Section 32A IBC Overrides PMLA Attachment: Supreme Court Allows Partial Release of Attached Properties
- REEDLAW
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REEDLAW Legal News Network reports: In a pivotal ruling, the Supreme Court clarified the overriding effect of Section 32A of the Insolvency and Bankruptcy Code, 2016 over attachment proceedings under the Prevention of Money Laundering Act, holding that once a resolution plan stands approved and statutory conditions are satisfied, attached properties may be restituted to facilitate resolution and protect the interests of genuine and innocent home buyers, subject to limited statutory exceptions.
The Supreme Court Bench of Justice Sanjay Kumar and Justice Alok Aradhe, while adjudicating a batch of three Appeals and connected Interlocutory Applications, held that restitution of properties attached under the PMLA was permissible in favour of the Successful Resolution Applicant for the benefit of genuine and innocent home buyers, where the resolution plan stood approved and the conditions stipulated under Section 32A of the Insolvency and Bankruptcy Code, 2016 were fulfilled. The Court clarified that continued attachment could subsist only in respect of those specific units found to be directly connected with proceeds of crime, in terms of the second proviso to Section 8(8) of the PMLA.
The Supreme Court had granted leave and considered the matter arising out of insolvency proceedings where provisional attachment orders under the Prevention of Money Laundering Act, 2002, had impacted the implementation of an approved resolution plan. Pursuant to earlier directions of the Court, the parties had arrived at an amicable settlement in the interest of genuine and innocent home buyers. The Directorate of Enforcement had placed an affidavit on record, on the basis of which the Court proceeded to pass orders without entering into the merits of the rival contentions.
The Court noted that the provisional attachment order issued against the Corporate Debtor was required to be partially set aside, and accordingly directed restoration of the attached properties to the Successful Resolution Applicant, who had stepped into the shoes of the Corporate Debtor solely for the benefit of innocent home buyers who had subsequently acquired the units. The restitution was expressly deemed to have been granted under the second proviso to Section 8(8) of the PMLA. At the same time, the Court protected the investigation under the PMLA by permitting continuation of attachment in respect of specified units identified as allegedly connected with proceeds of crime, along with the corresponding rights of the concerned home buyers, subject to further proceedings under the statute.
In view of the approval of the resolution plan and the operation of Section 32A of the Insolvency and Bankruptcy Code, 2016, the Court directed deletion of the Corporate Debtor from the array of accused in the pending prosecution complaint, while clarifying that the prosecution of erstwhile directors, persons in control, conspirators or abettors, and confiscation of their properties, if any, would continue in accordance with law. The proposal for confiscation of the Corporate Debtor’s properties was directed to be suitably modified so as to confine it only to the identified units, and the challenge raised by the Directorate of Enforcement to the approval of the resolution plan stood closed.
The Court further clarified that if, during the ongoing investigation, any payments made by other home buyers were found to be connected with proceeds of crime, the Directorate of Enforcement would remain at liberty to take action in accordance with the law. It was also emphasised that the statutory protection under Section 32A of the Code was conditional upon the Successful Resolution Applicant having no nexus with the erstwhile management or the proceeds of crime, and that erosion of this foundation would entitle the authorities to take appropriate steps, including questioning the resolution plan.
Consequently, the Court directed that there would be no subsisting right or lien of the Directorate of Enforcement over the properties of the Corporate Debtor, except to the limited extent expressly preserved, and facilitated implementation of the resolution plan by directing issuance of necessary intimations for registration of sale deeds. Pending proceedings before the appellate forum under the PMLA, the Special Court, and the High Court were rendered infructuous and disposed of. The Court clarified that the order was passed on the peculiar facts of the case, with the consent of the parties, and was not to be treated as a precedent, while placing on record its appreciation for the efforts made to secure the interests of genuine and innocent home buyers.
Mr. Neeraj Kishan Kaul, Senior Advocate (N/P), Ms. Diksha Rai, AOR, Ms. Atiga Singh, Ms. Purvat Wali, Mr. Piyush Vyas, Mr. Krishnan Agarwal, Mr. Toshiv Goyal and Mr. Varun Tyagi, Advocates, represented the Appellant.
Mr. Atul Nanda, Senior Advocate, Mr. Sahil Sharma, AOR, Ms. Rameeza Hakeem, Mr. Sarthak Sachdev, Mr. Kartik Yadav and Mr. Devanshu Yadav, Advocates, represented the Appellant.
Mr. Tushar Mehta, S. G. (N/P), Ms. Aishwarya Bhati, A.S.G., Ms. Radhika Misra Bose, Ms. Gargie Bose, Mr. Zoheb Hussain, Mr. Arkaj Kumar, Mr. Samrat Goswami, Mr. Anmol Chandan, Mr. Hitarth Raja and Mr. Aman Mehta, Advocates, Mr. Arvind Kumar Sharma, AOR, Mr. Sudarshan Lamba, AOR, Mr. Devanshu Yadav and Mr. Kartik Yadav, Advocates, Mr. Sahil Sharma, AOR, Mr. Gaurav Agarwal, Senior Advocate, Mr. Ashish Batra, AOR, Mr. Shantanu Sagar, Mr. Gunjesh Ranjan, Mr. Anil Kumar, Mr. Prabhat Ranjan Raj and Mr. Kanishk Khetan, Advocates, Mr. Shashwat Anand, AOR, appeared for the Respondent.
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