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2024 (8) TMI 794 - AT - Insolvency and BankruptcyApproval of Resolution Plan - lifting of attachment by Enforcement Directorate over the assets of the Corporate Debtor - Section 32A of the IBC - HELD THAT - Through, Section 32-A, the legislature have authoritatively spoken of the terminal point whereafter the powers under the PMLA would not be exercisable. The events which trigger its application when reached would lead to erection of an impregnable wall, which cannot be breached by invocation of the provisions of the PMLA. The Adjudicating Authority has missed the clear pronouncement by the Delhi High Court in Rajiv Chakraborty 2022 (11) TMI 600 - DELHI HIGH COURT with regard to Section 32A. The Appellant has relied on judgment of the Bombay High Court in Shiv Charan 2024 (3) TMI 136 - BOMBAY HIGH COURT , where the Bombay High Court has held that NCLT does not lack jurisdiction to use its judicial discretion to adjudicate upon the release of the attachment. The Hon ble Supreme Court had occasion to consider the challenge to Section 32-A in the Writ Petition filed in the Hon ble Supreme Court under Article 32 in the judgment of Manish Kumar vs. Union of India and Anr 2021 (1) TMI 802 - SUPREME COURT . In the above judgment challenge to Section 32-A was repelled and while repelling the challenge to Section 32-A, the Hon ble Supreme Court examined the legislative scheme of Section 32-A - Hon ble Supreme Court has clearly held that Section 32-A has been engrafted in the legislation, which is a legislative scheme and if legislature thought that immunity be granted to the Corporate Debtor or its property, it hardly furnishes a ground for this Court to interfere. In paragraph 326, it has been emphasized that the extinguishment of the criminal liability of the Corporate Debtor is apparently important to the new management to make a clean break with the past and start on a clean slate. Thus, the Adjudicating Authority erred in not extending the benefit of Section 32-A, subsection (2) to the Resolution Applicant, who was entitled to protection under Section 32A of the IBC. The SRA is entitled to relief of extension of benefit of protection of Section 32-A to lift the attachment by Enforcement Directorate over the assets of the Corporate Debtor - appeal allowed.
Issues Involved:
1. Approval of the Resolution Plan. 2. Refusal to release assets attached by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA). 3. Application of Section 32-A of the Insolvency and Bankruptcy Code (IBC), 2016. 4. Validity of the Adjudicating Authority's findings in paragraph 60 of the impugned order. 5. Jurisdiction and powers of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) regarding the release of attached properties. Detailed Analysis: 1. Approval of the Resolution Plan: The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor commenced on 08.10.2021. The Resolution Professional (RP) conducted due diligence and shared the Resolution Plan with the Committee of Creditors (CoC), which approved the plan with a 100% vote share on 18.10.2023. The RP filed an application for approval of the Resolution Plan. The Adjudicating Authority approved the Resolution Plan submitted by the Successful Resolution Applicant (SRA) but refused to grant the prayer for the release of assets attached by the ED. 2. Refusal to Release Assets Attached by ED: The SRA's Resolution Plan proposed the vacation of charges by the ED and other authorities. However, the Adjudicating Authority refused to grant this prayer, stating that it would be for the SRA to resort to appropriate proceedings to seek remedy. The Adjudicating Authority observed that the properties already attached by the ED under the PMLA would not be released and that the SRA would not be entitled to any criminal consequences for offenses committed by the ex-management of the Corporate Debtor prior to the commencement of the CIRP. 3. Application of Section 32-A of IBC, 2016: The central issue in the appeal was the application of Section 32-A of the IBC, which provides protection to the Resolution Applicant from any liability of the Corporate Debtor for offenses committed prior to the commencement of the CIRP. The SRA argued that Section 32-A should also cover the property/assets of the Corporate Debtor attached under the PMLA. The Adjudicating Authority, however, refused to extend this protection, relying on the judgment of the Delhi High Court in Rajiv Chakraborty vs. Directorate of Enforcement, which stated that the power to attach under the PMLA would not fall within the ken of Section 14(1)(a) of the IBC. 4. Validity of the Adjudicating Authority's Findings in Paragraph 60: The Adjudicating Authority's findings in paragraph 60 were challenged by the SRA. The Adjudicating Authority held that the SRA would not be entitled to any relief except those available under Section 31(1) and 32-A of the IBC. The Authority also noted the absence of an affidavit from the SRA stating eligibility under Section 29A, as required by Section 30(1) of the IBC. The SRA was given an opportunity to file this affidavit in the interest of justice. 5. Jurisdiction and Powers of NCLT and NCLAT: The judgment of the Bombay High Court in Shiv Charan and Ors. vs. Adjudicating Authority under the PMLA was relied upon by the SRA. The Bombay High Court held that once a Resolution Plan is approved, no action can be taken against the properties of the Corporate Debtor in relation to an offense committed prior to the commencement of the CIRP. The NCLT has the power to direct the ED to release its attachment in relation to the attached properties of the Corporate Debtor. The NCLAT found that the Adjudicating Authority erred in not extending the benefit of Section 32-A to the SRA. Conclusion: The NCLAT allowed the appeal, set aside the findings recorded in paragraph 60 of the impugned order, and extended the protection of Section 32-A to the SRA. The SRA was entitled to the relief of lifting the attachment by the ED over the assets of the Corporate Debtor. The appeal was allowed, and the findings denying the protection of Section 32-A were set aside.
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