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TMI Blog2020 (12) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 5 cannot sought to be trammelled upon merely because CIRP process is underway or because moratorium has been imposed. That, once the amended IBC has expressly laid down that only after the approval of a resolution plan under section 31 of the IBC, would the ED be precluded from proceeding against the assets of the Corporate Debtor for the commission of offences prior to the CIRP, it cannot be argued that merely because a moratorium period under section 14 of the IBC is active, the ED is precluded from proceeding against the assets of the Corporate Debtor. If the Applicant s arguments are accepted, it would lead to whittling down the provision of section 32A as well as reading into section 32A which is not there. Whether, after the appointment of the Liquidator, without hearing him any order could be passed in the appeal/application? - HELD THAT:- On being asked by this Tribunal as to whether the Liquidator appointed by the NCLT is a necessary party, it is replied by the learned counsel for the appellant that no relief has been sought against the Liquidator and that the present appellant/applicant is not going to sale the attached properties mortgaged with it, if releas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Prevention of Money Laundering Act, 2002 (PMLA) cannot continue. He submits that the National Company Law Tribunal (NCLT) is to consider the application for proceeding the Corporate Debtor into liquidation on 22.01.2020. The present petition is disposed of granting liberty to the petitioner to move the Appellate Tribunal under PMLA to seek early consideration of the appeal filed by the petitioner before it on the order of liquidation of the corporate debtor being passed by the NCLT. The application/appeal filed by the petitioner shall expeditiously considered by the Appellate Tribunal preferably within eight weeks of moving such application. It is made clear that this court has not expressed any opinion on the merits of the submissions made by the learned Sr. Counsel for the petitioner. The petition is disposed of with above direction. There shall be no order as to costs. The applicant has filed the present application in the light of the amendments made in Insolvency and Bankruptcy Code, (IBC) 2016 brought in vide THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2020 No. 1 of 2020 dated 13th March, 2020 with effect from 28.12.2019. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate 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 III 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 person; or (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation.- For the purposes of this sub-section, it is hereby clarified that,- (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; (ii) nothing in this sub-section shall be construed to bar an action against the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid amendment to the Code, it is clear that properties of the corporate debtor forming part of the resolution/liquidation process, which are subject to attachment under any other prevailing law, are liable to be released from attachment forthwith to aid and assist the resolution/liquidation process. (ii). That, vide Order dated 17th March, 2020, the Hon ble National Company Law Tribunal, Mumbai directed the liquidation of DSK Motors and as such, DSK Motors has been in liquidation since 17 March 2020. Therefore, in view of the express provisions of Section 32A, the JMFARC Mortgaged Properties are liable to be released from attachment under PMLA, such that the same can be dealt with in accordance with the provisions of the Code. (iii). That the provisions of Section 32A of the Code are attracted subject to two conditions being fulfilled (a) attachment must arise out of an offence committed prior to commencement of CIRP; and (b) property must be covered under an approved resolution plan or sale of liquidation assets. Both conditions are fulfilled in the present matter and as such the provisions of Section 32A of the Code are squarely applicable in relation to the JMF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he procedure established by law insofar as the rights of secured creditors under SARFAESI Act, Recovery of Debts and Bankruptcy Act, 1993 and the Code are concerned. Since the action under the SARFAESI Act as well as Recovery of Debts and Bankruptcy Act, 1993 initiated by the Appellant predates even registration of the Complaint by the Enforcement Directorate, it is trite law that the attachment under PMLA should take a back seat to the rights of the secured creditors, who have been repeatedly recognised as victims of crime by a plethora of judgments. And it is submitted by the learned counsel for the appellant that in view of the said provisions, no action, including attachment, can be taken over the assets of any corporate debtor undergoing litigation under the I BC and that the appellant mortgaged properties clearly fall within the purview of this provision and are liable to be released from attachment under PMLA such that they can be dealt with in accordance with the provisions of the code and that if the impugned order is not set-aside and the captioned appeal is allowed to languish, the liquidation process of DSK Motor would be significantly prejudiced and would squarely f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f companies / firms, (4) other Promoters / Directors / Partners of DSK group of companies, with dishonest, fraudulent and common intention, formed eight partnership firms viz. (i) D S Kulkarni and Company, (ii) D S Kulkarni and Associates, (iii) D S Kulkarni and Brothers, (iv) D S Kulkarni Sons, (v) DSK Sons, (vi) DSK Asso, (vii) DSK Construction and (viii) DSK Enterprises under the veil of DSKDL, with the sole motive to collect the funds from gullible public based in Mumbai, Pune, Kolhapur, and other cities of Maharashtra; 4. That to lure the general public, they systematically, step by step projected that the DSKDL, a public limited company is taking FDs/unsecured loans and all the partnership firms are part and parcel of DSKDL; that although, these eight partnership firms didn t have any profit generating business, nevertheless the above said persons, with the connivance of others, between 2006 to 2017 , dishonestly induced the gullible public and collected funds from them in the guise of different deposit schemes through these eight partnership firms and collected Crores of rupees during the period from 2006 to 2017 from the general public of which, as on 31.03.2017 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC, it cannot be an escape route for any action under the PMLA, as it would lead to abuse of the process of law by money-launderers. In this regard, it is relevant to place reliance on the judgment of the Hon ble Court in the case of Deputy Director, Directorate of Enforcement Delhi v. Axis Bank Ors. 2019 SCC Online Del 7854, wherein the Hon ble Court was pleased to hold as follows: 146...A view to the contrary, if taken, would defeat the objective of PMLA by opening an escape route. After all, a person indulging in money-laundering cannot be permitted to avail of the proceeds of crime to get a discharge for his civil liability towards his creditors for the simple reason such assets are not lawfully his to claim. 9.3. That the IBC cannot be an amnesty route for accused under the PMLA, and the entire confiscation regime under PMLA and its objects will be defeated if the Hon ble NCLT starts interfering with provisional attachment orders without the authority of law. Therefore, if said properties being the proceeds of crime described as above, are not attached provisionally under section 5(1) of the PMLA; the said property may be alienated, transferred or created enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the economic offences having deep rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of country. 9.9. That the Preamble to the PMLA states as follows: An Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. The PMLA was also enacted in furtherance of India s International obligations to implement the UN resolutions calling upon Member States to adopt national money-laundering legislation and programmes. This is evident from the Preamble of PMLA which reads as follows: WHEREAS the Political Declaration and Global Programme of Action, annexed to the resolution S-17/2 was adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty- third day of February, 1990; AND WHEREAS the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1998 calls upon the Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to investigate crime u/s. 5(1) of the act and the attachment is done based on his reasons to believe and to be recorded, while investigating a criminal case, instituted by a criminal investigation report and with an objective to enable confiscation after conviction in a criminal trial. Therefore, the process of attachment is not completely a civil process but a quasi-criminal process, as the ultimate object is confiscation which is done after a criminal trial and hence the attachment is merely a step-in-aid to achieve the object of PMLA,2002. Whereas, the primary purpose of IBC is to aid lenders in effective and timely recovery or restructuring of defaulted assets. Further, proceedings under the PMLA, attains finality only upon prosecution of the accused and confiscation of properties as a direct consequence from commission of scheduled offences. Therefore, such proceedings are primarily criminal in nature. On the other hand, proceedings under the IBC are primarily civil proceedings. Further the Hon ble High Court of Judicature at Madras in the matter between the Deputy Director, Directorate of Enforcement Vs. Asset Reconstruction Company India Ltd. and another Writ Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 Code is not applicable to such proceeding. .. 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. 9.16. That, the Hon ble Supreme Court has upheld the judgment of the Hon ble NCLAT in Varsanna Ispat (supra), and vide order dated 22.07.2019 dismissed Civil Appeal No. 5546 of 2019 being Varsanna Ispat Ltd vs. Deputy Director, Directorate of Enforcement, preferred against the judgment of the Hon ble NCLAT dated 02.05.2019. 9.17. That, reliance in this regard is also placed on the order of Hon ble NCLAT in the case of Andhra Bank versus Sterling Biotech Limited (Company Appeal (AT) (Insolvency) No. 601, 612, 527 of 2019), vide judgment d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mingly legitimate) creating a web lifting the veil whereof is not an easy task. The truth of the matter is expected to be uncovered by a detailed probe which may take long time to undertake and conclude. The total wrongful gain from the criminal activity cannot be computed till the investigation is completed. The authority for provisional attachment of suspect assets is to ensure that the same remain within the reach of the law. ******************************************************* 143. The proceeds of crime, there is no doubt, are not even remotely covered by the expressions revenues, taxes, cesses or other rates . The word revenue is the controlling word, the expressions following (taxes, cesses, rates) taking the colour from the same. The word revenue, in the context of Government is to be understood to be conveying taxation [Gopi Pershad v. State of Punjab, AIR 1957 Punjab 45 (DB)]. This is how the expression is defined by Black's Law Dictionary, Eighth Edition as also by Cambridge English Dictionary (accessible online). The reliance by the respondents on the use of the expression non-tax revenue with reference to PMLA under major accounting head 0047 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which gave jurisdiction to that Court over any claim for damage done by any ship also gave jurisdiction over claims for loss of life which would otherwise come under the Fatal Accidents Act. It was held that the general words of Section 7 of the Admiralty Court Act did not exclude the applicability of the Fatal Accidents Act and therefore, the Admiralty Court had no jurisdiction to entertain a claim for damages for loss of life. 9. The reason for the rule that a general provision should yield to a specific provision is this: In passing a special Act, Parliament devotes its entire consideration to a particular subject. When a general Act is subsequently passed, it is logical to presume that Parliament has not repealed or modified the former Special Act unless it appears that the Special Act again received consideration from Parliament. Vide London and Blackwall Railway v. Limehouse District Board of Works [26 LJ Ch 164 : 69 ER 1048] , and Thorpe v. Adams [(1871) LR 6 CP 125] . In J K Cotton Spinning and Weaving Mills Co. Ltd. v. State of U.P. [AIR 1961 SC 1170: (1961) 3 SCR 185 : (1961) 1 LLJ 540 : (1960- 61) 19 FJR 43] , this Court observed (at p. 1174): Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Amendment) Ordinance, 2019 whereby the new provision of section 32A has been introduced in the Insolvency and Bankruptcy Code, 2016 (hereinafter IBC ) which reads as follows: 32A. (1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date of the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not - (a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report of a complaint to the relevant statutory authority or Court: Provided that if a prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this Section, against whom such an action may be taken under such law as may be applicable. (3) Subject to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity given in this section, the corporate debtor and any person, who may be required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and co-operation to any authority investigating an offence committed prior to the commencement of the corporate insolvency resolution process . (emphasis added) 9.26. That, in accordance with newly inserted section 32A(2) of the IBC, the Enforcement Directorate is not precluded from proceeding against the assets of a Corporate Debtor, for commission of offence prior to the commencement of the corporate insolvency resolution process before a resolution plan covering such assets has been approved. 9.27. That, since in the present case there was no resolution plan covering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Prevention of Money Laundering Act, 2002 or provisions therein relates to proceeds of crime , we hold that Section 14 of the I B Code is not applicable to such proceeding. (emphasis added) 9.31. That, the decision of the Hon ble NCLAT in Varsanna Ispat (supra) was subsequently followed by in the case of Rotomac Global Private ltd. vs. Deputy Director, Directorate of Enforcement, Company Appeal (AT) (Insolvency) No. 140 of 2019. 9.32. That, the Hon ble High Court of Delhi in the case of Deputy Director, Directorate of Enforcement vs. Axis Bank 2019 SCC OnLine Del 7854 has also held that a moratorium in terms of section 14 of the Act cannot come in the way of the statutory authority conferred under the PMLA, and if a contrary view is taken it would defeat the very objective of the PMLA. The relevant paragraph from Axis bank (supra) is extracted hereunder: 146. A Resolution Professional appointed under the Insolvency Code does not have any personal stake. He only represents the interest of creditors, their committee having appointed and tasked him with certain responsibility under the said law. The moratorium enforced in terms of Section 14 of Insolvency Code canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taching and releasing the properties in its favor. 9.35. And that, attention is invited to Order dated 4.9.2020 passed by High Court of Kolkata in IA CAN 1 of 2020 ( Old CAN No. 5363 of 2020) in Writ Petition 6575/2020 Directorate of Enforcement vs. Anil Goel Anr. Wherein the order dated 12.3.2020 passed by NCLT Kolkata Bench wherein it was held as under: Heard the appearing parties. The petitioners raise a fundamental question of jurisdiction exercised by the National Company Law Tribunal (NCLT), Kolkata Bench vide its order dated 12th March, 2020 concerning the Respondent No.2/the Company in liquidation which is being also proceeded against under the Prevention of Money Laundering Act, 2002 (for short the PML Act). Mr. Hossain, learned Counsel appearing for the petitioners, i.e. the Directorate of Enforcement submits that the Respondent Nos. 1 and 2/ representing the Company in liquidation, have earlier submitted themselves to the adjudicatory process under the PML Act and the law is now squarely settled in the case of Embassy Property Development Private Limited Vs. State of Karnataka reported in 2019 SCC Online SC 1542 that in the event two separate jurisdictions invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The Liquidator on liquidation of assets/properties involved in the present proceedings would distribute the proceeds to the Financial Creditors. Therefore, Liquidator is a necessary party in the appeal as well as in the application to decide the question raised in the appeal and in the application. Heard both sides on the question whether the Liquidator is a necessary party to decide the present application. It is seen from the record that subsequent to the coming into the force of the I BC (Amendment) Act, 2020 the NCLT, Court-III, Mumbai Bench vide order dated 17.03.2020 in the matter of M.A. No. 3348 of 2019 in C.P. No. 512/2019 has appointed Mr. Indrajit Mukherjee as Liquidator as provided under Section 34(1) of the IBC. This order has been passed subsequent to the order passed by Hon ble High Court, Delhi directing this Tribunal to consider the application/appeal filed by the petitioner i.e. the present appellant. There was no occasion before the Hon ble High Court to know that Mr. Mukherjee has been appointed as the Liquidator. Now the question is whether, after the appointment of the Liquidator, without hearing him any order could be passed in the appeal/applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution Professional (RP) and the same was approved by this Bench by an order dated 01.07.2019. 3. The CoC in its 3rd meeting held on 16.07.2019 decided to appointed Valuers. The RP accordingly appointed two registered valuers as required under Regulation 27 of the IBBI (IRP for Corporate Persons) Regulations, 2016 and the Information Memorandum was prepared as provided under Regulation 36(1) of the Code. 4. The RP submits that the public announcement was made on 20.04.2019 for submitting the claims. It is further submitted than an advertisement, inviting Expression of Interest (EoI) in Form G was not published, for the reasons that the Resolution to publish Form G was rejected by 91.78%. Thereafter, no extension has been sought and no EoI was invited and no Resolution plan was received. 5. The Resolution Professional submits that in the 7th CoC meeting held on 13.09.2019, the CoC having 95.41% voting rights passed a resolution for liquidating the company in view of the fact that the no Resolution Plan was received in stipulated time period. Accordingly, the Resolution Professional filed this application for liquidation of the Company as provided u/s. 33 of the Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor. i. that upon having initiated liquidation process, subject to section 52 of the Code, no suit or other legal proceeding shall be instituted by or against the Corporate Debtor save and except the liberty to the liquidator to institute suit or other legal proceeding on behalf of the corporate debtor with prior approval of this Adjudicating Authority. j. That this order for liquidation under this Section shall be deemed to be a notice of discharge to the officers, employees and workmen of the Corporate Debtor except when the business of the Corporate Debtor is continued during the liquidation by the Liquidator. The appellant/applicant has filed the present application on 06.08.2020 through e-mail which is much after the liquidation order dated 17.03.2020 passed by the NCLT. The appellant/applicant should have prayed this Tribunal to make the liquidator as a party in the present proceedings. Even at the time of filing the appeal, the Insolvency Resolution Professional (IRP) because, as per the own admission of the appellant the Corporate Insolvency Resolution Process (CIRP) was initiated against DSK Motors i.e. Corporate Debtor on 9th April, 2019 whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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