'Provisional Order of Attachment' under PMLA will not Nullify Protection u/s 32A IBC: NCLT [Read Order]

The National Company Law Tribunal, Hyderabad Bench observed that 'Provisional Order of Attachment' under the Prevention of Money Laundering Act, 2002 (PMLA) will not nullify protection under Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC).

The applicant filed the application under Sections 32A and 60(5) of the IBC with the prayer of obtaining a declaration asserting that the assets and/or properties belonging to the corporate debtor, as outlined in the resolution plan, are not subject to attachment by the Enforcement Directorate (Respondent No. 1). Additionally, the applicant sought the annulment of the provisional order of attachment issued under Section 5(1) of PMLA.

The respondent no.1 submitted that the Resolution Plan of the Corporate Debtor cannot be implemented as the Resolution Plan deals with the attached property of the Corporate Debtor. If the Resolution Plan is implemented without considering Provisional Attachment Orders, it will be detrimental to all the stakeholders including the Enforcement Directorate and Successful Resolution Applicant.

The applicant submitted that the Resolution Professional has not taken any action against attachment of assets of the Corporate Debtor so far. It is settled principle of law that proceedings under IBC is not a recovery proceeding. The applicant cannot be called upon to implement Resolution Plan in part when the ED itself admitted in Counter Affidavit that the Resolution Plan cannot be implemented in its current form.

A Two-Member Bench comprising Charan Singh, Technical Member and DR. Venkata Ramakrishna Badarinath Nandula, Judicial Member observed that “On careful examination of the ‘impact’ of the impugned provisional order of attachment on the implementation of the approved resolution plan by the Successful Resolution Applicant (SRA) and taking into consideration the ‘clean slate’ theory propounded by Hon’ble Supreme Court, besides the very object behind introducing section 32A by way of an amendment in I&B Code, in our considered view, the power of this Tribunal to interfere with the “impugned measure” is well within the teeth of section 60 (5)(c) of IB Code.”

“We hereby hold that, all the assets and properties of the corporate debtor which formed part of the approved resolution plan for the resolution of the insolvency of the corporate debtor, are immune from the provisional order of attachment made vide order No.1 of 2020, ECIR No.CIR/HYZO/02/2015 dated 15.10.2020, under section 5(1) of Prevention of Money Laundering Act, 2002” the Bench concluded.

To Read the full text of the Order CLICK HERE

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