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TMI Blog2020 (5) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... facilities, such as, leisure, health, business, entertainment, recreation, etc. consisting of 4 hotels and villa resorts of 462 keys, a 3,00,000 sq ft international convention and sporting facility with a capacity of over 6000 guests, over 50 indoor and outdoor banqueting venues. It has various other amenities as mentioned in paras 2 and 3 of the application. 2.2 The corporate debtor is under CIRP vide order dated 09.04.2019 (ANNEXURE-1) passed by the Tribunal and moratorium is in effect as on date of application. Shri B. Naga Bhushan has been appointed as Interim Resolution Professional, who filed report dated 02.05.2019, stating that the claims against the corporate debtor had been collated and that the Committee of Creditors (COC) constituted on 01.05.2019 in compliance of section 18 of the I&B Code. In its first meeting held on 08.05.2019 the CoC recommended replacement of Interim Resolution Professional and appointment of Resolution Professional under section 24 of I&B Code. In its second meeting dated 22.05.2019, CoC approved appointment of Shri Raj Kumar Ralhan as Resolution Professional under section 22(2) of the I&B Code and the Tribunal has confirmed the said appointmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assets of the corporate debtor and it further sees to revive the corporate debtor through resolution. 3. DECISIONS RELIED ON BY THE APPLICANT : 3.1 The applicant relied on the following decisions: (i) SWISS RIBBONS PVT LTD AND OTHERS Vs. UNION OF INDIA AND OTHERS, MANU/SC/0079/2019, wherein the Hon'ble Supreme Court has held that one of the primary objectives of the corporate insolvency process is resolution by way of value maximization of the assets of the corporate debtor. (ii) BINANI INDUSTRIES LIMITED Vs. BANK OF BARODA & ANOTHER, AT INSOLVENCY No. 82 of 2018, wherein the Hon'ble NCLAT has reiterated the objectives of the I&B Code. (iii) REI AGRO, CA (IB) No. 453/KB/2018 in CP (IB) No. 73/KB/2017 (NCLT, KOLKATA), wherein it is held that "the properties and assets of the relevant corporate debtor have to be set free from the attachment order of the Enforcement Directorate to enable the liquidation of the said corporate debtor." (iv) PUNJAB NATIONAL BANK Vs. DIRECTOR, DIRECTORATE OF ENFORCEMENT, RAIPUR, FPA-PMLA-2633/RP/2018, wherein the PMLA Appellate Tribunal held that, "The proceeding before the Adjudicating Authority under PMLA is civil in nature and hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the provisions of IBC will prevail over other laws and that conflicting laws cannot impede the functioning of the CIRP in the following words: "It is clear that the later non-obstante clause of the Parliamentary enactment will also prevail over the limited non-obstante clause contained in Section 4 of the Maharashtra Act. For these reasons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code." (x) KSL AND INDUSTRIES LIMITED Vs. ARIHANT THREADS LIMITED, (2008) 9 SCC 763. 3.2 In light of the above laws it is contended that the I&B Code will prevail over PMLA. 3.3 The applicant has also relied on newly enacted section 32-A of The Insolvency and Bankruptcy Code by way of Ordinance dated 24.12.2019, which seeks to provide a regime where liability of corporate debtor for an offence committed during pre-CIRP period shall cease. 4. REPLY DATED 20.01.2020 ON BEHALF OF RESPONDENTS No. 1 & 2. 4.1 By way of preliminary objections it is contended that the Tribunal does not have jurisdiction to interfere with the Provisional Attachment Order issued under section 5 of PMLA by the competent authority under PM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes, 12th Edition. Page 196-7. (viii) UPSEB Vs. HARI SHANKAR JAIIN, MANU/SC/0500/1978 : (1978) 4 SCC 16. (ix) ROTOMAC GLOBAL PRIVATE LTD Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, order dated 02.07.2019 (sic) NCLAT in Company Appeal (AT) (sic) (Insolvency) No. 140 of 2019. (ANNEXURE R-7), as averred in para 37 of the Reply. 6. In para 20 of the Reply, the respondents relied on newly enacted section 32-A of The Insolvency and Bankruptcy Code by way of Ordinance dated 24.12.2019 (ANNEXURE R-6) to contend that it is only after a resolution plan covering such assets has been approved by the Tribunal under section 31 of the IBC that the Enforcement Directorate is precluded from proceeding against the assets of corporate debtor, for commission of offence prior to commencement of CIRP. Whereas in the present case there is no Resolution Plan covering the assets of the corporate debtor attached by the Enforcement Directorate vide the impugned Provisional Attachment Order dated 30.12.2019. 7. In para 42 of the Reply the respondents relied on its own File No. ECIR/HYZO/5/2015 initiated on 28.05.2015 based on predicate FIR registered by CBI, BS & FC, Bengaluru vide FIR No. RC-02(E) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restrains a person from alienating a property and if such orders are brought to the notice of the Registering officers or served on the Registering Officer, the Registering Office is estopped from going ahead with the Registration." 10.2 It is averred in para 3 of the Counter that the applicant has neither sought any relief nor levelled any allegation against respondent no. 4. It is also averred that the applicant has not submitted any documents for registration of the properties in question. Apparently respondent no. 4 learnt about issuance of the Provisional Attachment Order No. 05/2019 in Ref. No. ECIR/05/HYZO/2015 dated 30.12.2019. Respondent no. 4, adopts the Reply filed by respondents no. 1 and 2-Enforcement Directorate. 10.3 Respondent no. 4 sought exemption from personal appearance and also from submission of statement as regards the contents of the application and the Provisional Attachment Order in question inasmuch as the relief sought for by the applicant relates to respondents no. 1 and 2 only. 11. WRITTEN SUBMISSIONS DATED 11.03.2020 FILED ON BEHALF OF RESPONDENTS No. 1 & 2. 11.1 The respondents have furnished the status of the cases cited by the applicant herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions and the ratio decidendi therein. Para no. Page no. Citation Ratio decidendi 3 8 Hon'ble Supreme Court's decision in Rohit Tandon Vs. Enforcement Directorate and Y.S. Jagan Mohan Reddy Vs. CBI, MANU/SC/1403/2017 : . (para 15). Economic offices constitute a class apart and need to be visited with different approach in the matter of bail. C 8 Hon'ble NCLAT decision in Andhra Bank Vs. Sterling Biotech, (para 15) "....if it is based on the proceeds of crime, it is always open to the 'Enforcement Directorate' to seize the assets of the 'Corporate Debtor' and act in accordance with PMLA." 2 8 Hon'ble Delhi High Court's decision in Deputy Director Vs. Axis Bank, (para 146) Role of the corporate debtor and risk in lifting an attachment order under PMLA. 3 9 The Hon'ble NCLAT decision in Global V. Deputy Director, (para 12) ".... Thus, as the PMLA, 2002 or provisions therein relates to 'proceeds of crime' we hold that section 14 of 'I&B Code' is not applicant to such proceeding. 3 11 Decision of the Hon'ble NCLAT in JSW Steel Vs. Mahender Kumar Khandelwal and others. (para 44) There cannot be any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PMLA Appellate Tribunal that the proceedings before the Adjudicating Authority under PMLA are civil in nature. The same view is reaffirmed by the PMLA Appellate Tribunal in BANK OF INDIA Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, MUMBAI, FPA-PMLA-2173/MUM/2018. 12.3 It is thus submitted that it is of paramount significance to consider that the moratorium so declared strictly prohibits and bars any transfer, encumbrance, alienation or disposition of any corporate debtor's assets. 12.4 In paras 6 and 7 of the Written Submissions it is averred that section 238 of I&B Code shall have overriding effect over other laws. The Hon'ble Supreme Court in PR. COMMISSIONER OF INCOME TAX Vs. MONNET ISPAT AND ENERGY LTD., MANU/SC/1018/2018 : , has held as follows: "Given section 238 of the Insolvency and Bankruptcy Code, 2016 it is obvious that the Code will override anything inconsistent contained in any other enactment including the Income Tax Act." 12.5 In para 8 of the Written Submissions, decision of the Hon'ble Supreme Court in the case of INNOVENTIVE INDUSTRIES LTD Vs. ICICI BANK 8s ANOTHER, (2017) AIR 2017 SC 4084 is relied on wherein it is held that: "It is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (ii) the Hon'ble NCLAT in the said case has held that: "151. However, the judgment passed by the Adjudicating Authority and this Appellate Tribunal will not come in the way of the Directorate of Enforcement or the 'Serious Fraud Investigation Office' or the Central Bureau of Investigation' to proceed with investigation or to take any action in accordance with law against erstwhile promoters, officers and other of the 'corporate debtor'. No costs." It is contended that in view of the above decision of the Hon'ble NCLAT the provisional attachment in question be removed with immediate effect. 12.10 In para 18 of the Written Submissions the applicant contended that the case of SARWAN SINGH AND Ors. Vs. KASTURI LAL, MANU/SC/0071/1976 : has no application to the facts of the present case. 13. The applicant submits that proceedings are of two kinds, viz. (i) Criminal proceedings against accused, (ii) Civil proceedings against the assets of the company to which they are promoters. Criminal proceedings against the accused may proceed before the PMLA Adjudicating Authority. However, the provisional attachment in question is of civil nature as held by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Tribunal under the PMLA in the case of PUNJAB NATIONAL BANK Vs. DIRECTOR, DIRECTORATE OF ENFORCEMENT, RAIPUR, FPA-PMLA-2633/RP/2018. The same view was also reaffirmed by the Appellate Tribunal under the PMLA in the case of BANK OF INDIA Vs. THE DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, MUMBAI, FPA-PMLA- 2173/MUM/2018. The learned counsel contended that the proceedings under the PMLA are of civil in nature. Therefore, such proceedings initiated against the Corporate Debtor are barred by moratorium order. In this connection, the learned counsel for Resolution Professional relied on the order passed by the NCLT, Mumbai in the case of SREI INFRASTRUCTURE FINANCE LIMITED Vs. (sic) AND INFRASTRUCTURE LIMITED, M.A. 1280/2018 in C.P. 405/2018. The learned counsel contended that the provisions of I&B Code have over-riding effect by virtue of section 238 of the I&B Code. Therefore, the attachment order issued under the PMLA is hit by section 14 of the I&B Code. Thus, the contention of the learned counsel is that the provisions of the I&B Code have over-riding effect over the proceedings of the PMLA. Once moratorium order is passed by the Adjudicating Authority, then the proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is quasi criminal process. The learned counsel contended that the PML Act is a special enactment intended to prevent laundering of illegal money which is an economic offence. The learned counsel has relied on the decision of the Hon'ble Apex Court in the matter of ROHIT TANDON VS. THE ED AND Y.S. JAGAN MOHAN REDDY VS. CBI, MANU/SC/1403/2017 : (supra) and contended that the economic offence is to be viewed seriously and to be considered as a grave offence, thus, affecting the economy of the country. 19. The learned counsel for the Enforcement Directorate would contend that section 14 of the I&B Code will not apply to the proceedings initiated under the PML Act. The learned counsel in this connection relied on a decision of the NCLAT in the case of ANDHRA BANK Vs. STERLING BIOTECH LTD., COMPANY APPEAL (AT) (INSOLVENCY) No. 601, 612, 527 of 2019, vide judgment dated 28.08.2019 (supra), whereby the Hon'ble NCLAT upheld the independence of the Directorate of Enforcement by observing that: "Insofar the assets of the 'Corporate Debtor' is concerned, if it is based on the proceeds of crime, it is always open to the 'Enforcement Directorate' to seize the assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of crime' and the offence relates to money-laundering resulting in confiscation of property derived therefrom and therefore, section 14 of the I&B Code is not applicable to such proceeding. The learned counsel has relied on relevant para which is as follows: "12. From the aforesaid provisions, it is clear that the 'Prevention of Money-Laundering Act, 2002' relates to 'proceeds of crime' and the offence relates to 'money-laundering' resulting confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. Thus, as the 'Prevention of Money Laundering Act, 2002' or provisions therein relates to 'proceeds of crime', we hold that Section 14 of the 'I&B 23. The learned counsel for Enforcement Directorate further contended that section 32A of the I&B Code is not applicable to the facts of the present case since the COC has not yet approved any Resolution Plan as on the date of issuing Provisional Attachment Order. In this connection the learned counsel has relief] on section 32A(2) of the I&B Code, which is as follows: "32(2) No action shall be taken against the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the Resolution Plan. 27. The learned counsel further relied on para 14 of the decision of the Hon'ble NCLAT in the matter of ROTOMAC GLOBAL PRIVATE LTD Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT (supra), which is as follows: "14. As the 'Prevention of Money Laundering Act, 2002' relates to different fields of penal action of proceeds of crime', it invokes simultaneously with the 'I&B Code', having no overriding effect of one Act over the other including the 'I&B Code', we find no merit in this appeal. It is accordingly dismissed. No costs." Thus, the learned counsel contended that attachment is valid and as such it cannot be set aside. Thus, the learned counsel would contend that the application deserves to be dismissed. 28. The short question for consideration is that whether respondent no. 1 can issue Provisional Attachment Order against the assets of the Corporate Debtor during the currency of moratorium order passed under section 14 of the I&B Code. The admitted fact is that CIRP has commenced against the Corporate Debtor -company, viz. LMIPHL. The Provisional Attachment Order was issued on 30.12.2019 by attaching the assets of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel is at pages 191-199 of Volume-2 of the Reply Affidavit filed by respondents no. 1 and 2. It is also the case of the learned counsel for respondent no. 1 that the order of the Hon'ble NCLAT was also confirmed by the Hon'ble Apex Court. The order of the Hon'ble Apex Court in Civil Appeal No. 5546 of 2019 is cited at pages 200-203 of Volume-2 of the Reply Affidavit. 34. It is an undisputed fact that when CIRP is pending against the Corporate Debtor the respondent no. 1 has issued Provisional Attachment the Corporate Debtor when moratorium order is in force. The issue involved is decided by the Hon'ble NCLAT in the case of VARRSANA ISPAT LIMITED Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, judgment dated 02.05.2019 in COMPANY APPEAL (AT) (INSOLVENCY) No. 493 of 2018 (supra). In para 12 the Hon'ble NCLAT held as follows: "From the aforesaid provisions, it is clear that the 'Prevention of Money-Laundering Act, 2002' relates to 'proceeds of crime' and the offence relates to 'money-laundering' resulting confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e PML Act relates to different fields of penal action of 'proceeds of crime', it invokes simultaneously with the 'I&B Code', having no overriding effect of one Act over other laws including the I&B Code. So, there is no question of overriding effect. As such the present application filed by the Provisional Attachment Order is not maintainable and is liable to be dismissed. 38. Section 32A of the I&B Code was introduced in the I&B Code by virtue of Amending Ordinance dated 28.12.2019. Subsection (2) of Section 32A of the I&B Code reads as follows: "32A. (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter 111 of Part II of this Code to a person, who was not-- (i) a promoter or in the management or control of the corporate debtor or a related party of such a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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