ED’s Pre-CIRP Attachment Ceases Post Plan Approval: NCLAT Extends S. 32A Protection to Respondent[Read Order]

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has ruled that the Enforcement Directorate’s (ED) provisional attachment of the respondent properties and accounts made before initiation of insolvency proceedings ceases to operate once a resolution plan is approved.

The dispute arose from the resolution process of Alchemist Infra Realty Ltd., a real estate company incorporated in 2008.

The Enforcement Directorate (ED) had provisionally attached the company’s properties and accounts on 24 January 2019 under Section 5 of the Prevention of Money Laundering Act (PMLA), following a complaint by SEBI alleging offences under the SEBI Act, 1992. The Delhi High Court, in February 2019, directed maintenance of the status quo over the attached assets, restraining any alienation.

Subsequently, insolvency proceedings were initiated against Alchemist Infra Realty Ltd. on 23 March 2022 under Section 7 of the IBC. Resolution Professional (RP) Gaurav Misra invited resolution plans, and the plan submitted by Vantage Point Asset Management Pte. Ltd. was approved by the Committee of Creditors (CoC) in October 2023 with 100% voting share. The plan promised full repayment to depositors, whose admitted claims exceeded ₹537 crore.

When the RP sought approval of the resolution plan before the NCLT, the SRA requested release of the attached properties and accounts to enable implementation of the plan. On 4 July 2024, the NCLT approved the resolution plan but refused to direct ED to lift its attachment, holding that the SRA must pursue remedies under PMLA.

The Tribunal emphasized that while Section 32A of the IBC grants immunity to new management from criminal liability for past offences, it does not automatically vacate attachments already imposed under PMLA.

Aggrieved, the SRA appealed before NCLAT, arguing that Section 32A protects the assets of the corporate debtor from attachment, seizure, or confiscation once a resolution plan is approved and management shifts to an unrelated party.

Section 32A of the Insolvency and Bankruptcy Code (IBC) provides immunity to the corporate debtor and its new management from liability for offences committed before the insolvency process began, and protects the debtor’s property from further attachment or confiscation once a resolution plan is approved

Counsel for the appellant contended that provisional attachment does not extinguish ownership rights of the corporate debtor, and since no confiscation order had been passed under Section 8 of PMLA, the assets should be treated as free for resolution purposes. Reliance was placed on the Supreme Court’s ruling in Manish Kumar v. Union of India (2021) and earlier NCLAT decisions affirming the broad scope of Section 32A.

The ED, however, opposed the plea, asserting that assets attached before CIRP constitute “proceeds of crime” and cannot form part of the resolution estate. It argued that Section 32A operates prospectively, protecting assets only from future action post-plan approval, but does not undo attachments already in place.

The ED relied on Delhi High Court’s judgment in Rajiv Chakraborty RP v. ED (2022) and NCLAT’s three-member bench ruling in Anil Kohli v. ED, which held that provisional attachments remain unaffected by insolvency proceedings.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

After hearing all parties, the bench comprising Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member)upheld the appellant’s submissions. It was held that once the resolution plan was approved on 4 July 2024, Section 32A immunity extended to the debtor’s assets, and ED’s provisional attachment ceased to operate.

NCLAT found the NCLT wrong in directing the SRA to approach PMLA authorities, clarifying that Section 32A itself provides statutory protection.

Accordingly, NCLAT set aside the NCLT’s findings in its order, allowed the appeal, and directed that the resolution plan be implemented without hindrance from ED’s prior attachment.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates