Delhi High Court Quashes PMLA Proceedings Against BPSL In ₹47,000 Crore Bank Fraud Case Due To Successful CIRP

The Delhi High Court recently quashed criminal proceedings against Bhushan Power & Steel Limited (BPSL) in relation to a complaint filed by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA) in view of Section 32A of the Insolvency and Bankruptcy Code (IBC).Noting that BPSL underwent a successful resolution under the IBC, Justice Manmeet Pritam Singh Arora held that the company could not have been prosecuted for offences committed before the commencement of the Corporate Insolvency Resolution Process (CIRP). “A plain reading of the above provision would reveal that there is no dispute over the legal position that once a resolution plan has been approved by the adjudicating authority under Section 31 of IBC and the conditions specified in Section 32A of the IBC are fulfilled, the Corporate Debtor shall not be prosecuted for an offence committed prior to the commencement of the CIRP” the Court said. BPSL (petitioner) sought quashing of the process order issued by the Special Court, CBI (PC Act) and other proceedings under the PMLA in relation to a complaint filed by the ED.The brief facts of the case are that the National Company Law Tribunal (NCLT) had admitted CIRP against BPSL. During the CIRP, JSW Steel Ltd emerged as the successful resolution applicant.Subsequently, the CBI registered a case against BPSL, its chairman, director and others under Section 13(2) r/w 13(1) (d) Prevention of Corruption Act and Sections 120-B r/w 420, 468, 471 and 477A of IPC. Based on the FIR registered by the CBI, the ED registered an Enforcement Case Information Report (ECIR) against BPSL for the offence of money laundering. The ED's complaint alleged that BPSL and its officers were involved in bank fraud of around Rs 47,000 Crores.The ED then passed a Provisional Attachment Order (POA), provisionally attaching assets of BPSL as 'proceeds of crime' under the PMLA. However, the PAO was struck down by the NCLAT as being violative of Section 32A IBC. The ED then appealed to the Supreme Court, but the appeal was disposed of with a direction to restore the confiscated properties of BPSL. However, the Apex Court reserved the right of the ED to investigate cases registered against the erstwhile promoters of BPSL. Considering the facts of the case, the High Court stated that in view of BPSL undergoing a successful resolution process under Section 31 of IBC, it cannot be prosecuted for offences committed prior to the commencement of the CIRP as per Section 32A(1) of IBC. The Court also referred to Section 32A of IBC, which provides that any officer of the corporate debtor who was responsible for the conduct of its business or was directly or indirectly involved in the commission of offence prior to the commencement of CIRP would be prosecuted for the offence committed by the Corporate Debtor regardless of its liability. In view of this provision, the Court noted that the BPSL's role would have to be examined during the trial of its erstwhile promoters/directors as it concerns the commission of offence by BPSL before the CIRP. “…it is clarified that the role of the Corporate Debtor, as elaborately stated in the prosecution complaint filed before the Special Court for PMLA cases under the PMLA, will necessarily have to be examined in the trial of the erstwhile promoters/directors of the Petitioner Company as it relates to the commission of the offence by the Petitioner Company in its earlier avatar as it was under the erstwhile management, when the offence was committed, more so when there are allegations under Section 70 of the PMLA.”In view of the above, the Court quashed the criminal proceedings against BPSL under the PMLA.Case title: Bhushan Power & Steel Limited vs. Union Of India & Anr.Citation: 2025 LiveLaw (Del) 146Counsels for Petitioner/BPSL: Dr. Abhishek Manu Singhvi and Mr. Vikas Pahwa, Ld Senior Counsel, assisted by Mr. Raunak Dhillon, Partner Ms. Madhavi Khanna, Principal Associate, Ms Isha Malik, Senior Associate and Ms. Niharika Shukla, Senior Associate (Cyril Amarchand Mangaldas)Counsels for Respondent: Mr. Zoheb Hossain, Spl. Counsel wit Mr. Manish Jain, SPP with Mr. Vivek Gurnani, SC with Mr. Kartik Sabharwal, Mr. Pranjal Tripathi and Mr. Kaushik Maurya, Advocates. Mr Satya Ranjan Swain (SPC), advocate for Respondent no. 1/UOIClick Here To Read/Download Order

Delhi High Court Quashes PMLA Proceedings Against BPSL In ₹47,000 Crore Bank Fraud Case Due To Successful CIRP

Sanjana Dadmi

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