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2022 (2) TMI 583 - AT - Insolvency and BankruptcyProceedings under PMLA while CIRP is in process - Provisional Attachment of the Properties - property is a part of Proceeds of Crime or not - it is the plea of the Appellant that the Attachment Proceedings and its resultant order under PMLA being Civil Proceedings should have been stayed with effect from 06.09.2019 - constitutional validity of Section 32A of the I B Code - overriding effect of IBC - HELD THAT - In the event of Resolution Plan is approved by the Committee of Creditors the said Plan is to be placed before the Adjudicating Authority as per Section 31 of the Code. The Adjudicating Authority is to apply his judicial mind in respect of the Resolution Plan so submitted who upon subjective satisfaction being arrived at that the Plan meets the requirements contemplated under Section 30 of the Code can approve the Resolution Plan . In case the Resolution Plan does not satisfy the ingredients of the Section 30 of the Code the Adjudicating Authority is to reject the said Plan . Ousting of Civil Court s Jurisdiction - HELD THAT - In matters relating to Corporate Insolvency Resolution the petition/application under Section 7 or 9 as the case may be has to be made only before the Adjudicating Authority . The National Company Law Tribunal and the National Company Law Appellate Tribunal have sole jurisdiction in respect of matters arising under the I B Code 2016 - As per Section 430 of the Companies Act 2013 the National Company Law Tribunal alone has jurisdiction in relation to the matters coming under the ambit of the Companies Act 2013 or any other law which means the I B Code as opined by this Tribunal. Indeed the exclusion under Section 63 of I B Code 2016 limiting the powers of a Civil Court to grant injunction is taken care of by means of the ingredients of Section 430 of the Companies Act. Prevention of Money Laundering Act 2002 - HELD THAT - The goal of Money Laundering operation is to hide either the source or the destination of money. The aspect of Money Laundering involves hiding moving and investing the proceeds of Criminal Conduct. The proceeds of crime is a property derived by any person as a result of criminal activity pertaining to a schedule offence mentioned in Part A or Part-B or Part-C of the schedule to the Prevention of Money Laundering Act 2002 - It is pointed out that the Shell Companies do exist only on paper and they do not partake in the ordinary commercial sphere of activity. Undoubtedly Money Laundering is a global menace. This Tribunal points out that in the decision Mahanivesh Oils Foods Pvt. Ltd. V. Directorate of Enforcement 2016 (5) TMI 981 - DELHI HIGH COURT it is held that the concerned Officer must have a Reason to Believe on the basis of material in his possession sought to be attached is likely to be concealed transferred or dealt with in a manner which may result in frustrating any proceedings for confiscation. It comes to be known that upon Default committed by the Corporate Debtor in repayment of the loan amount the Bank of India issued a Notice under Section 13(4) SARFECIE Act. On 23.07.2015 and took symbolic possession of the said property of the Corporate Debtor on 16.05.2018. The Corporate Debtor being dissatisfied with the action of the Bank of India in releasing the Auction Notice inviting bids towards sale of the property filed necessary application before the Debt Recovery Tribunal Nagpur which admitted the Application of the Corporate Debtor and granted injunction on the sale of the property - The plea of the Appellant is that the property could not be attached as per Section 8(1) of the Prevention of Money Laundering Act 2002 especially where there exists charge on the property the fact of the matter is that the mortgaged was already created in favour of the Bank. It is to be relevantly pointed out that Section 32-A Liability for Prior Offences etc. was inserted by Act 1 of 2020 S. 10 (with effect from 28.12.2019) and in reality this Section only bars attachment after approval of Resolution Plan by an Adjudicating Authority of course subject to the requirement of certain conditions being satisfied. In the instant case in hand admittedly there is no approval of Resolution Plan till date and as such it is held by this Tribunal that the Appellant cannot press into service the ingredients of Section 32-A(2) of the I B Code - this Tribunal points out that Section 32 A of the I B Code 2016 in the present form and content in a cocksure manner will negate the action i.e. taken to discharge the criminally acquired asset/property in the considered opinion of this Tribunal . Further more such Illgotten/ Illegitimate Assets will be legitimised after the Corporate Insolvency Resolution Process was completed. Although Section 14 of I B Code deals with moratorium it is not a hindrance for the Authority and the Officers under the Prevention of Money Laundering Act 2002 to deny a person of the tainted Proceeds of Crime . Suffice it for this Tribunal to point out that a person who is involved in Money Laundering is not to be allowed to enjoy the fruits of Proceeds of Crime with a view to ward off is Civil indebtedness in respect of his Creditors - As seen from the Prevention of Money Laundering Act 2002 the purpose of the Act is to prevent Money Laundering and it deals with confiscation of property derived from or concerned with Money Laundering etc. In fact The Prevention of Money Laundering Act 2002 is to fulfill our Country s obligation in adhering to the United Nations Resolutions and in regard to Assets/Properties being the Proceeds of Crime it takes a primacy and precedence over the Insolvency and Bankruptcy Code 2016 which promotes Resolution as its objective over Liquidation in the considered opinion of this Tribunal . In the instant case there is no Resolution Plan as approved by the Tribunal and further no Liquidation Proceedings had ended in the sale of Liquidation Assets of the Corporate Debtor - the objective purpose of two enactments (1) I B Code and (2) PMLA even though at the first blush appear to be at logger heads there is no repugnancy and inconsistency between them in lieu of the fact the text shape and its colour are conspicuously distinct and different operating in their respective spheres. More importantly when confiscation of the Proceeds of Crime takes place the said Act is performed by the Government not in its status/capacity/role as Creditor. There is no two opinion of the fact that the First Appeal to the Appellate Tribunal is as per Section 26 of the PMLA against the Order passed by the Adjudicating Authority under sub Sections 2 3 of Section 8 of the Act. This Tribunal makes it crystalline clear that the proper recourse to be resorted to by the Corporate Debtor is to approach the Competent Forum by pursuing its remedy in Appeal under the Prevention of Money Laundering Act 2002 to its logical end or any other Jurisdictional Forum (other than the purview of I B Code 2016, ) of course in the manner known to Law and in accordance with Law if it so desires/advised. Appeal dismissed.
Issues Involved:
1. Jurisdiction of NCLT under IBC vs. PMLA. 2. Effect of moratorium under Section 14 of IBC on PMLA proceedings. 3. Applicability of Section 32-A of IBC. 4. Priority and conflict between IBC and PMLA. 5. Validity and maintainability of the appeal. Issue-wise Analysis: 1. Jurisdiction of NCLT under IBC vs. PMLA: The NCLT, while dealing with insolvency proceedings, does not have jurisdiction over matters governed by PMLA. The judgment emphasized that NCLT cannot adjudicate on issues related to the attachment of properties under PMLA, as these issues fall within the exclusive domain of the authorities under PMLA. The NCLT is not a superior court with judicial review powers over administrative actions taken under PMLA. 2. Effect of Moratorium under Section 14 of IBC on PMLA Proceedings: The moratorium imposed under Section 14 of IBC does not apply to proceedings under PMLA. The judgment referenced the Madras High Court's decision, which clarified that Section 14 of IBC does not bar proceedings under PMLA, as PMLA is a special statute with its own objectives. The attachment of properties under PMLA is not affected by the moratorium under IBC. 3. Applicability of Section 32-A of IBC: Section 32-A of IBC, which provides immunity to the corporate debtor from prosecution for prior offenses upon approval of a resolution plan, was discussed. However, the judgment noted that this section only applies after the approval of the resolution plan by the adjudicating authority. Since no resolution plan was approved in the present case, Section 32-A was not applicable. 4. Priority and Conflict between IBC and PMLA: The judgment highlighted that there is no repugnancy or inconsistency between IBC and PMLA. Both statutes operate in their respective spheres, with PMLA dealing with the proceeds of crime and IBC focusing on insolvency resolution. The PMLA takes precedence over IBC concerning the attachment and confiscation of properties derived from criminal activities. 5. Validity and Maintainability of the Appeal: The appeal filed by the resolution professional was deemed not maintainable. The judgment emphasized that issues related to the attachment of properties under PMLA should be addressed through the appellate mechanism provided under PMLA, not through NCLT or NCLAT. The resolution professional had already approached the PMLA Appellate Tribunal, and the appropriate forum for challenging the attachment order was under PMLA. Disposition: The appeal was dismissed, and the resolution professional was directed to pursue the remedy under PMLA. The judgment underscored that the proper recourse for the corporate debtor is to approach the competent forum under PMLA for redressal.
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