ED Attachment During CIRP Requires Court Leave Where Action May Jeopardise Resolution Process
- REEDLAW
- 2 hours ago
- 3 min read
REEDLAW Legal News Network reports: In a significant interim ruling, the Delhi High Court protected the insolvency resolution process by holding that coercive or attachment action against a Corporate Debtor undergoing CIRP cannot be undertaken without judicial oversight where such action risks undermining the resolution framework and stakeholder interests.
The Court, presided over by Justice Sachin Datta, considered submissions made by the Resolution Professional regarding the advanced stage of the CIRP, including approval of a resolution plan by the Committee of Creditors, and directed that any precipitative or attachment action by the Enforcement Directorate shall be undertaken only with the leave of the Court, pending further consideration of the matter.
The Petitioner, acting through the Resolution Professional of the Corporate Debtor, approached the High Court seeking protection against coercive and attachment actions initiated by the Enforcement Directorate in connection with an ECIR arising out of a predicate offence registered by the Economic Offences Wing. The Corporate Debtor, engaged in real estate development, had failed to deliver residential units within stipulated timelines, leading homebuyers to initiate proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016. The NCLT admitted the petition and commenced the Corporate Insolvency Resolution Process, appointing an Interim Resolution Professional, during which a resolution plan came to be approved by the Committee of Creditors and awaited final approval of the Adjudicating Authority.
It was contended on behalf of the Resolution Professional that any precipitative or attachment action by the Enforcement Directorate during the pendency of CIRP would jeopardise the resolution process and seriously prejudice the interests of homebuyers, who constituted the principal stakeholder class as Financial Creditors. It was urged that the substratum of the predicate offence itself arose from complaints made by homebuyers, and that disruption of the CIRP at this advanced stage would defeat the objectives of the Code.
The Enforcement Directorate raised a preliminary objection to the maintainability of the writ petition but sought time to take instructions on whether any immediate attachment action was proposed. The Court, taking note of the advanced stage of the CIRP and the potential adverse impact of enforcement action on the resolution plan, directed that any precipitative or attachment action by the respondent, prior to the next date of hearing, shall be undertaken only with the leave of the Court. The order thus ensured judicial supervision over enforcement measures so as to preserve the sanctity of the insolvency resolution process and protect stakeholder interests pending adjudication.
Mr. Rakesh Kumar, Mr. Piyush Kalra and Mr. Sahil Chawla, Advocates, represented the Petitioner.
Mr. Zoheb Hossainb, Mr. Vivek Gurnani, Mr. Kartik Sabharwal, Mr. Pranjal Tripathi and Mr. Kanishk Maurya, Advocates, appeared for the Respondent.
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