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TMI Blog2019 (2) TMI 1710X X X X Extracts X X X X X X X X Extracts X X X X ..... 99/2018 in C.P. 402/2018 - - - Dated:- 12-2-2019 - Hon ble Bhaskara Pantula Mohan, Member Hon ble V. Nallasenapathy, Member (T) For the Applicant: Mr. Shavez Mukri a/w Ms. Almira Lasrado, Advocates i/b India Law, Mr. Vishal G. Jain, Resolution Professional. Respondent: Mr. Retesh Srivastava, Advocate and Mr. Nitesh Rana, Mr. Mayur R. S. Khandeparkar, Advocate. ORDER V. Nallasenapathy, Member (Technical) 1. The Applicant is the resolution Professional of Sterling International Enterprises Ltd. (hereinafter called Corporate Debtor ) and has sought the following reliefs; a. To direct the Enforcement Directorate to release the provisional (or final, if confirmed) attachment on all the assets and properties of the company and hand over the charge to the Resolution Professional b. For such orders as may be necessary in the interest of justice. 2. FACTS OF THE CASE: a. This Tribunal admitted a Section 7 petition against the Corporate Debtor on 16.07.2018 and appointed the Applicant herein as the Interim Resolution Professional who was subsequently confirmed as Resolution Professi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was allowed. d. The Hon ble Supreme Court in Solidaire India Ltd v. Fairgrowth Financial Services Pvt. Ltd., (2001) 3 SCC 71 held that where there are two special statues which contain non-obstante clauses, the later statute must prevail. This is because at the time of enactment of the later statute, the Legislature was aware of the earlier legislation and its non-obstante clause. If the Legislature still confers the later enactment with a non-obstante clause it means that the Legislature wanted that enactment to prevail. If the Legislature does not want the later enactment to prevail then it could and would provide in the later enactment that the provisions of the earlier enactment continue to apply. e. The Applicant further contended that the Tribunal established under the Prevention of Money Laundering Act, 2002 (PMLA) being a criminal court can only decide whether the properties attached during investigation from the possession of the Corporate Debtor could be said to be the properties acquired by them by using the proceeds of crime. It is for the NCLT to decide how the properties and assets of the Corporate Debtor under liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money led to attachment of properties involved in money laundering which were nothing but proceeds of crime to the tune of ₹ 4274 Crores and filing of different prosecution complaints, the last being filed on 23.10.2018 before special PMLA Court, Patiala House, New Delhi. On the said Court taking cognizance of the matter, issued nonbailable warrants against the accused persons/promoters of SBL group on 25.10.2018. g. The Promoters of SBL group left the country under suspicious circumstances and evaded the process of law to face criminal prosecution. h. The property in question constitute the value of proceeds of the crime as defined u/s 2(1)(u) of PMLA which provides that even if the direct link between the crime proceeds and the property is not available/determinable the value thereof (equivalent value of such proceeds of crimes) can be attached. i. The properties provisionally attached constitute the value of such proceeds of crime. The PMLA is a special act and have overriding effects in terms of section 71 of the PMLA. The main object of Insolvency and Bankruptcy Code, 2016 (Code) and PMLA are different from each other. The Code being a civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red out of proceeds of crime. In the present MA, the Resolution Professional have sought release of attachments as well as handing over possession of the assets. However, there is nothing on record to indicate that the possession of these assets in question have been taken over by the ED under PMLA. In absence of such material, it is obligation/duty of the Resolution Professional to take control and custody of assets of the Corporate Debtor in terms of Section 18(1)(f) of the Code. However, it is required to be noted that the provisions of PMLA permit possession to be taken by the ED under Section 8(4) of the PMLA only after confirmation of the provisional order of attachment under Sub-Section 3 thereof. There is nothing on record to indicate that ED has taken any such steps after passing of the order of confirmation of attachment dated 20.11.2018. It is pertinent to note that the order dated 20.11.2018 passed by the Adjudicating Authority (under PMLA) has been passed after the order of admission of the Petition against the Corporate Debtor and during CIRP as well as moratorium. The issue as to whether the proceedings before the Adjudicating Authority under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the present case. The only other provisions which may be applicable for considering raising of attachment would be section 60 (5) of IBC where under NCLAT would have jurisdiction to pass appropriate orders and decide all such issues relating to the Corporate Debtor or as regards any claim against the same. It was further submitted that the Resolution Professional to take out an appropriate application before the adjudicating authority under PMLA for raising the attachment. However, in the interregnum the Resolution Professional can take physical possession of the properties attached in terms of Section 18(1)(f) of the Code. The Hon ble Supreme Court and several High Courts have consistently held that an order of attachment is passed for achieving a limited purpose. The attachment is used for two purposes (1) to compel the appearance of the Defendant and (2) to cease and hold his property for the payment of debt. The Hon ble High Court of Andhra Pradesh in W.P. No. 8560 of 2018 by an order dated 26.07.2018 held that a prior attachment under the Income tax Act long before the commencement of proceedings under IBC before NCLT would yield to the provisions of IBC. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Court may direct the Central Government to restore the confiscated property or part thereof to the claimant with legitimate interest therein. Thus in both situations the ultimate beneficiaries are financial creditors/secured creditors. The object of IBC is to expedite the insolvency process and to secure maximization of value of assets of Corporate Debtor for distribution to all stake holders. PMLA contemplates restoration of confiscated property to the claimants who have legitimate interest. The Appellate Tribunal for PMLA in the case of Punjab National Bank (supra) held as below:- The Adjudicating authority is bound by the law laid down by the higher courts. No authority has any justification to ignore the law laid down by the Supreme Court and various High Courts and this Tribunal, who on the basis of decisions of the Hon ble Supreme Court and various High Courts has delivered orders. Unless each and every judgment is distinguished or are on different facts and legal issues are almost same and the Adjudicating Authority has incorrectly passed by impugned order by saying that it cannot Concur with the law laid down by this Tribunal. The appellate is a publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 18. Shri Dave's ingenious argument that since Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule of the Code, the amended Section 434 must be read as being part of the Code and not the Companies Act, 2013, must be rejected for the reason that though Section 434 of the Companies Act, 2013 is substituted by the Eleventh Schedule of the Code, yet Section 434, as substituted, appears only in the Companies Act, 2013 and is part and parcel of that Act. This being so, if there is any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that the NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 14 of the Code and considering the overriding effect of IBC under Section 238 of the Code, this Tribunal is of the considered view that the attachment order under PMLA Act is a nullity and non-est in law and hence it will not have any binding force. c. Section 63 of the IBC provides that, no Civil Court or Authority shall have jurisdiction to entertain any suit or proceeding in respect of any matter on which NCLT or NCLAT has jurisdiction under this Code. In view of the ruling by the Appellate Authority under PMLA in Bank of India vs Deputy Directorate Enforcement, Mumbai supra, that the proceedings before Adjudicating Authority under PMLA in respect of attached properties is a civil proceedings, the Adjudicating Authority under PMLA does not have jurisdiction to attach the properties of the Corporate Debtor undergoing Corporate Insolvency Resolution Process. d. The suggestion made by the amicus curiae that the resolution professional or other creditors can approach the adjudicating authority under PMLA for raising the attachment though seems plausible but will definitely further delay the CIRP which will be against the spirit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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