Kareena Eugene
The National Company Law Appellate Tribunal (NCLAT) had restated that rules and actions under the IBC (Insolvency and Bankruptcy Code) will outweigh other laws and actions such as attachment of property under the Prevention of Money Laundering Act by the ED (Enforcement Directorate).
On hearing an appeal moved by the ED against an order of the Mumbai Bench of the National Company Law Tribunal (NCLT), the NCLAT held that even if the probe agency had attached property under PMLA, the ED must vacate its claim over the assets once the insolvency process starts against the same company.
In February 2019, despite the ED having attached the assets of both the companies on May 2018, the Mumbai Bench of NCLT had asked the resolution professional of Sterling SEZ Infrastructure Limited and Sterling International Enterprises Limited to take charge of the properties of the Companies and deal with them as per the rules of IBC.
The probe agency argued that, since the attachment orders had been held to be right by the PMLA appellate tribunal, the resolution professional of both the companies should have approached that tribunal instead of NCLT to stake claim on the assets of the company.
A two-member Bench headed by Justice A. I. S. Cheema stated in its judgement that, “In our view, there is no conflict between PMLA and IBC and even if a property has been attached in the PMLA which is belonging to the Corporate Debtor, if CIRP is initiated, the property should become available to fulfil objects of IBC till a resolution takes place or sale of liquidation asset occurs”.
However, the NCLAT held that, to keep a Corporate debtor as a going concern, it was important that the resolution professional or the liquidator, “have duty and right to take over and manage assets”.
It also said, “If properties of the Corporate debtor would not be available to keep it a going concern, or to get the properties valued without which the resolution/sale would not be possible, the obstruction will have to be removed.”
During the Insolvency Resolution of Bhushan Steel and Power Limited earlier, the NCLAT held that the ED cannot attach the properties of the company, thereby giving immunity to the new owners.
The issue of IBC’s precedence over actions under all the laws is pending as the ED had moved last July, to the Supreme Court seeking clarification on it.