2021 (7) TMI 305 - HC - Money Laundering

Money Laundering - seeking release of provisionally attached of movable properties - waterfall mechanism - overriding provisions of IBC - NCLT had already passed an order appointing an Official Liquidator for the sale of the assets of the Company In Liquidation - Adjudicating Authority under the PMLA ought not to have passed the Provisional Attachment Order - HELD THAT - On a plain reading of the provisions of the IB Code, it is clear that statutory dues, which come within the meaning of operational debt , could be claimed against the Corporate Debtor only under the provisions of the IB Code and not under any other law. All such claims have to be lodged with the Official Liquidator and are payable under the waterfall mechanism provided in Section 53 of IB Code - the dues relatable to the vehicles belonging to the Corporate Debtor can only be recovered under the provisions of the IB Code, i.e. the waterfall mechanism under Section 53 of the IB Code and not from the petitioners, being the auction purchasers. The petitioners could be held liable to pay statutory dues in respect of the subject vehicles, which have been claimed by the respondent Regional Transport Offices after their purchase by the petitioners in April 2019, only from the date when they had purchased the subject vehicles after having exercised their right to raise objections to such claim. It would be appropriate to direct the petitioners to make payment of the statutory dues from the date of purchase of the subject vehicles by the petitioners, which would be made subject to other proceedings in relation to the said vehicles since the petitioners, being the auction purchasers, could not be asked to make payment of the statutory dues claimed against the Corporate Debtor in liquidation in respect of vehicles prior to their date of purchase by the petitioners. The respondents Regional Transport Offices, Gujarat and Maharashtra are directed to complete the transfer proceedings of the subject vehicles purchased by the petitioners from the Court appointed Official Liquidator of M/s. Siddhi Vinayak Logistic Ltd., which shall be subject to the outcome of the proceedings that may be pending under the provisions of the PMLA or under any other corresponding law - the petition is partly allowed.

Issues Involved:

1. Validity of the Provisional Attachment Order under the Prevention of Money Laundering Act (PMLA).
2. Transfer of ownership of vehicles purchased in an auction from the Official Liquidator.
3. Compliance with the Motor Vehicles Act and the Rules for vehicle transfer.
4. Payment of statutory dues relating to the vehicles.

Issue-wise Detailed Analysis:

1. Validity of the Provisional Attachment Order under the PMLA:

The petitioners challenged the Provisional Attachment Order dated 18.06.2019 issued by the Deputy Director, Directorate of Enforcement, under Section 5(1) of the PMLA, which attached 6170 commercial vehicles of the Corporate Debtor. The petitioners contended that the attachment order was unjust as the vehicles had already been sold in an e-auction conducted by the Official Liquidator. The Adjudicating Authority under the PMLA later confirmed the attachment for 1334 vehicles while releasing 4826 vehicles, which were sold in auction proceedings, indicating partial confirmation of the provisional attachment order.

2. Transfer of Ownership of Vehicles Purchased in Auction:

The petitioners sought directions for the transfer of vehicles purchased from the Official Liquidator. The petitioners argued that they faced severe financial loss due to the non-transfer of vehicles, as they had obtained loans for the purchase and the vehicles' value was depreciating. The Court directed the Regional Transport Offices (RTOs) to complete the transfer proceedings of the vehicles subject to the outcome of pending proceedings under the PMLA or any other law.

3. Compliance with the Motor Vehicles Act and Rules for Vehicle Transfer:

The respondents argued that the petitioners had not completed the necessary documentation and had not paid the mandatory taxes/fees required for vehicle transfer under the Motor Vehicles Act and Rules. The Court acknowledged the need for compliance with the Motor Vehicles Act but emphasized that the statutory dues should be claimed under the Insolvency and Bankruptcy Code (IB Code) provisions, specifically the waterfall mechanism under Section 53 of IB Code, which prioritizes the distribution of liquidation assets.

4. Payment of Statutory Dues Relating to the Vehicles:

The Court held that statutory dues, classified as 'operational debt,' should be claimed against the Corporate Debtor under the IB Code, not from the petitioners. The petitioners were directed to pay statutory dues from the date of their vehicle purchase and not for the period prior to their purchase. The RTOs were instructed to inform the petitioners of the dues by 15th July 2021, and the petitioners were to pay 50% of the dues within three weeks of communication, subject to the outcome of proceedings under the relevant Motor Vehicles Tax Acts.

Conclusion:

The petition was partly allowed with specific directions:

(i) RTOs were directed to complete the transfer of vehicles purchased by the petitioners, subject to pending proceedings under the PMLA or other laws.
(ii) RTOs were to inform the petitioners of the statutory dues from the date of vehicle purchase by 15th July 2021.
(iii) Petitioners were to pay 50% of the statutory dues within three weeks of communication, subject to ongoing proceedings.
(iv) The process was to be concluded within four weeks from the receipt of the writ order.
(v) Respondents were granted liberty to approach the Official Liquidator for their dues as per the law.

The petition was disposed of with these directions, and the rule was made absolute to the extent specified.

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