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2020 (12) TMI 518 - Tri - IBCDirection to declare the attachment of the only property of the corporate debtor as Null and Void - petitioner would contend the present Application is not maintainable at the instance of Resolution Professional because PAO was passed on 17.10.2018 which was prior to commencement of CIRP against Corporate Debtor - PAO was also confirmed by the Adjudicating Authority under PMLA - resolution plan not approved - whether this Adjudicating Authority can set aside the order of attachment passed under the provisions of PMLA on the ground that attachment is in contravention of moratorium order passed under Section 14 of IBC? HELD THAT - The attachment was effected prior to the commencement of CIRP - The Hon'ble Appellate Authority NCLAT in the matter of Rotomac Global v. Deputy Director 2019 (9) TMI 797 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI has held that Section 14 of IBC is not applicable. Section 32(A) is also not applicable to the facts of the present case since CoC has not yet approved any Resolution Plan as on the date of issue of PAO. Application dismissed.
Issues Involved:
1. Validity of the attachment of the corporate debtor's property. 2. Conflict between the provisions of the Insolvency and Bankruptcy Code (IBC) and the Prevention of Money Laundering Act (PMLA). 3. Jurisdiction of the National Company Law Tribunal (NCLT) to adjudicate on the attachment order under PMLA. 4. Impact of the attachment on the Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis: 1. Validity of the attachment of the corporate debtor's property: The application was filed under Sections 60(5), 32(A), and 238 of the IBC, 2016, seeking a declaration that the attachment of the corporate debtor's property is null and void. The property was attached by the Enforcement Directorate (ED) on 17.10.2018, confirmed by the Adjudicating Authority under PMLA on 10.04.2019. The applicant argued that the attachment is detrimental to the CIRP and should be removed to maximize the value of the corporate debtor's assets. The ED countered that the attachment was lawful and conducted under Section 5 of PMLA, prior to the initiation of CIRP. 2. Conflict between the provisions of IBC and PMLA: The applicant contended that the provisions of IBC should prevail over PMLA by virtue of Section 238 of IBC, which states that IBC provisions will have an overriding effect. However, the ED argued that PMLA, being a penal statute, overrides IBC. The ED cited various judgments, including the NCLAT's decision in Varrsana Ispat Limited vs. Deputy Director, ED, which held that IBC does not have an overriding effect on PMLA. The NCLAT further stated that PMLA and IBC operate in different fields and can be invoked simultaneously without one having an overriding effect over the other. 3. Jurisdiction of NCLT to adjudicate on the attachment order under PMLA: The Tribunal noted that it does not have jurisdiction to set aside the attachment order passed under PMLA. The applicant should seek remedies under the appropriate forums provided by PMLA. The Tribunal referenced the Supreme Court's decision in Embassy Developers Private Limited vs. State of Karnataka, which clarified that decisions taken by the government or statutory authorities under public law cannot be adjudicated by NCLT. 4. Impact of the attachment on CIRP: The applicant argued that the attachment order hampers the CIRP as it discourages prospective resolution applicants from submitting resolution plans, thereby affecting the maximization of the corporate debtor's asset value. The ED maintained that the attachment was necessary as the property was acquired using proceeds of crime. The Tribunal observed that the attachment was made prior to the commencement of CIRP and confirmed by the Adjudicating Authority under PMLA. Therefore, Section 14 (moratorium) of IBC is not applicable. Additionally, Section 32(A) of IBC, which provides immunity to the corporate debtor's assets upon approval of a resolution plan, was deemed inapplicable as no resolution plan had been approved by the Committee of Creditors (CoC). Conclusion: The Tribunal concluded that the application to declare the attachment null and void is not maintainable. The attachment was effected before the initiation of CIRP and confirmed by the Adjudicating Authority under PMLA. The Tribunal emphasized that any challenge to the attachment order should be made before the appropriate authorities under PMLA. Consequently, the application was dismissed.
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