NCLAT rules that the Adjudicating Authority erred in denying the Successful Resolution Applicant protections under Section 32A of the IBC
- REEDLAW
- Sep 24, 2024
- 3 min read
NCLAT ruled that the Adjudicating Authority erred in denying the Successful Resolution Applicant protections under Section 32A of the IBC.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra and Mr. Arun Baroka (Technical Members) reviewed an appeal and observed that the Adjudicating Authority erred in denying the Successful Resolution Applicant protections under Section 32A of the IBC, which mandates the release of assets attached by the Enforcement Directorate once a Resolution Plan is approved, thereby facilitating the implementation of the plan without encumbrances from pre-CIRP liabilities.
The NCLAT reviewed an appeal from the Successful Resolution Applicant (SRA) contesting the National Company Law Tribunal's (NCLT) order dated July 4, 2024, which had partially approved a Resolution Plan for Alchemist Infra Realty Limited. The appeal arose from the NCLT's denial of the SRA's request to release assets attached by the Enforcement Directorate (ED). The Corporate Insolvency Resolution Process (CIRP) commenced on October 8, 2021, and the SRA's plan received unanimous approval from the Committee of Creditors (CoC) on October 18, 2023. The SRA sought the removal of charges imposed by various authorities to facilitate asset monetization, but the NCLT maintained that the SRA would need to pursue separate legal action for any asset release, indicating that protections under Sections 31(1) and 32A of the Insolvency and Bankruptcy Code (IBC) were the only entitlements afforded to the SRA.
The SRA argued that Section 32A was designed to protect them from liabilities stemming from pre-CIRP offences, including attachments under the Prevention of Money Laundering Act (PMLA). The NCLAT determined that the NCLT had misapplied the implications of the Bombay High Court's decision in Shiv Charan and Others v. Adjudicating Authority under the Prevention of Money Laundering Act, 2002, Department of Revenue, Ministry of Finance, New Delhi and Another, REEDLAW 2024 Bom 03592, which affirmed that once a Resolution Plan is approved, the ED must release attachments concerning pre-CIRP offences. The NCLAT concluded that the NCLT's refusal to apply protections under Section 32A was erroneous, as these provisions were meant to facilitate the implementation of the Resolution Plan without burdens from past liabilities, aligning with the IBC's objectives.
Referencing the Bombay High Court's ruling, the Appellant argued that the NCLT maintained jurisdiction to exercise discretion regarding the release of attachments. The High Court had emphasized that the NCLT could interpret and implement relevant laws, affirming its authority to direct the release of property attached under the PMLA while clarifying that such release was not obligatory in all cases. The NCLT had also noted that it would not assess the approval of the resolution plan, as no challenges were posed regarding it. However, it distinguished the present case by stating that matters of moratorium application or ramifications of the resolution plan approval were absent.
The NCLAT, aligning with the Supreme Court's interpretation of Section 32A, underscored its legislative intent to shield corporate debtors from actions against their property under specific conditions. Ultimately, the NCLAT ruled that the Adjudicating Authority had erred by not extending the benefits of Section 32A to the SRA. Consequently, the NCLAT allowed the appeal, reversed the findings of the impugned order, and granted the relief sought to lift the ED's attachment over the corporate debtor’s assets, concluding with no order as to costs.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines Press Release and more.
Click on the Citation/Link to access these resources
Comments