release of attached property and to restore possession - property of Corporate Debtor who is not a financial establishment as defined under Section 2(e) WBPIDFE Act - assets of the Corporate Debtor should be kept outside the purview of sale or not - consistency of provision of Section 3 of the WBPIDFE Act with Sections 14 and 33(5) of the IBC - whether Section 14 as well as Section 33(5) of the IBC shall prevail over Section 3 of WBPIDFE Act?. Whether the property of Corporate Debtor who is not a financial establishment as defined under Section 2(e) WBPIDFE Act can be attached? - HELD THAT - Under the WBPIDFE Act, the property acquired either in the name of a financial establishment or in the name ofany other person on behalf of such financial establishment can also be attached. In the present case, the property of the Corporate Debtor is attached on the allegation that Corporate Debtor is one of the Companies of Pincon Group Companies and the Pincon Group Companies had fraudulently accepted the deposits and all the money went to Corporate Debtor and the Corporate Debtor had purchased the attached properties with the money of the depositors. In this regard, the appellant placed reliance on the findings of the designated court - There is nothing on record that Corporate Debtor had raised any objection under Section 14(3) of the WBPIDFE Actthat the properties were wrongfully attached and produced before the court. In such circumstances, we are unable to convince with the argument of Ld. counsel for the respondent that the findings of the designated court are not binding on the Corporate Debtor - thus, the properties of the corporate debtor can be attached. Whether High Court of Calcutta in WP No. 24110(W)of 2016 vide order dated 23.04.2019 directed that the assets of the Corporate Debtor should be kept outside the purview of sale? - HELD THAT - High Court have not placed on record any objection which has been filed under section 14 (3) of WBPIDFE Act. In such a situation, it cannot be said that the Hon ble High Court directed that the assets of the Corporate Debtor be kept outside the purview of sale. Whether the provision of Section 3 of the WBPIDFE Act is inconsistent with Sections 14 and 33(5) of the IBC. Therefore, Section 14 as well as Section 33(5) of the IBC shall prevail over Section 3 of WBPIDFE Act? - HELD THAT - In this case, the properties of the Corporate Debtor were attached during 10.11.2017 to 17.11.2017 and after investigation DEO, WB filed charge sheet on 31.01.2018 under Sections 406, 409, 420 and 120B of IPC and under Section 3(1)(e) of the WBPIDFE Act against 41 accused persons, including Manoranjan Roy Director of the M/s Pincon Spirits Ltd. On 16.04.2018, the registered office of M/s. Pincon Spirits Ltd. (Corporate Debtor) was sealed. Thereafter, on 26.04.2018 and 25.02.2019, various properties of M/s Pincon Spirits Ltd. were attached by the DEO, WB. Meanwhile, on 19.07.2018 initiated CIRP against M/s Pincon Spirits Ltd. Thus, admittedly, the properties of M/s Pincon Spirits Ltd. were seized and the registered office was sealed much prior to the initiation of CIRP - the moratorium has been declared after the properties were attached by the DEO, WB and produced before the Designated Court of Economic Offences - Section 14 of the IBC has no overriding effect on Section 3 of the WBPIDFE Act. Whether Section 33 (5) of the IBC prevails over Section 3 of the WBPIDFE Act? - HELD THAT - No resolution plan was approved which resulted in the change in control of the Corporate Debtor, therefore, there is no bar to take action against the property of the Corporate Debtor in connection with the offence. The explanation to sub-section (2)has clarified that the words and actions against the Corporate Debtor in relation to an offence would include the attachment, seizure, retention or confiscation of such property under the law applicable to the Corporate Debtor. Since the word include issued under sub-clause 1 of the explanation, the word action against the property of the Corporate Debtor is intended to have the widest possible amplitude. There is a clear nexus with the object of the IBC. The other part of the clarification under the explanation is found in the second sub-clause of the explanation. The Director of the Corporate Debtor and the property of the Corporate debtor cannot get immunity from the prosecution. Thus, the attached property, which is confiscated by the Designated Court of Economic Offences, cannot be de-attached - Now the attached property is not in possession and control of the DEO, WB. Therefore, as per the impugned order DEO, WB cannot de-attach the property which is already confiscated by the Designated Court of Economic Offences. The impugned order is not sustainable in law therefore, the order is hereby set aside - Appeal allowed.
Issues Involved:
1. Attachment of Corporate Debtor's property under WBPIDFE Act. 2. High Court of Calcutta's direction regarding Corporate Debtor's assets. 3. Inconsistency between WBPIDFE Act and IBC provisions. Detailed Analysis: Issue 1: Attachment of Corporate Debtor's Property under WBPIDFE Act The properties of the Corporate Debtor (M/s Pincon Spirits Ltd.) were attached in connection with fraudulent transactions by Pincon Group Companies, which included the Corporate Debtor. The Directorate of Economic Offences (DEO), WB, attached and sealed the properties under Section 3 of the WBPIDFE Act. The Designated Court of Economic Offences found that the properties were acquired using fraudulent deposits and thus ordered their confiscation. The court held that the Corporate Debtor was involved in the fraudulent activities and that the properties could be attached under the WBPIDFE Act. The judgment emphasized that the Corporate Debtor had not raised any objections under Section 14(3) of the WBPIDFE Act, making the findings of the Designated Court binding on the Corporate Debtor. Issue 2: High Court of Calcutta's Direction Regarding Corporate Debtor's Assets The judgment clarified that the High Court of Calcutta did not direct the de-attachment of the Corporate Debtor's assets. The High Court's order dated 23.04.2019 only required the DEO, WB, to disclose particulars of all attached assets except those of M/s Pincon Spirits Ltd. and M/s Greenage Food Products Ltd. The Adjudicating Authority's interpretation that the High Court directed to keep the Corporate Debtor's assets outside the purview of sale was found to be incorrect. The High Court had also directed the sale of certain assets of the Corporate Debtor to be held in a fixed deposit account, indicating no blanket exemption from attachment or sale. Issue 3: Inconsistency between WBPIDFE Act and IBC Provisions The judgment analyzed whether Section 14 (moratorium) and Section 33(5) of the IBC have an overriding effect on Section 3 of the WBPIDFE Act. Section 14 of the IBC relates to the declaration of a moratorium, which prohibits certain actions against the Corporate Debtor during the insolvency process. However, the court held that the WBPIDFE Act, which deals with fraudulent deposits and provides for penal actions, operates in a different legislative field with a distinct aim of protecting depositors' interests. The court concluded that the IBC's moratorium does not apply to criminal proceedings or actions under the WBPIDFE Act. Additionally, Section 32-A of the IBC, which provides immunity to the Corporate Debtor's properties under certain conditions, was not applicable as no resolution plan was approved in this case. The judgment ultimately set aside the Adjudicating Authority's order directing the DEO, WB, to de-attach the properties, emphasizing that the properties were already confiscated by the Designated Court and were not in the DEO, WB's possession. The liquidator was advised to pursue appropriate legal actions available under the WBPIDFE Act. Conclusion: The appeal was allowed, and the impugned order was set aside, with the liquidator given the liberty to take further legal actions. The judgment clarified the interplay between the IBC and WBPIDFE Act, emphasizing the latter's provisions in cases of fraudulent deposits.
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