ED‘s Action under PMLA cannot be reviewed by NCLT/NCLAT: Supreme Court [Read Judgement]

In a recent case, the Supreme Court held that the National Company Law Tribunal (NCLT) or the National Company Law Appellate Tribunal (NCLAT) cannot review the actions taken by statutory authorities under other laws.

JSW, which was Respondent No. 2 filed by the CoC, filed an application seeking clarification of the order dated 06.03.2020 to the extent that JSW was not obligated to implement the Resolution Plan during pendency of the SLPs filed by the CoC, Kalyani Transco, Sanjay Singal and others against the Judgment dated 17.02.2020 passed by NCLAT. The said was resisted by the CoC by filing a detailed reply contending inter alia that JSW was attempting to seek a stay on the implementation of the plan under the garb of clarification of the order dated 06.03.2020. The CoC in the said reply made some serious allegations of misuse of process of court against JSW and sought direction against JSW to implement the plan as per its statutory obligations under the IBC.

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According to the NCLAT, once the Resolution Plan was approved, the criminal investigations against the corporate debtor would also be halted because the Directorate of Enforcement/Investigating Agencies lacked the authority to seize the corporate debtor's assets in accordance with Section 32A(1)(2). Additionally, the NCLAT ruled that the ED's seizure of the corporate debtor's assets was unlawful or outside its authority.

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The bench comprising Justice Bela M Trivedi and Justice Satish Chandra Sharma observed that the NCLT and NCLAT are constituted under Section 408 and 410 of the Companies Act, 2013 and not under the IBC. The jurisdiction and powers of the NCLT and NCLAT are well circumscribed under Section 31 and Section 60 so far as NCLT is concerned, and under Section 61 of IBC so far as the NCLAT is concerned. Neither the NCLT nor the NCLAT is vested with the powers of judicial review over the decision taken by the Government or Statutory Authority in relation to a matter which is in the realm of Public Law.

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Reference was made to the judgment in Embassy Property Developments Private Limited vs. State of Karnataka & Ors which held that a decision taken by the Government or a statutory authority in relation to a matter which is in the realm of Public Law, cannot be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution” appearing in Section 60(5)(C) IBC.

The court ruled that, as an Appellate Authority under Section 61 over the NCLT's orders, the NCLAT could not exercise any authority or jurisdiction beyond Section 61 of the IBC when the NCLT was unable to exercise the judicial review powers that fell under the purview of public law or outside the IBC. The Court ruled that because the PMLA is a public law, the NCLAT lacked the authority and jurisdiction to examine the Statutory Authority's ruling under the PMLA.

The NCLAT's observations and findings regarding the ED's provisional attachment order were deemed "coram non judice" by the court, meaning they were made without legal authority or jurisdiction.

To Read the full text of the Order CLICK HERE

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