2025 (1) TMI 740 - SCH - Money Laundering

Jurisdiction to attach properties of a Corporate Debtor undergoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) - Section 32A of the IBC - HELD THAT - The Appellant-E.D. is directed to handover and the Respondent successful Resolution Applicant JSW is directed to take over the control of the properties of Corporate Debtor-Bhushan Power and Steel Ltd., provisionally attached vide the order dated 10.10.2019 passed by the E.D., immediately in view of Section 8(8) of the PMLA read with Rule 3A of the said Rules. Appeal disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the Directorate of Enforcement (E.D.) has the jurisdiction to attach properties of a Corporate Debtor undergoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC), particularly in light of Section 32A of the IBC.
The implications of Section 32A of the IBC, which was inserted after the provisional attachment by the E.D., on the attachment of properties considered as proceeds of crime under the Prevention of Money Laundering Act, 2002 (PMLA).
The interaction between the powers of the E.D. under the PMLA and the resolution process under the IBC.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction of the E.D. to Attach Properties During CIRP

Relevant Legal Framework and Precedents: The PMLA allows the E.D. to attach properties suspected to be proceeds of crime. Section 5 of the PMLA empowers the E.D. to provisionally attach such properties. The IBC governs the insolvency resolution process, and Section 32A provides immunity to the corporate debtor's assets from prosecution for offenses committed prior to the resolution plan approval.
Court's Interpretation and Reasoning: The court did not express an opinion on the interpretation of Section 32A of the IBC or the E.D.'s powers under the PMLA. The decision was based on the consensus among parties and the specific circumstances of the case.
Key Evidence and Findings: The E.D. had provisionally attached the properties of Bhushan Power and Steel Ltd. post the approval of the resolution plan by the NCLT. Section 32A was inserted after this provisional attachment.
Application of Law to Facts: The court considered the timing of the E.D.'s attachment order and the subsequent insertion of Section 32A. The resolution plan had already been approved, which influenced the decision to allow the resolution applicant to take control of the attached properties.
Treatment of Competing Arguments: The E.D. maintained its right to investigate under the PMLA, while the CoC and the resolution applicant agreed to the transfer of control over the properties, considering the peculiar facts.
Conclusions: The court directed the E.D. to hand over control of the attached properties to the successful resolution applicant, JSW Steel Ltd., without prejudice to ongoing investigations and without ruling on the legal issues under the PMLA or IBC.

Issue 2: Implications of Section 32A of the IBC

Relevant Legal Framework and Precedents: Section 32A of the IBC, effective from December 2019, provides that a corporate debtor's assets cannot be attached for offenses committed prior to the resolution plan's approval.
Court's Interpretation and Reasoning: The court did not delve into the retrospective application of Section 32A, focusing instead on the parties' consensus and the resolution plan's approval by the NCLT.
Key Evidence and Findings: Section 32A was not in effect at the time of the E.D.'s attachment order. The resolution plan's approval by the NCLT predated this section's enactment.
Application of Law to Facts: The court allowed the resolution applicant to take control of the properties, considering the non-retrospective nature of Section 32A and the resolution plan's prior approval.
Treatment of Competing Arguments: The E.D. argued for its investigative rights, while the resolution applicant and CoC focused on the resolution plan's execution.
Conclusions: The court facilitated the resolution process by enabling the transfer of property control, without making a determination on Section 32A's impact on the E.D.'s powers.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The court clarified that "this order is passed with the consensus of the learned counsels appearing for the concerned parties, considering the peculiar facts and circumstances of the cases."
Core Principles Established: The judgment underscores the importance of consensus among parties in resolving complex legal issues when statutory interpretations are not conclusively addressed.
Final Determinations on Each Issue: The court ordered the E.D. to transfer control of the attached properties to the resolution applicant, JSW Steel Ltd., without prejudice to the E.D.'s investigative rights and without ruling on the statutory interpretations of Section 32A or the PMLA's provisions.

The judgment ultimately resolved the appeals by facilitating the execution of the resolution plan, while leaving the broader legal questions open for future consideration.

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