Bombay High Court Quashes ED’s Order Attaching Properties Of V Hotel

Bombay High Court quashes ED’s order attaching properties of V Hotel

The Bombay High Court has invalidated the order of the Enforcement Directorate (ED) attaching several properties of V Hotels, under the Prevention of Money Laundering Act (PMLA), 2002.

A division bench of Justice BP Colabawalla and Justice Somasekhar Sundaresan observed that V Hotels (formerly Tulip Hospitality Services), faced Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016 (IBC), and the company was taken over by Macrotech Developers Ltd.

The court held, “Once a resolution plan is approved under Section 31 (of the IBC) and a change in control and management is effective, the property of the corporate debtor would also get immunity from further prosecution of proceedings.”

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Clarifying that it was explained in the appended Section 32A (2), the bench added, “The ED’s attachment, provisionally or otherwise, cannot continue even for a day after the approval of the resolution plan, which meets the parameters of Section 32A.” After the ED provisionally attached its properties, V Hotels approached the court in April.

The properties included the Juhu Beach hotel, five flats in the Sunder Jamnotri building in Malad West, three flats each, in Abhanga Samata building in Malad West and Goa Bhavan in the JVPD Scheme. During the pendency of the petition, in October, the adjudicating authority confirmed the attachment under the PMLA.

The court accepted the company’s arguments that once a resolution plan was approved by the National Company Law Tribunal (NCLT)under Section 31 of the IBC, the corporate debtor (V Hotels) could not be prosecuted for any offence, and action could not be taken against its property related to the offence committed before the commencement of the CIRP.

That’s because the property was covered under the approved resolution plan, resulting in a change in control of the corporate debtor to a third party.

The court also struck down the Enforcement Case Information Report (ECIR) registered by the ED against V Hotels on successful insolvency resolution proceedings.