Supreme Court Restores Property Of Corporate Debtor Attached Under PMLA To Successful Resolution Applicant
The Supreme Court recently reiterated that the objective of Section 8(8) of the Prevention of Money Laundering Act(PMLA) is to ultimately restore any attached properties to the bonafide successful resolution application(SRA) who have a legitimate interest in it.Section 8(8) allows the Special Court to direct the Central Government to restore property that has been confiscated under the Act to...
The Supreme Court recently reiterated that the objective of Section 8(8) of the Prevention of Money Laundering Act(PMLA) is to ultimately restore any attached properties to the bonafide successful resolution application(SRA) who have a legitimate interest in it.
Section 8(8) allows the Special Court to direct the Central Government to restore property that has been confiscated under the Act to a person or claimant who has a legitimate interest in it, upon conclusion of the trial. However, second proviso allows restoration during the trial.
Involving second proviso to Section 8(8) of PMLA, the Court allowed that the property of V Hotels Limited(corporate debtor), confiscated by the Enforcement Directorate (ED), be restored to Macrotech Developers Limited(SRA), considering the peculiar circumstances, consent of the parties, and without going into the merits. However, it stated that the same shall not be treated as precedent.
As per brief facts, V Hotels Limited went into corporate insolvency under the Insolvency and Bankruptcy Code(IBC) and approached the National Company Law Tribunal (NCLT), Mumbai. In the meantime, the Enforcement Directorate initiated an investigation under the PMLA and issued a provisional attachment order, attaching the properties of V Hotels on allegations that these were proceeds of crime.
During this time, the NCLT approved a resolution plan submitted by Macrotech Developers Limited(SRA), which was upheld by the Supreme Court on April 26, 2024. But since there was a provisional attachment order, the SRA approached the Bombay High Court in which regard which set aside the ED's order. Against this order, the ED approached the Supreme Court.
A bench comprising Justice MM Sundresh and Justice Satish Chandra Sharma noted that the attached properties stand substituted with a money deposition in terms of the Court's order dated July 2. Therefore, in light of Section 8(8) PMLA and also Directorate of Enforcement v. JSW Steel Ltd. & Ors.(2024) and Udaipur Entertainment World Private Limited v Union of India & Ors(2025), the property should be restored to the SRA.
"The attached properties, which stand substituted with a deposit in terms of this Court's order dated 02.07.2025, are directed to be restored to the SRA, who stepped into the shoes of the Corporate Debtor, upon successful resolution by the Corporate Insolvency Resolution Process. This order is being passed, without going into the merits and the rival contentions of the parties, with regard to the correctness or otherwise of the impugned Judgment of the Bombay High Court, and all questions of law emanating from the same are kept open," the Court noted.
Furthermore, in light of Section 32A(Liability for prior offences) IBC, the Court ordered that the name of the corporate debtor shall be deleted from the array of accused, while continuing with the prosecution of erstwhile directors and promoters. However, the benefit of Section 32A will be subject to the fact that the SRA is not involved in the alleged scheduled offence.
"Needless to state, the benefit of Section 32A of IBC is subject to the condition that the SRA is neither connected with the erstwhile Directors of the Corporate Debtor nor is the SRA a beneficiary of proceeds of crime derived from the alleged scheduled offence. If this foundation is eroded in the ongoing investigation, the Directorate of Enforcement shall be at liberty to take appropriate steps in accordance with law, including questioning the resolution plan."
It therefore held that any challenge by the ED to the resolution plan stands closed and accordingly it has no right or lien either on the properties of the V Hotels or any other asset that forms a part of the resolution plan.
"The Resolution Plan already stands substantially implemented is accordance with law. The amounts deposited by the Respondent No. 2 with the Directorate of Enforcement, in terms of this Court's directions dated 02.07.2025, shall be released to the Respondent No. 2 along-with accrued interest, if any, within a period of two weeks from the date of this order.
This order is being passed based on the peculiar facts of the case and with the consent of the parties under the second proviso to sub-Section (8) of Section 8 of the PMLA, and shall not be treated as a precedent and the questions of law shall remain open to be decided in an appropriate case."
Case Details: DIRECTORATE OF ENFORCEMENT v. V HOTELS LIMITED & ORS.|Criminal Appeal No(s). 2925/2025
Appearances: For Appellant(s) Mr. S. D. Sanjay, A.S.G. Mr. Sarthak Karol, Adv. Mr. Padmesh Mishra, Adv. Mr. Bhuvan Kapoor, Adv. Mr. Parantap Singh, Adv. Mr. Kartikeya Asthana, Adv. Mr. Arvind Kumar Sharma, AOR Mr. Zoheb Hussain, Adv. Mr. Kanu Agrawal, Adv. Mr. Saurav Roy, Adv. Ms. Rajeshwari Shankar, Adv. Mr. Sudarshan Lamba -aor, Adv. Ms. Aakriti Mishra, Adv. Ms. Anushka Gupta, Adv. Mr. Prakhar Bharadwaj, Adv. Ms. Divya S. Rao, Adv.
For Respondent(s) Mr. Gautam Khazanchi, Adv. Mr. Vipul Kumar, AOR Mr. Sidharth Luthra, Sr. Adv. Mr. Vinayak Bhandari, Adv. Mr. Arnav Narain, AOR Mr. Mishra Raj Shekhar, Adv. Mr. Ishaan Phukan, Adv. Ms. Shilpa Nair, Adv. Ms. Bhavi Vora, Adv.