Case Note & Summary
The judgment concerns two writ petitions: one by individuals (Shiv Charan, Pushpalata Bai, and Bharti Agarwal) challenging a provisional attachment order under the Prevention of Money Laundering Act, 2002 (PMLA) against assets of a corporate debtor, and another by the Directorate of Enforcement challenging the release of those assets. The corporate debtor had undergone corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC), and a resolution plan was approved by the National Company Law Tribunal (NCLT) on 21 December 2021. The Enforcement Directorate had provisionally attached certain properties of the corporate debtor under Section 5 of PMLA on 28 December 2021, after the resolution plan approval. The petitioners sought quashing of the attachment order, while the Enforcement Directorate sought to continue the attachment. The court framed the issue as whether Section 32A of IBC, which grants immunity to corporate debtors and their assets upon approval of a resolution plan, overrides the PMLA attachment. The court analyzed the language of Section 32A, which states that no action can be taken against the corporate debtor or its assets in respect of an offence committed prior to the commencement of the resolution process, subject to conditions. The court held that the provisional attachment order under PMLA cannot survive after the resolution plan approval, as Section 32A IBC has overriding effect. The court directed the Adjudicating Authority under PMLA to release the attached properties. The petitions were disposed of accordingly.
Headnote
A) Insolvency and Bankruptcy Code - Section 32A - Immunity - Overriding Effect - Section 32A of the Insolvency and Bankruptcy Code, 2016 - The court considered whether the immunity under Section 32A IBC protects the corporate debtor's assets from attachment under PMLA after resolution plan approval. Held that Section 32A IBC has overriding effect and the provisional attachment order under PMLA cannot survive after approval of resolution plan (Paras 2, 30-35). B) Prevention of Money Laundering Act - Attachment - Provisional Attachment Order - Section 5 of the Prevention of Money Laundering Act, 2002 - The court examined the validity of a provisional attachment order passed under PMLA against assets of a corporate debtor after resolution plan approval. Held that such attachment order ceases to have effect once resolution plan is approved under IBC (Paras 20-25). C) Insolvency and Bankruptcy Code - Resolution Plan - Approval - Effect on Attachments - Section 31, 32A of the Insolvency and Bankruptcy Code, 2016 - The court analyzed the effect of approval of resolution plan on existing attachments. Held that the resolution plan approved by NCLT extinguishes all attachments, including those under PMLA, and the Adjudicating Authority must release the properties (Paras 30-35).
Issue of Consideration
Whether the immunity granted under Section 32A of the Insolvency and Bankruptcy Code, 2016 to a corporate debtor and its assets upon approval of a resolution plan overrides a provisional attachment order passed under the Prevention of Money Laundering Act, 2002.
Final Decision
The court allowed the writ petitions, holding that the provisional attachment order under PMLA cannot survive after approval of resolution plan under IBC. The Adjudicating Authority under PMLA was directed to release the attached properties.
Law Points
- Section 32A of IBC
- 2016 provides immunity to corporate debtor and its assets upon approval of resolution plan
- overriding attachment under PMLA
- 2002
- Enforcement Directorate cannot continue attachment after resolution plan approval
- Adjudicating Authority under PMLA must release attached properties.
