Moratorium u/s 14 of IBC will not bar attachment under PMLA: Delhi High Court [Read Order]

The Delhi High Court ruled that Moratorium under Section 14 of Insolvency and Bankruptcy Code, 2016 (IBC) will not bar attachment under Prevention of Money Laundering Act (PMLA), 2002.

The Court was dealing with a petition filed by the resolution professional, Rajiv Chakraborty of Era Infra Engineering Limited challenging the validity of Enforcement Directorate (ED)’s Provisional Attachment Orders and their confirmation by the Adjudicating Authority. It was argued that once the moratorium under Section 14 of the IBC came into effect, the ED stood denuded of jurisdiction to exercise powers under the PMLA.

The Bench consisting of Justice Yashwant Varma observed that the provisions of PMLA are not subservient to the moratorium provision in Section 14 of the IBC and that while both the statutes are special statutes in the generic sense, they both seek to subserve independent and separate legislative objectives and the subject matter and focus of the two legislations are clearly distinct. The Court also said that the extent to which PMLA was intended to capitulate to the IBC is an issue which must be answered based on Section 32A of the IBC.

In the case of effect of attachment by ED the Court noted that “Attachment under the PMLA does not result in an extinguishment or effacement of property rights. It is essentially a fetter placed upon the possessor of that property to deal with the same till such time as proceedings under the aforesaid enactment come to a definitive conclusion on the question of confiscation”.

On the impact of moratorium, the Court observed that “The assets which may have been obtained by the commission of a scheduled offense thus cannot be accorded exemption or immunity from the rigours of the PMLA and that acceptance of such a contention would not only run contrary to the legislative policy but also undermine the efforts of the legislature to combat the offense of money laundering.”

“In fact, if Section 14 were to be interpreted in the manner as suggested by the petitioner, it would deprive the authorities charged with implementing the provisions of the PMLA of an essential weapon in their quest to confiscate proceeds of crime” the Court said.

The Court also noted that the government, while proceeding to act under the PMLA cannot be considered as acting as a creditor who seeks to enforce a debt.

To Read the full text of the Order CLICK HERE

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