Can Provisional Attachment Under PMLA Be Passed After Initiation Of CIRP Under IBC? Supreme Court To Consider

Background Facts

Kohinoor Steel Private Limited ("Corporate Debtor") was admitted into CIRP by the Adjudicating Authority and Mr. Ashok Kumar Sarawagi ("Petitioner") was appointed as the Resolution Professional. Thereafter, the PMLA Court by invoking provisions of the Prevention of Money Laundering Act, 2002 ("PMLA") had passed an order on 30.12.2021 for provisional attachment of the Corporate Debtor's assets. The Resolution Professional had filed an application before the Adjudicating Authority seeking setting aside of the provisional attachment order. However, on 02.03.2022 the Adjudicating Authority dismissed the application with following observations:

"We are of the view that this Adjudicating Authority, with utmost regard to the order relied upon by the Applicant, is bound by the order dated 3rd of January, 2022 passed by Hon'ble 3 Member Bench of NCLAT which took the view that NCLT is not empowered to deal with the matters falling under PMLA. In the present case since notice impugned has been issued under the Prevention of Money Laundering Act, 2002 therefore, this application is not maintainable and the same is hereby rejected."

Thereafter, the Petitioner filed an appeal before the NCLAT challenging the Adjudicating Authority's order dated 02.03.2022. The NCLAT Bench placed reliance on its previous judgments passed in (i) Varrasana Ispat Limited Vs. Deputy Director of Enforcement, Company Appeal (AT) (Insolvency) No.493 of 2019 and; (ii) Kiran Shah vs. Enforcement Directorate, Company Appeal (At) (Ins.) No.817 of 2021, wherein it was held that Adjudicating Authority is not empowered to deal with the matters falling under the purview of PMLA. The NCLAT vide an order dated 09.05.2022 upheld the Adjudicating Authority's order and dismissed the appeal.

The Petitioner filed a Special Leave Petition before the Supreme Court challenging the NCLAT order dated 09.05.2022. The Petitioners contended that the order of PMLA Court for provisional attachment in their case was passed after initiation of CIRP. Whereas, in the already decided cases of Varrasana Ispat Limited Vs. Deputy Director of Enforcement and Kiran Shah vs. Enforcement Directorate, the order of attachment was passed under PMLA much prior to initiation of CIRP.

The Supreme Court has issued notice on the Special Leave Petition and has directed the Parties to maintain status quo with respect to the proceedings in question. The question before the Bench is whether a provisional attachment order passed under PMLA subsequent to initiation of CIRP would prevail over IBC or not.

The next date of hearing is 21.11.2022.

Case Title: Ashok Kumar Sarawagi v Enforcement Directorate & Anr.

Case no.: Special Leave Petition (Civil) Diary No(S). 30092/2022

Counsel For Petitioner(s): Mr. Dhruv Mehtra, Sr. Adv. Mr. Tishampati Sen, Adv. Ms. Riddhi Sancheti, AOR Mr. Anurag Anand, Adv. Ms. Anupama Dhurve, Adv.

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