NCLT: Declaration of Moratorium under Section 14 of IBC Would Not Bar a Proceeding under PMLA

NCLT: Declaration of Moratorium under Section 14 of IBC Would Not Bar a Proceeding under PMLA

The National Company Law Tribunal (NCLT), Ahmedabad, division bench comprising of Dr. Madan B. Gosavi, (Judicial Member) and Shri Kaushalendra Kumar Singh (Technical Member), while adjudicating an application under Section 60(5) of Insolvency and Bankruptcy Code, 2016 (IBC) in Bank of India vs M/s Mayfair Leisures Ltd., observed that Section 14 of IBC would not bar a proceeding under the Prevention of Money Laundering Act, 2002 (PMLA, 2002).

The background of the case was that an application was filed by the Applicant under section 60(5) and 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 11 of NCLT Rules, 2016 (NCLT Rules) seeking release of attachment of property by the Enforcement Directorate, Ahmedabad.

M/s. Mayfair Leisure Limited is the Corporate Debtor and was admitted in Corporate Insolvency Resolution Process (CIRP) vide order dated 2 June, 2020 by the Adjudicating Authority in a petition filed by the Financial Creditor i.e., Bank of India under section 7 of the IBC.

An e-mail dated 22.06.2020 was received by the IRP from the Suspended Management through which he was informed that the property of the Corporate Debtor located in Vadodara had been attached by the CBI on 5 April, 2018 and the attachment was confirmed by the Gujarat High Court in 2019.

It was further informed in the email that the property was also attached by the Enforcement Directorate (ED) vide its provisional attachment order dated 24 April, 2018. The said order was confirmed by the Hon’ble PMLA Appellate Tribunal vide its order dated 3 December, 2018.

It was submitted by the Insolvency Resolution Professional that he was neither able to take the possession of the property nor dispose it off due to the order dated 12 May, 2020. ED has not filed its claim with the IRP and the IRP vide a letter dated 21.07.2020 requested the ED to release the attached property. Hence, the present application was filed seeking release of attached property by the ED.

The NCLT observed that the Corporate Debtor was admitted in CIRP vide order dated 2 June, 2020 by this Adjudicating Authority in Petition filed by the Financial Creditor i.e., Bank of India under section 7 of the IBC. However, the property was already attached by the ED vide its provisional attachment order dated 24 April, 2018.

The said order was confirmed by the PMLA Appellate Tribunal vide its order dated 3 December, 2018. The PMLA Appellate Tribunal vide order dated 12 May, 2020 had directed that the status of the property of the Corporate Debtor has to be maintained as it was on 7 April, 2018 during the course of investigation of the money laundering under PMLA, 2002.

The bench also noted that the complaint has already been filed before Hon’ble Special Court under PMLA, 2002 for confiscation of the attached properties and prosecution of the accused persons. Hence, criminal action under PMLA, 2002 was already taken by the Director of Enforcement Department of Revenue (Respondent) on 24 April, 2018 which was prior to the admission of the instant application by the Adjudicating Authority.

In this regard, the NCLT referred the decision in Deputy Director, office of the Joint Directorate of Enforcement vs. Asset Reconstruction Company of India Ltd. and others passed by the High Court of Madras, wherein it was held that, NCLT has no jurisdiction to go into the matters governed under the PMLA, 2002 and, therefore, section 14, having consequent upon an order passed by the Adjudicating Authority declaring moratorium, would not apply to the PMLA which is a distinct and special statute having its own objective and as such section 14 would not bar a proceeding under the Act.

Hence, the NCLT observed, “that the proper recourse to be resorted by the ‘Corporate Debtor’ is to approach the ‘Competent Forum’ under the PMLA, 2002 to its logical end or any other ‘Jurisdictional Forum’ (other than the purview of IBC, 2016,) in the manner known to Law and in accordance with Law.”

Accordingly, the bench rejected the application.