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2021 (9) TMI 1027 - AT - Insolvency and BankruptcySeeking removal of attachment order - Attachment of bank accounts - accounts of the Corporate Debtor attached was subsequent to the admission of Application under Section 7 and initiation of CIRP - Deputy Collector inspite of service of notice did not respond and remained ex parte - applicability of Section 32A of IBC - HELD THAT - Although Section 14 of the MPID Act (which is an Act earlier to IBC) has effect notwithstanding anything inconsistent with any other law, the said Section 14 would be subject to the subsequent Code promulgated by the Government of India which has amended laws related to insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner - there are no force in the argument of the Appellants that the Resolution Professional and later Liquidator could not have moved the Adjudicating Authority for orders to tide over the attachment. Applicability of Section 32A - HELD THAT - In the present matter, the argument that unless liquidation takes place, protection of Section 32A cannot be invoked is not well founded. Unless property becomes available and is subjected to the Liquidation Process under Chapter III Part II of the IBC, the applicability or inapplicability of Section 32A cannot be claimed. As per Chapter III, the Liquidator is duty bound under Section 35 to take into custody or control all the assets, property, effects and actionable claims of the Corporate Debtor. Explanation below sub-section (2) of Section 32A makes it clear that no action shall be taken against the property of the Corporate Debtor in relation to an offence committed prior to the commencement of CIRP and the action includes the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the Corporate Debtor. If in liquidation, there is a change of control of Corporate Debtor to a person who was not a promoter or in management or in control of the Corporate Debtor or a related party of such person, the person will be protected. Thus, beforehand it cannot be claimed that protection of Section 32A is not available. The seizure or attachment of accounts of Corporate Debtor cannot stand as obstruction when the Corporate Debtor is at the stage of liquidation under IBC - MPID aims to protect interest of Depositors. IBC is broader and aims to consolidate and amend laws relating to re-organisation and insolvency resolution of corporate persons and partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons. The scheme aims at balancing interest of all stakeholders. This will include interest of Depositors. Thus, IBC has broader contours. Letting one set of creditors march over others is not permissible. In the present matter also, if the MPID Act is seen, Section 7(5) makes it clear that when dealing with the attachment of property, the procedure to be followed by the designated court is as per the Code of Civil Procedure. In the subsequent part of the Act while dealing with offence (as per Section 3 of the PMLA), the procedure for taking cognizance of offence is given in Section 13 and provisions of CrPC as applicable for warrant trial cases is applied. There is similarity on these broad aspects between PMLA and MPID. Thus, for attachment under the MPID Act, Section 14 of the IBC dealing with Moratorium would apply and the provisions dealing with powers of IRP, RP and duty to take into custody and control the assets of the Corporate Debtor would be enforceable. In para 7 of the Application, the Resolution Professional had clearly mentioned that certain properties owned by the Directors/ promoters were also attached and filed the notification dated 31.03.2017. Action against personal properties of owners/ promoters may continue under MPID. In IBC concern is with property of Corporate Debtor. The correspondence impugned before the Adjudicating Authority was the letter dated 22.10.2018 (Annexure-7; Page 109) sent by the Deputy Collector ordering attachment of the Bank Accounts of the Corporate Debtor in the State Bank of India, Anantpura and Rania - Adjudicating Authority wrongly in the impugned order read this order dated 22.10.2018 with notification dated 31.03.2017. Appeal allowed in part.
Issues Involved:
1. Validity of the impugned order passed by the Adjudicating Authority. 2. Applicability of Section 32A of the Insolvency and Bankruptcy Code (IBC). 3. Overriding effect of IBC over the Maharashtra Protection of Interest of Depositors (MPID) Act. 4. Jurisdiction of the Adjudicating Authority under IBC. Detailed Analysis: 1. Validity of the Impugned Order: The appeals challenge the impugned order dated 15th January 2020, which directed the removal of attachment on the bank accounts of the Corporate Debtor, Namdhari Food International Pvt. Ltd., by the Deputy Collector. The Adjudicating Authority had set aside the attachment order dated 22.10.2018 and directed the Home Secretary of Maharashtra and the Deputy Collector to hand over the assets to the Liquidator. The appellants argued that the Adjudicating Authority did not have the power to set aside a gazette notification passed by an administrative or quasi-judicial body. 2. Applicability of Section 32A of the Insolvency and Bankruptcy Code (IBC): The appellants contended that Section 32A of the IBC, which provides immunity to the corporate debtor and its property from prosecution for offences committed prior to the commencement of the Corporate Insolvency Resolution Process (CIRP), was inapplicable. They argued that Section 32A could not be invoked for properties not part of a Resolution Plan or sold as liquidation estate. The Tribunal, however, held that Section 32A provides protection to the property of the Corporate Debtor in relation to an offence committed prior to the commencement of CIRP and includes attachment, seizure, retention, or confiscation of such property under applicable law. 3. Overriding Effect of IBC over MPID Act: The appellants argued that the MPID Act, enacted under the State List, could not be overridden by the IBC, which is under the Concurrent List. They relied on the judgment in "K.K. Baskaran v. State" to argue that MPID Act has exclusive domain. The Tribunal, however, held that Section 238 of the IBC, which gives the Code an overriding effect, would prevail. The Tribunal noted that the IBC aims to consolidate and amend laws related to insolvency resolution of corporate persons in a time-bound manner for maximization of value of assets and balancing the interests of all stakeholders, including depositors. 4. Jurisdiction of the Adjudicating Authority under IBC: The appellants argued that the Adjudicating Authority under IBC did not have jurisdiction to interfere with the attachment made under the MPID Act. They contended that the Resolution Professional should have approached the MPID Court. The Tribunal, however, held that the Adjudicating Authority under IBC has broad jurisdiction under Section 60(5)(c) to decide any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor. Conclusion: The Tribunal allowed the appeals in part, modifying the impugned order by deleting the reference to the notification dated 31.03.2017. The rest of the impugned order was maintained, thereby upholding the removal of attachment on the bank accounts of the Corporate Debtor. The Tribunal emphasized that the IBC has broader contours and aims to balance the interests of all stakeholders, including depositors, and that letting one set of creditors march over others is not permissible.
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