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TMI Blog2024 (8) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... ], where the Bombay High Court has held that NCLT does not lack jurisdiction to use its judicial discretion to adjudicate upon the release of the attachment. The Hon ble Supreme Court had occasion to consider the challenge to Section 32-A in the Writ Petition filed in the Hon ble Supreme Court under Article 32 in the judgment of Manish Kumar vs. Union of India and Anr [ 2021 (1) TMI 802 - SUPREME COURT ]. In the above judgment challenge to Section 32-A was repelled and while repelling the challenge to Section 32-A, the Hon ble Supreme Court examined the legislative scheme of Section 32-A - Hon ble Supreme Court has clearly held that Section 32-A has been engrafted in the legislation, which is a legislative scheme and if legislature thought that immunity be granted to the Corporate Debtor or its property, it hardly furnishes a ground for this Court to interfere. In paragraph 326, it has been emphasized that the extinguishment of the criminal liability of the Corporate Debtor is apparently important to the new management to make a clean break with the past and start on a clean slate. Thus, the Adjudicating Authority erred in not extending the benefit of Section 32-A, subsection (2) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assets and the Adjudicating Authority observed that it would be for the SRA to resort to the appropriate proceedings to seek remedy in this regard. The following findings have been returned by the Adjudicating Authority in paragraph 60 of the judgment: 60. In sum and substance, the SRA/ CD would be entitled to no other relief/ concession/waiver except those, which are available to it as per the provisions of Section 31(1) and 32A of IBC, 2016. Nevertheless, the properties which are already attached by ED, under PMLA would not be released and it would be for the SRA to resort to the appropriate proceedings to seek remedy in this regard. In any case, the changed management covered under Sec. 32A(l)(a) (2)(i) of IBC, 2016, would not be entitled for any criminal consequences for the offences committed by the ex-management of the CD prior to commencement of the CIRP. It is also noticed that though in the certificate furnished by the RP in Form-H prescribed under Regulation 39(4) of IBBI (CIRP) Regulations, 2016, as also in the Affidavit filed by him, the RP has authenticated that the SRA does not suffer any ineligibility under Sec. 29A of IBC, 2016, but in terms of provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be available to the Corporate Debtor. It is submitted that judgment of the Bombay High Court in Shiv Charan and Ors. vs. Adjudicating Authority under the Prevention of Money Laundering Act, 2002 and Anr. was relied by the Appellant, which has also been noticed by the Adjudicating Authority in the impugned order. The Adjudicating Authority erred in distinguishing the judgment while refusing to grant relief claimed by the Appellant under Section 32-A. It is submitted that law is now well settled that after approval of the Resolution Plan, SRA is absolved from liability of offences committed by Corporate Debtor, prior to initiation of CIRP, which will also cover the property/ assets of the Corporate Debtor attached under the PMLA Act, hence, the Adjudicating Authority ought to have allowed the relief as claimed under Section 32A, which is within the statutory jurisdiction available to the SRA. It is submitted that the Appellant is, thus, only aggrieved by part of order, by which Adjudicating Authority refused to extend the benefit of Section 32A to the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal under Section 26( 1) of the PMLA, 2002 in order to raise the attachment levied on the properties of the corporate debtor or to Section 8(5) of the PMLA, 2002 (to reverse confiscation, which itself is rendered impossible by Section 32A of the IBC, 2016) is wholly unnecessary. This is for the simple reason that Section 32A itself mandates that once a resolution plan is approved, no action can be taken against the properties of the corporate debtor in relation to an offence committed prior to the commencement of the CIRP of the corporate debtor, where such property is covered under a resolution plan approved by it under Section 31 of the IBC, 2016. It is it is wholly untenable to contend that the NCLT, and which is the Adjudicating Authority constituted under the IBC, 2016, is incompetent and/ or powerless to either interpret or to give effect to the provisions of the very Act under which it was constituted. 26. We are of the clear view that looking at the purpose and object of not only Section 31, but also Section 32A of the IBC, 2016, the NCLT had all powers to direct the ED to raise its attachment in relation to the attached properties of the corporate debtor once a resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the invocation or utilisation of the powers available under PMLA would come into effect only once the trigger event envisaged under Sec. 32A comes into effect. According to Hon ble High Court, the legislature in its wisdom chose to place an embargo upon the continuance of criminal proceedings including action of attachment under PMLA only once a resolution plan is approved or a measure in aid of liquidation is adopted. In Para 115 of the judgment in Rajiv Chakraborty (supra), Hon ble High Court concluded that the power to attach under the PMLA would not fall within the ken of Sec.14(1)(a) of IBC, 2016. 12. The Adjudicating Authority has also noticed paragraph 115 of the judgment of the Delhi High Court in Rajiv Chakraborty, which lays down following: 115. The Court has independently come to the conclusion that the power to attach under the PMLA would not fall within the ken of Section 14(1)(a) of the IBC. Through Section 32A, the Legislature has authoritatively spoken of the terminal point whereafter the powers under the PMLA would not be exercisable. The events which trigger its application when reached would lead to the erection of an impregnable wall which cannot be brea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the CIRP qua the same only for the purpose of changing the hands qua the properties/ assets to ensure that the property is clean in the hands of the SRA. A thought may evolve that the benefit of Sec. 32A of IBC, 2016 is available to SRA only after approval of the Plan, thus, if investigation is pending against the CD, the Adjudicating Authority may refuse to approve the Plan. Such approach may not work either in the interest of economy or to achieve the object of the Code. The approach would also be perceived as antithesis to realisation of the debt, which the creditors could extend to CD before commencement of CIRP. Thus this Tribunal need to approach the situation with care and precision. Sec. 32A of IBC, 2016 absolve the corporate debtor from liability for offence committed prior to commencement of CIRP and the new management has no liability towards such offence. The Corporate debtor stands discharged from the prosecution, with the approval of Resolution Plan. 14. In the above paragraph, the Adjudicating Authority has noticed that in respect of the avoidance transactions, if any, the Application will be pursued after the approval of Resolution Plan. Hence, the scheme of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aran (supra), where the Bombay High Court has held that NCLT does not lack jurisdiction to use its judicial discretion to adjudicate upon the release of the attachment. In paragraph 50, 51 and 52 following has been held: 50. As far as the judgment of Hon'ble High Court of Judicature at Bombay in Shiv Charan and Ors. vs. Adjudicating Authority under the Prevention of Money Laundering Act, 2002 and Anr. (Writ Petition (L) No. 9943 of 2023) is concerned in the said case Hon'ble High Court of Bombay ruled that it is untenable to contend that the NCLT is incompetent and/or powerless to either interpret or to give effect to the provisions of vary act under which it was constituted. Para 25 of the judgment is reproduced hereinabove. In sum and substance the view taken by Hon'ble High Court in the case of Shiv Charan is that this Tribunal is well within its power to direct release of the property attached under PMLA. It is not the view taken by Hon'ble High Court that this Tribunal should mandatorily release the attached property. In the said case, the order passed by this Tribunal, approving the Plan was not under challenge before Hon ble High Court Bombay. Para 40 and 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor an issue of ramification of approval of plan by this Tribunal is involved. The issue involved is as to whether we should grant relief and concession in the nature of direction to ED to release the property attached by it. We have already viewed that the property of the CD attached by ED cannot be directed to be released and the approval of the Plan would also not result in such release. In CCE vs. M/s Alnoori Tobacco Products, Hon'ble Supreme ruled thus:- 11. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are neither to be read as Euclid's theorems nor as provisions of a statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark on lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it. 52. Indubitably, the value of the plan as also the amount distributed to the stakeholders is not such as should have been. Nevertheless, it is stare decisis that once in exercise of its commercial wisdom the CoC has accepted the Resolution Plan, this Tribunal/ Adjudicating Authority should not interfere with the same. In Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta Ors, Hon'ble Supreme Court ruled that the limited power of judicial review available to this Tribunal is in four corners of Section 30(2) of the Code. It is also the view taken by Hon'ble Supreme Court that such power of review does not enable this Tribunal to interfere with the Resolution Plan. 18. The Hon ble Supreme Court had occasion to consider the challenge to Section 32-A in the Writ Petition filed in the Hon ble Supreme Court under Article 32 in the judgment of Manish Kumar vs. Union of India and Anr. (2021) 5 SCC 1. In the above judgment challenge to Section 32-A was repelled and while repelling the challenge to Section 32-A, the Hon ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he widest possible amplitude. There is a clear nexus with the object of the Code. The other part of the clarification, under the Explanation, is found in the second sub-clause of Explanation (ii). 322. Under the second limb of the Explanation to Section 32-A(2), the law giver has clearly articulated the point that as far as the property of any person, other than the corporate debtor or any person who had acquired the property of the corporate debtor through the CIRP or liquidation process under the Code and who otherwise fulfils the requirement under Section 32-A, action can be taken against the property of such other person. 20. Paragraphs 323, 323.1, 323.2, 323.3 and 324 also elaborate legislative scheme, which is as follows: 323. Thus, reading sub-section (1) and sub-section (2) of Section 32-A together, two results emerge: 323.1. Subject to the requirements embedded in sub-section (1) of Section 32-A, the liability of the corporate debtor for the offence committed under the CIRP, will cease. 323.2. The property of the corporate debtor is protected from any legal action again subject to the safeguards, which we have indicated. 323.3. The bar against action against the property, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts justifiably hold such laws in cannot but be applicable in the instant case as well. The provision deals with reference to offences committed prior to the commencement of the CIRP. With the admission of the application the management of the corporate debtor passes into the hands of the interim resolution professional and thereafter into the hands of the resolution professional subject undoubtedly to the control by the Committee of Creditors. As far as protection afforded to the property is concerned there is clearly a rationale behind it. Having regard to the object of the statute we hardly see any manifest arbitrariness in the provision. 22. In view of the foregoing discussions, we are of the view that the Adjudicating Authority erred in not extending the benefit of Section 32-A, subsection (2) to the Resolution Applicant, who was entitled to protection under Section 32A of the IBC. 23. In result, we allow the Appeal, set aside the findings recorded in the impugned order in paragraph 60 and observations made in the judgment, denying the benefit of Section 32-A to the SRA. The SRA is entitled to relief of extension of benefit of protection of Section 32-A to lift the attachme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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