NCLT Chennai: Adjudicating Authority Under IBC Is Not The Appropriate Forum To Decide On Revocation Of Attachment Made By ED Under PMLA During CIRP
The National Company Law Tribunal ('NCLT') Chennai, comprising Shri Justice Jyoti Kumar Tripathi (Judicial Member) and Shri Ravichandran Ramasamy (Technical Member) held that the Adjudicating Authority under Insolvency and Bankruptcy Code, 2016 ('IBC') is not the appropriate fora to decide on revocation of attachment made by Enforcement Directorate ('ED') under Prevention of Money...
The National Company Law Tribunal ('NCLT') Chennai, comprising Shri Justice Jyoti Kumar Tripathi (Judicial Member) and Shri Ravichandran Ramasamy (Technical Member) held that the Adjudicating Authority under Insolvency and Bankruptcy Code, 2016 ('IBC') is not the appropriate fora to decide on revocation of attachment made by Enforcement Directorate ('ED') under Prevention of Money Laundering Act, 2002 ('PMLA') during Corporate Insolvency Resolution Process ('CIRP').
Background Facts:
On 23.04.2018, Nathella Sampath Jewelry Pvt. Ltd. (Corporate Debtor) was entered into CIRP. Via Order dated 31.07.2018, the Directorate of Enforcement ('ED') made a provisional attachment post commencement of CIRP of the Corporate Debtor. The said Order provided that the Corporate Debtor's funds were used in acquiring properties in the names of the directors and related parties.
Moreover, since any kind of Resolution was not received by the Resolution Professional ('RP') due to the Provisional Attachment Order, the Corporate Debtor went into liquidation. On 25.02.2020, Mr. Palaniappan (Applicant) was appointed as the Liquidator of Nathella Sampath Jewelry Pvt. Ltd. (Corporate Debtor). Via Order dated 31.07.2018, the ED made a provisional attachment post commencement of CIRP of the Corporate Debtor.
NCLT Verdict:
The NCLT Chennai dismissed the application and held the Adjudicating Authority under IBC is not the appropriate fora to decide on the revocation of attachment made by ED under the PMLA during CIRP.
It observed that the moratorium period is initiated just after the initiation of CIRP. Presently, ED made the attachment order much after the commencement of the Corporate Debtor's CIRP proving that ED had acted upon the assets of the Corporate Debtor during the moratorium period. Moreover, the Applicant is fulfilling its duties under IBC since it has applied before the Appellate Tribunal under PMLA for the lifting of the provisional attachment order which is still pending.
The Tribunal observed that the present attachment order being made under Section 5(1) of the PMLA under the prescribed rules and regulations before the Appellate Tribunal under PMLA clearly points out that the attachment has been made following the essential provisions of the PMLA. It highlighted that the attachment order can only be dealt with under the relevant provisions of PMLA and IBC is restricted to the questions concerning CIRP and Liquidation Proceedings of the Corporate Debtor.
In conclusion, NCLT observed that the 'Attachment' as a concept cannot be decided upon by the Adjudicating Authority (NCLT) and cannot be subject to Section 60(5) of IBC. Thus, the Adjudicating Authority has no authority to decide on a remedy relating to PMLA under the IBC.
Case Title: Mr. Palaniappan Liquidator of Nathella Sampath Jewelry Pvt. Ltd. vs. The Joint Director Directorate of Enforcement
Case No.: MA/30(CHE)/2021 in CP/129(IB)/2018
Counsel for Applicant: Ms. Indumathi Ravi & Associates