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2023 (3) TMI 592 - AT - Companies LawProvisional attachment of property - Power of the NCLT to protect the assets of corporate debtor - Action under the Prohibition of Benami Property Transactions Act, 1988 - clear cut stand of the Respondent is that, in the instant case, the Adjudicating Authority (Prohibition of Benami Property Transactions Act, 1988), having passed an Order, treating the Appellant s Assets as Benami Assets, only the Appellate Tribunal, under PBPT Act, can test the veracity of the PBPT Adjudicating Authority. HELD THAT - It transpires that the Appellant / Liquidator, had placed the proposed Resolution Plans, before the Committee of Creditors, during the 9th CoC Meeting, that took place on 02.11.2018. After due consideration of the Resolution Plans submitted, the CoC, had rejected the Resolutions Plans, and consciously had resolved to prefer an Application for Liquidation of the Corporate Debtor, before the Adjudicating Authority. In MA/604/2018, filed by the Appellant / Liquidator /Petitioner, under Section 33 (2) of the I B Code, 2016, for Liquidation of the Corporate Debtor, a Liquidation Order, was passed on 14.02.2019. It appears that the Appellant / Petitioner / Liquidator (pending the Liquidation Proceeding), had received a Notice dated 01.11.2019, from the Respondent, to Show Cause, as per Section 24(1) of the The Prohibition of Benami Property Transactions Act, 1988, as to why the Property being the proportionate share of the Land, owned by the Corporate Debtor, out of the total extent of 889.82 Acres, where the factory of the Corporate Debtor, was located, should not be treated as Benami Property, and that, any Reply ought to be provided on or before 21.11.2019. The Respondent, also had issued a Provisional Attachment Order dated 01.11.2019, as per Section 24(3) of the Act, 1988. The crystalline stand of the Appellant / Liquidator is that, there was no Cash Inflows into the Company, either in the form of Cash or Cheque, from the Promoters of the Company or others, and the same is evidenced from the Disclosure on Specified Bank Notes, given by the Statutory Auditor, in his Report for the Financial year 2016-17, filed with the Ministry of Corporate Affairs. To support the fact that there was no Cash Flows into the Corporate Debtor, the Appellant / Petitioner, had enclosed the Copy of the Audited Balance Sheets for the Financial Years 2016-17, 2017-18 and 2018-19, Income Tax Returns for the Years 2016-17, 2017-18 and 2018-19 and the Bank Statements from October 2016 to March 2017 of the Corporate Debtor. In the instant case, it is quite evident that the Respondent / Department had attached the Property of the Corporate Debtor, as per the ingredients of the Provisions of The Prohibition of Benami Property Transactions Act, 1988. Therefore, an Attachment effected, under The Prohibition of Benami Property Transactions Act, 1988, is to be assailed under the relevant provisions of the said Act, 1988, and in fact, the I B Code, 2016, only pertains to questions concerning the Insolvency Resolution or Liquidation Proceedings of the Corporate Debtor - the Attachment, made as per Section 24(3) of The Prohibition of Benami Property Transactions Act, 1988, cannot be a subject matter of proceedings, under Section 60(5) of the I B Code, 2016, in the considered opinion of this Tribunal. To put it differently, the Adjudicating Authority (National Company Law Tribunal), is not the proper FORA, to determine the controversies, revolving around the Attachment of the Property, under The Prohibition of Benami Property Transactions Act, 1988, as held by this Tribunal. As such, it is held by this Tribunal, that the filing of the instant Comp. App (AT) (CH) (INS.) Nos. 188 and 189 of 2022, by the Appellant / Petitioner / Liquidator, per se are not Maintainable, in the eye of Law. A closure scrutiny of The Prohibition of Benami Property Transactions Act, 1988, and the I B Code, 2016, clearly exhibit that they do operate in their own field and without any simmering doubt, this Tribunal, without any haziness, holds that an element of public interest, is involved in PBPT Act - Only when a Resolution Plan was approved by the Adjudicating Authority (Tribunal), Section 32A of the I B Code, 2016, gets attracted. In reality, an Adjudicating Authority (Tribunal), cannot traverse upon matters which is beyond its scope. To put it precisely, issues/disputes, pertaining to an Attachment, effected under The Prohibition of Benami Property Transactions Act, 1988, cannot be gone into, by an Adjudicating Authority (Tribunal), under the I B Code, 2016. In short, the Appellant / Liquidator, cannot take umbrage, either under the ingredients of Section 32A, coupled with Section 60(5) of the I B Code, 2016. This Tribunal, taking note of the divergent contentions advanced on either side, considering the fact that Liquidator, cannot bypass a remedy, provided under The Benami Transactions (Prohibition) Act, 1988, in assailing the Order, passed by the Adjudicating Authority, before the Appellate Tribunal, under the PBPT Act, 1988, keeping in mind of the surrounding facts and circumstances of the case, in a holistic fashion, comes to a resultant conclusion that the view arrived at, by the Adjudicating Authority (National Company Law Tribunal, Division Bench II, Chennai), in dismissing the MA/1373/2019 and MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, through its Impugned Order, dated 29.03.2022, is free from Legal Infirmities. Appeal dismissed.
Issues Involved:
1. Jurisdiction of NCLT under Section 60(5) of IBC, 2016. 2. Applicability of Prohibition of Benami Property Transactions Act, 1988. 3. Conflict between IBC, 2016 and Prohibition of Benami Property Transactions Act, 1988. 4. Validity of Provisional Attachment Orders. 5. Role and Powers of the Liquidator. 6. Moratorium under Section 14 of IBC, 2016. 7. Non-obstante Clauses in Special Statutes. Summary: 1. Jurisdiction of NCLT under Section 60(5) of IBC, 2016: The Appellant argued that the NCLT should have entertained and disposed of questions arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor under Section 60(5) of IBC, 2016. However, the Tribunal held that the attachment made under the Prohibition of Benami Property Transactions Act, 1988, cannot be a subject matter of proceedings under Section 60(5) of the IBC, 2016, as the NCLT is not the proper forum to determine controversies revolving around the attachment of property under the Benami Act. 2. Applicability of Prohibition of Benami Property Transactions Act, 1988: The Respondent contended that once a cause of action arises under the Prohibition of Benami Property Transactions Act, 1988, any properties subject to such transactions shall be liable to be confiscated by the Central Government. The Tribunal noted that the Benami Act has its own procedural hierarchy and remedies, which the Appellant must follow. 3. Conflict between IBC, 2016 and Prohibition of Benami Property Transactions Act, 1988: The Appellant argued that IBC, 2016, should prevail over the Benami Act due to its overriding effect. However, the Tribunal found no inconsistency between the two statutes and held that the Benami Act operates in its own field. The Tribunal emphasized that public interest is involved in the Benami Act, and it cannot be overridden by IBC, 2016. 4. Validity of Provisional Attachment Orders: The Tribunal observed that the provisional attachment orders made by the Respondent were in accordance with the Benami Act and that the Liquidator should seek remedy under the provisions of the Benami Act. The Tribunal also noted that the moratorium under Section 14 of IBC, 2016, does not affect the provisional attachment orders passed under the Benami Act. 5. Role and Powers of the Liquidator: The Tribunal stated that the Liquidator's actions are under the parental supervision of the Adjudicating Authority and that the Liquidator has no unfettered powers. The Liquidator must perform functions in a reasonable and prudent manner and cannot bypass the procedural hierarchy of the Benami Act. 6. Moratorium under Section 14 of IBC, 2016: The Tribunal clarified that the moratorium under Section 14 of IBC, 2016, does not affect the provisional attachment orders passed under the Benami Act. The object of the Benami Act is to prohibit benami transactions and recover properties held benami. 7. Non-obstante Clauses in Special Statutes: The Tribunal noted that both the Benami Act and IBC, 2016, contain non-obstante clauses. However, it emphasized that the Benami Act has an overriding effect as per Section 67 of the Act. The Tribunal held that the Benami Act's non-obstante clause takes precedence in this case. Disposition: The Tribunal dismissed the appeals, stating that the Appellant/Liquidator must seek redressal through the competent forum under the Benami Act. The Tribunal's dismissal does not preclude the Appellant from approaching the appropriate forum for necessary reliefs.
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