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TMI Blog2022 (3) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... kruptcy Code, 2016 (IBC), seeking the following reliefs: a) Declaration that the Provisional Attachment Order dated December 30, 2021 is null and void and not binding on the Corporate Debtor and the same be ordered to be quashed and/ or set aside; b) Stay of operation of the Provisional Attachment Order dated December 30, 2021; c) Order of injunction restraining the Respondents from giving any effect or further effect to and/ or taking any steps or further steps on the basis of the Provisional Attachment Order dated December 30, 2021; d) Ad- interim orders in terms of prayers above; e) Costs of this application be paid by the Respondents; f) Such further orders or directions be passed as this Hon'ble Tribunal may deem fit and proper. Submissions of the Applicant: 3. The Case of the Applicant is that the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor was commenced on 20.11.2019. Presently, the CIRP is at an advance stage, with seven Resolution Plans pending before the Committee of Creditors (CoC). Due to pending litigations particularly I.A. (IB) No. 162/KB/2021, this Tribunal by order dated 31.05.2021 had directed that the period fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14 moratorium, it is settled law that there cannot be any action taken to deprive the CIRP of the assets of the Corporate Debtor. The ultimate intent and result of CIRP is not to confer any benefit on the ex- promoters of the Corporate Debtor but to resolve the insolvency on a 'clean slate theory' with the control of the Corporate Debtor being vested with a fresh Resolution Applicant. Under section 14 of IBC, there is a complete prohibition of dealing with or attaching of any assets of the Corporate Debtor during continuation of moratorium. 9. Ld. Senior Counsel has drawn our attention to the decision of Hon'ble National Company Law Appellate Tribunal (NCLAT) in Company Appeal (AT) (Insolvency) No. 575/2019 titled The Directorate of Enforcement vs. Manoj Kumar Agarwal wherein vide judgment dated 09.04.2021, the law has been laid down in this regard at paras 1,2,3,39,40,4,42 and 43. In this decision, it has been categorically held that there cannot be any attachment of Corporate Debtor's assets under PMLA during continuation of CIRP 10. Under PMLA also, the process contemplated is for attachment of "proceeds of crime" and ultimately for sale of confiscated properties under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot non-existent; c) Assuming a situation where the matter goes before the PMLA Adjudicating Authority, even if eventually the said authority ultimately sets aside the attachment, the CIRP will be rendered nugatory in the interregnum, since the proceedings before PMLA may continue for several years. None of the aforesaid vital considerations have been considered and the same have been completely ignored in the Kiran Shah decision. On the face of it, the decision is perverse, per incuriam and ought not to be treated as a binding precedent. 15. It is strenuously emphasised and argued by Ld. Senior Counsel Shri Ratnanko Banerji appearing for the Applicant/Resolution Professional that if the order of attachment impugned dated 31/12/2021 attaching the properties of the Corporate Debtor worth Rs. 96.69 Crores is allowed to continue, the Applicants in the 7 Resolution Plans pending before CoC will not be interested to buy the assets of Corporate Debtor. 16. It is further argued that the attachment order is against the objectives of the Insolvency and Bankruptcy Code, 2016 (IBC) which contemplates as its principal objects the following- " An Act to consolidate and amend the laws relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor. If CIRP is initiated, the property should become available to fulfil objects of IBC till a Resolution Plan is passed or the sale of liquidation asset occurs in terms of 32A. 21. Ld. Counsel has submitted that in view of these categorical findings of the Appellate Tribunal, the present application filed by the Resolution Professional deserves to be allowed and notice dated 30th of December, 2021 issued by the PMLA is required to be quashed as a necessary consequence. Submissions of the Respondents: 22. The Respondents contend that the Central Bureau of Investigation, New Delhi registered FIR no. RC 219 2014 E0019 dated 07.08.2014 invoking Section 120-B read with Section 420 of IPC, 1860 against M/s Kohinoor Steel Pvt. Ltd. (herein after referred to as M/s KSPL) and its promoters / Directors and others unknown persons for submitting and misrepresenting on the accounts of net worth of the company in order to bolster its chances of getting coal block allotted of Mednirai Coal Block. 23. Subsequently, the Central Bureau of Investigation, EO-I, New Delhi in the said FIR No. RC 219 2014E0019 dated 07.08.2014, filed Final Report/Charge Sheet bearing no. 20 / 2019 on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter preparedness compared to other competing applicants. 27. The CBI investigation also revealed that to enjoy the net worth of the purported Group Companies, Shri Vijay Bothra, Director, M/s KSPL had manipulated the format of application form and inserted the information of "Group Company" which was not asked by the Ministry of Coal. This was done by Shri Vijay Bothra, Director M/s KSPL, with the mala fide intention to take a benefit of the net worth of claimed group companies, despite the fact that the guidelines nowhere mentioned about group companies. 28. As per the advertisement published in the newspaper "Hindustan Times" dated 09.09.2005, the Ministry of Coal intended to allocate 20 coal and 11 lignite blocks for captive mining by companies engaged in the business of generation of power, production of iron and steel or cement. Whereas, in the Application form at SI. No. 6 - Core Business of Applicant was mentioned as "Manufacturing of FMGC Product, Import and Trading of Agro Products, Automobiles and Finance & Investment". Investigation revealed that at the time of submission of application, M/s KSPL had no existing capacity of generation of power, production of iron and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 19.08.2006 informed to M/s KSPL that consent application (both Air and Water) was rejected due to non-compliance of condition mentioned in the No Objection Certificate (Consent to Establish) issued under Section 25/26 of the Water Act, 1974 and under Section 21 of Air Act and further directed for the closure the unit under Section 31-A of the Air (Prevention and Control of Pollution) Act, 1981. 32. During the meeting before Screening Committee on 08.09.2006, M/S KSPL had misrepresented that 04 Kilns of 100 TPD had become operational, which was false and incorrect. By furnishing above mentioned false information to the Ministry of Coal and Screening Committee, accused company M/s KSPL dishonestly induced Ministry of Coal and Screening Committee to make recommendations in their favour for allotment of a coal block. 33. The letter of allocation of Mednirai Coal block was issued to M/s Rungta Mines Ltd. Jointly with M/s Kohinoor Steel Pvt. Ltd. by the Ministry of Coal, Govt. of India, New Delhi vide their letter No. 38011/11/2006-CA-I dated 28.05.2009. Investigation under PMLA, 2002 34. Since, Sections 120B r/w 420 of IPC and Section 13(2) r/w 13 (1) (d) of PC Act being the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 28.05.2009. 37. Pursuant to the said criminal conspiracy with others and to present the aforesaid false claim of M/s KSPL as genuine, Shri Vijay Bothra not only started to infuse his unaccounted money in M/s KSPL in the guise of share application money received by M/s KSPL through various companies under his control but also made round tripping of money among bank a/cs of M/s KSPL, Investing Companies and others in the guise of share application and thus, increased the net-worth of the company and utilized the same in expansion of the company to get allocated coal block. 38. That, further, in order to accommodate unaccounted money of Shri Vijay Bothra in M/s KSPL in the guise of the share application money through various companies under his control as well as round tripping of money among bank a/cs of M/s KSPL, Investing Companies and others to increase the net-worth of M/s KSPL, the authorized capital of M/s KSPL was increased from 1.00 lakhs to Rs. 20.00 Crore in a short period of 2005 to 2009 and 193.380 lakh shares were issued at Rs. 50 /- per share ( face value of Rs. 10 /- at premium Rs. 40 /-) although loss was being incurred by M/S KSPL in 2005-06 & 2006-07. 39. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit / business gains from "allocated coal mines" where allocation of coal block was secured through fraudulent manner. This investment was made in anticipation of undue "benefit to be derived or obtained" by M/s KSPL as a result of or consequence to criminal activity relating to a scheduled offence. The said investment, which is covered by the definition of "proceeds of crime" as per definition "property" under Section 2(1)(v) of PMLA and "proceeds of crime" under Section 2(1)(u) of PMLA, has been laundered and it was projected that the same was used for the purpose of project development related to "legally obtained Coal Block", and therefore, not only such proceeds of crime is liable to confiscation under Section 8(5) of PMLA but all the persons, whether directly or indirectly attempted to indulge or knowingly assisted or knowingly a party or was actually involved in any process or activity connected with the proceeds of crime shall be guilty of offence of money-laundering. Thus, M/s KSPL and its promoter director Shri Vijay Bothra have committed the offence of Money Laundering as defined u/s 3 read with Section 70 of PMLA, 2002 and punishable u/s 4 of PMLA, 2002 and properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Zone - (I) Directorate of Enforcement Govt. of India issued a letter dated 27th of October, 2021 to the Resolution Professional to intimate the Directorate of Enforcement conducting investigations under the provision of Prevention of Money Laundering Act, 2002 against Kohinoor Steel Pvt. Ltd. and its creditors for illegal allocation of Coal Blocks and approximate proceeds of crime to the tune of Rs. 96.69 Crores. 45. It is further argued that the provisional attachment order was issued on 30th of December, 2021 by the Directorate of Enforcement which has been challenged in the present application. It has been further stated by the Ld. Counsel appearing for the Directorate of Enforcement that a moratorium does not effect either initiation or continuation of investigation under the provision of PMLA 2002 which is special statute. To support this argument, the Ld. Counsel for the Enforcement Directorate has relied upon an order passed by NCLAT in Company Appeal (AT) (Insolvency No. 493 of 2018) titled Varrsana Ispat Limited. Vs. Deputy Director of Enforcement which was similar in facts and circumstances as in the present case. 46. The Ld. Counsel while reading out this order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of May, 2019 wherein it was held that "it is clear that the 'Prevention of Money-Laundering Act, 2002' relates to 'proceeds of crime' and the offence relates to 'money-laundering' resulting in 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 relate to 'proceeds of crime', we hold that Section 14 of the IBC is not applicable to such proceeding". 51. It is further stated by the Ld. Counsel that a Civil Appeal No. 5546 of 2019 was preferred against this Order before the Hon'ble Supreme Court of India and the Apex Court dismissed the said appeal on 22nd of July, 2019. 52. We have heard the Ld. Counsel for both the parties and perused the record available before this Adjudicating Authority. We are of the view that this Adjudicating Authority, with utmost regard to the order relied upon by the Applicant, is bound by the order dated 3rd of January, 2022 passed by Hon'ble 3 Member Bench of NCLAT which took the view that NCLT is not empowered to deal with the matters falling under PMLA. In the present case since notice impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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