Amendments Needed in IBC for Granting NOC to Successful Resolution Applicants Upon Approval of Resolution Plan Over Attached Properties
- REEDLAW
- Jan 22
- 3 min read
On Friday, 17th January 2025, a roundtable discussion titled "Understanding the Synergy Between PMLA and IBC" was held at the India International Centre, New Delhi, by the Insolvency Law Academy (ILA) in collaboration with NM Law Chambers. The event brought together legal professionals, policymakers, and academicians to explore the intersection of the Prevention of Money Laundering Act (PMLA) and the Insolvency and Bankruptcy Code (IBC).
The discussion featured three distinguished panellists: Mr. Mukul Rohatgi, Senior Advocate and Former Attorney General for India; Mr. Karnal Singh, Former Director of the Enforcement Directorate (ED); and Mr. Sumant Batra, Insolvency Lawyer and Founder of the Insolvency Law Academy.
Mr. Mukul Rohatgi initiated the discussion by providing a historical overview of insolvency laws in India before the enactment of the IBC. He highlighted the limitations of the Recovery of Debts and Bankruptcy Act, 1993, and the SARFAESI Act, which led to the formation of the T.K. Vishwanathan Committee. The present IBC was enacted based on the committee's recommendations with two primary objectives: the revival of distressed companies and maximizing the value of their assets.
Mr. Rohatgi elaborated on the provisions of the PMLA and the Supreme Court's judgment in Vijay Madanlal Choudhary. He pointed out that the PMLA grants sweeping powers to the ED, allowing them to use witness statements under Section 50 against the same person if they become an accused. He criticized the Supreme Court's rejection of the argument that ED officers should be considered police officers, drawing comparisons with the Toofan Singh judgment related to the NDPS Act.
Addressing the intersection of PMLA and IBC, Mr. Rohatgi raised concerns regarding Section 32A of the IBC, which provides immunity to the corporate debtor from offences committed prior to the commencement of the Corporate Insolvency Resolution Process (CIRP). He questioned whether the ED could continue attaching properties covered under an approved resolution plan. He argued that the power to remove attachments should be vested with the National Company Law Tribunal (NCLT) instead of the Adjudicating Authority under PMLA and suggested issuing a No Objection Certificate (NOC) once a resolution plan is approved.
Adv. Sumant Batra cited the Bombay High Court's judgment in the Shiv Charan case, which held that the NCLT has the authority to direct the ED to lift attachments over properties covered under the resolution plan. He emphasized that the Adjudicating Authority under PMLA need not be approached separately.
Regarding the moratorium under Section 14 of the IBC, Mr. Rohatgi opined that the ED is justified in attaching properties during the moratorium. However, Adv. Sumant Batra referred to the Delhi High Court's ruling in Rajiv Chakraborty, which clarified that the ED can attach properties only before the commencement of CIRP but not after the approval of a resolution plan under Section 32A. Mr. Karnal Singh, in contrast, opined that the ED should defer its attachment powers until after the insolvency process concludes.
The panel made key recommendations, including:
The power to discharge attachments under PMLA should be vested with the NCLT to ensure smooth resolution implementation.
A statutory provision for automatic issuance of an NOC once a resolution plan is approved.
Training and sensitization of ED personnel regarding the workings of IBC.
Mr. Rohatgi further remarked that PMLA proceedings create a duplication of offences, which may violate legal principles under Section 300 of the Cr.P.C. and Article 20(2) of the Indian Constitution, which prohibit double jeopardy.
The discussion also highlighted the inconsistency introduced by the Bharatiya Nagarik Suraksha Sanhita, 2023, which grants attachment powers to police officers, potentially leading to parallel actions by both the ED and the police.
The roundtable served as a precursor to a working group led by Ms. Madhavi Divan, Senior Advocate, Supreme Court of India, and Dr. M.S. Sahoo, Former Chairperson, IBBI, which will propose legislative amendments to better align the PMLA and IBC frameworks.
Comments