The provisions of section 32(a)(2) states that no action can be taken against the property of the Corporate Debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process, where such property is covered under resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of part II of this Code to a person, who was not

  • A promoter or in the management or control of the corporate debtor or a related party of such a person.
  • A person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority under the court.

The essence of the provision can be assessed in view of the recent judgement passed by the Delhi High Court in the matter of Nitin Jain Liquidator PSL Ltd Vs. Enforcement Directorate.

The principal question which falls for the determination in this writ petition is whether the authorities under the Prevention of Money Laundering Act, 2002 would retain the jurisdiction of the authority to proceed against the properties of a corporate debtor once a liquidation measure has come to be approved in accordance with the provisions made in the Insolvency and Bankruptcy Code, 2016. The Petitioner is the Liquidator appointed by the NCLT (the Adjudicating Authority under the IBC) to administer the affairs and the estate of M/S PSL Ltd(Corporate Debtor). The petition has been preferred seeking the following reliefs: –

  • Issue a Writ of Mandamus of any other appropriate writ, in order to refrain the respondent from giving directions to the Liquidation and not to take any coercive steps against the petitioner, in the conduct of his duties and discharge of his responsibilities as a Liquidator of the said Corporate Debtor during the continuation of the E-Action proceedings;
  • Allowing the Liquidator to perform his duties as a Liquidator as mandated under the Code;
  • Issue a Writ of Mandamus of any other appropriate writ, to refrain the respondent from passing any attachment orders, in respects of the assets of the Corporate Debtor.

 

It was observed that the Liquidator was compelled to approach to the Court, on receipt of the summons issued by the respondent Enforcement Directorate, who was investigating into the affairs of the Corporate Debtor under the provisions of the Corporate Debtor. In the present matter under consideration, the petitioner was appointed as the Resolution Professional, thereafter CoC moved a petition for the Liquidation and appointed the said petitioner as the Liquidator to discharge his responsibilities as laid down under the Code. The petitioner received a summon from the ED, hereinafter referred to as “The Respondent” wherein it was directed by the Assistant Director (PMLA), Delhi Zonal Office, not to dispose of the assets of the said Corporate Debtor, undergoing liquidation. The said summon was followed by an email by virtue of which it was stated that M/s. PSL Limited & Others, the said Corporate Debtor was pending under PMLA, 2002 which has over riding effect on the IBC and other laws governing such transactions. The learned Sr Council submits that there was no proceedings pending against the Corporate Debtor or any of its promoters, moreover no Provisional Attachment Order (PAO) was served on the Corporate Debtor at this stage.

The said matter was discussed in the light of various judicial pronouncements below mentioned:

In the matter of Opto Circuit India Ltd vs. Axis Bank & Ors, the Supreme Court held that it is a well settled salutary principal that if any statute provides for a thing to be done in a particular manner, then it has to be done in that specified manner and no other manner. In view of the said perspective, it can be inferred that thought the Authorised Officer is vested with sufficient power and such power is circumscribed by a procedure laid down under the statute. As the legal requirement of following the procedure specified under the law, with respect to the freezing of the account, is not duly exercised by the Learned Authorised Officer, the said action was declared to be bad in the eyes of the law.

The learned Counsel submitted that, in the instant case, that there was no PAO was issued by the respondent Enforcement Directorate, although an investigating procedure was going on under the way. Therefore, the impugned email and the directions issued by the ED, not to auction the assets of the Corporate Debtor, by the petitioner Liquidator, was declared stayed.