NCLAT Orders ED to Lift PMLA Attachment on Corporate Debtor's Asset Citing SRA Protection u/s 32A of IBC [Read Order]

The Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) has directed the Enforcement Directorate (ED) to lift the PMLA attachment on the corporate debtor's assets, citing the protection granted under Section 32A of the Insolvency and Bankruptcy Code ( IBC ) for Successful Resolution Applicants ( SRA ). NCLT while approving the resolution plan, refused to grant prayer made by the SRA for release of the assets attached by ED under PMLA.

The Successful Resolution Applicant (SRA) has filed an appeal challenging a portion of the order dated July 4, 2024, passed by the National Company Law Tribunal (NCLT), New Delhi Bench (Court-II) in IA No.01 of 2024. The appeal pertains to the findings in paragraph 60 of the impugned order, which were made in response to the Resolution Professional's (RP) application seeking approval of the Resolution Plan.

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The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Alchemist Infra Realty Limited, commenced on October 8, 2021. During the CIRP, the appellant submitted a Resolution Plan. After conducting due diligence, the RP shared the plan with the Committee of Creditors (CoC), which approved the plan on October 18, 2023, with a 100% vote share. Subsequently, the RP filed IA No.01/2024 seeking approval of the Resolution Plan.

The appellant’s Resolution Plan included a proposal for the vacation of charges by the Directorate of Enforcement (ED) and other authorities. The Resolution Applicant requested that upon approval of the plan, all charges and attachments by the relevant government authorities be vacated to allow the Resolution Applicant/Corporate Debtor to monetize the assets for the implementation of the plan. Although the NCLT approved the plan, it refused to grant the appellant's request for the release of assets, indicating that the SRA should pursue appropriate legal proceedings to seek remedy.

Senior Counsel Mr. Arun Kathpalia, representing the appellant, argued that the NCLT erred in its interpretation of Section 32-A of the Insolvency and Bankruptcy Code, 2016 (IBC). He emphasized that Section 32-A is intended to protect the Resolution Applicant from liabilities related to offenses committed by the Corporate Debtor before the CIRP commenced. Kathpalia referred to the Explanation to Section 32-A, which clarifies that actions against the Corporate Debtor's property concerning an offence include attachment, seizure, retention, or confiscation of such property. The appellant also cited the Bombay High Court's judgment in Shiv Charan and Ors. vs. Adjudicating Authority under the Prevention of Money Laundering Act, 2002, a case referenced by the NCLT in its order.

The appellant contended that the NCLT erred in distinguishing the cited judgment and refusing to grant relief under Section 32-A. It was argued that the law is well-established, ensuring that after the approval of a Resolution Plan, the SRA is absolved of liability for offences committed by the Corporate Debtor before the CIRP, including any assets attached under the PMLA Act. Therefore, the appellant sought the relief provided under Section 32-A, which should have been within the NCLT's jurisdiction to grant. The appellant's grievance lies primarily with the NCLT's refusal to extend the benefit of Section 32-A.

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Supporting the appellant's arguments, Senior Counsel Mr. Krishnendu Datta, representing the respondent, stated that the appellant was entitled to the benefits of Section 32-A, which should have been granted by the NCLT. He argued that the NCLT ought to have approved the Resolution Plan, including the release of attachments by the ED, to enable the Resolution Applicant to implement the plan.

In this case, the NCLT while approving the Rplan, refused to grant prayer made by the SRA for release of the assets attached by ED under PMLA. The three-member bench, comprising Justice Ashok Bhushan, Technical Member Barun Mitra, and Technical Member Arun Baroka, referred to several judgments, including Shiv Charan and Ors. vs. Adjudicating Authority and Anr. (2024), Rajiv Chakraborty vs. Directorate of Enforcement (2022), and Manish Kumar vs. Union of India and Anr. (2021). the bench concluded that the SRA is entitled to the relief of extending the protection under Section 32-A to lift the attachment by the Enforcement Directorate over the Corporate Debtor's assets. Consequently, the appeal was allowed, and the relevant portion of the impugned order was set aside.

To Read the full text of the Order CLICK HERE

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