Khaitan & Co Secured Discharge Of Vadraj Cement Limited Under PMLA Proceedings With IBC Section 32A Immunity

Khaitan & Co secured discharge of Vadraj Cement Limited under PMLA proceedings with IBC Section 32A immunity

The leading law firm in India, Khaitan & Co successfully represented Nuvoco Vistas Corporation Limited (“NVCL”), the successful resolution applicant, in securing the discharge of Vadraj Cement Limited (“VCL”) in proceedings under the Prevention of Money Laundering Act, 2002 (“PMLA”) arising from the IL&FS Financial Services Ltd. money laundering matter.

VCL had been arrayed by the Enforcement Directorate (“ED”) as an accused, with allegations relating to proceeds of crime of approximately INR 952 crores. The ED had provisionally attached VCL’s properties in January 2020, which was confirmed by the Adjudicating Authority under the PMLA in August 2021.

VCL underwent a Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”), pursuant to which NVCL’s resolution plan—unanimously approved by the Committee of Creditors—was sanctioned by the National Company Law Tribunal, Mumbai on 1 April 2025. Khaitan & Co argued that Section 32A of the IBC grants statutory immunity to the corporate debtor upon approval of a resolution plan (subject to change in management to persons unconnected with the erstwhile promoters), thereby entitling VCL to discharge. The ED opposed the discharge, asserting that the PMLA’s non-obstante clause should prevail and cautioning against creating an “amnesty route” precedent.

The Court allowed the discharge of the corporate debtor in view of statutory immunity under Section 32A of the IBC, clarifying that erstwhile officers, directors, and persons responsible for or involved in the conduct of offences prior to CIRP will continue to be prosecuted notwithstanding the discharge of the corporate debtor.

The Khaitan & Co team was led by Manavendra Mishra (Partner), with support from Royden Fernandes (Principal Associate), Amol Jhunjhunwala (Senior Associate), and Parimal Kaushik (Associate). Senior Advocate Pranav Badheka led arguments on behalf of NVCL.

Unique feature: The matter involved the interplay between statutory immunity under Section 32A of the IBC and parallel criminal proceedings under a special legislation (PMLA), including a direct challenge based on competing non-obstante clauses. The order reinforces the “clean slate” principle for bona fide resolution applicants while maintaining accountability of alleged individual wrongdoers associated with the corporate debtor prior to CIRP.

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