The NCLAT, New Delhi, has held that the Provisional Attachment of assets by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) shall cease to operate after the resolution plan is approved, bringing into effect Section 32A of the Insolvency and Bankruptcy Code (IBC).
Since, in the present case, the conditions under Section 32A for extending the benefit to the appellant are fulfilled, and it is not the case of either of the parties that the Successful Resolution Applicant (SRA) does not fulfil the condition contemplated under Section 32A, the Tribunal opined that the Provisional Attachment Order has to be treated to cease by virtue of legislative scheme under Section 32A and there is no necessity to obtain any order by the SRA from the adjudicating authority under the PMLA.
The Division Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that in the present case, no proceedings have taken place under Section 8 of the PMLA Act, 2002, and apart from the provisional attachment, no further steps could be taken up under the PMLA. The Bench emphasised that the resolution plan having been approved, and by virtue of Section 32A, now authorities cannot proceed under the PMLA Act, 2002, which is a legislative injunct under Section 32A.
When the Section 32A itself contemplates cessation of liability and injunction not to prosecute for any offence after approval of the resolution plan and to discharge the corporate debtor, we fail to see any purpose and object of continuing the Provisional Attachment affecting the resolution process, which has undergone and attained finality under IBC, added the Bench.
The Tribunal went on to observe that Section 32A which was inserted by Act No. 01/2020 in the IBC was brought by legislature providing for certain immunity from the liability from prior offences to a new management of the corporate debtor, which has come into existence after approval of the resolution plan, which result in change in the management or control of the corporate debtor.
The Tribunal also clarified that Section 32A only gives immunity to the new management of the corporate debtor and does not absolve the person who was a promoter or the person who was in the management of the corporate debtor. Thus, the proceedings under the PMLA against the promoter or the persons who were in the management of the corporate debtor and were involved in the commission of the offence can be proceeded.
While explaining the legislative scheme under Section 32A, the Tribunal stated that it does not carve out any exception that where Provisional Attachment Orders have been passed prior to initiation of CIRP or prior to approval of the resolution plan, assets have to be kept out of the resolution. The trigger event when 32A comes into operation is the approval of the resolution plan, and it carves out no exception for the applicability of Section 32A in a case where a Provisional Attachment Order has been passed prior to initiation of CIRP.
Briefly, in this case, the Vantage Point Asset Management, as the SRA for Alchemist Infra Realty Ltd., approached NCLAT, challenging the approval of the resolution plan by the NCLT, without instructing the ED to lift the provisional attachment on the company’s assets. Rather, the NCLT had directed the SRA to approach the PMLA authorities separately.
The SRA argued that approval of the resolution plan triggers Section 32A of the IBC, which extinguishes prior liabilities and prevents enforcement actions against the corporate debtor’s assets, as the attachment was provisional and no confiscation order existed. This was opposed by the ED, claiming that its attachment preceded the insolvency process and could not be nullified by a later resolution plan approval.
Appearances:
Senior Advocate Dhruv Mehta, along with Advocates Palash Singhai, Harshal Sareen, Kartikey Shrarma, Prachi Johri, and Mirgangi Parul, for the Appellant
Senior Advocate Krishnendu Datta, along with Advocates Zohab Hossain, Vivek Gurnami, Vivek Gaurav, Satyam, and Varsha Banerjee, for theRespondent
