NCLAT: IBC Will Hold Precedence Over PMLA & Other Laws
The National Company Law Appellate Tribunal (NCLAT) heard a plea filed by Enforcement Directorate (ED) against an order of the National Company Law Tribunal (NCLT), Mumbai Bench, wherein the Appellate Tribunal held that even if the probe agency had already attached property under the Prevention of Money Laundering Act (PMLA) and it must vacate its claim over the assets once insolvency process starts against the same company.
The Appellate Tribunal reiterated that rules and actions under the Insolvency and Bankruptcy Code (IBC) would hold precedence over other laws and actions. The NCLAT clarified that it shall hold precedence on actions comprising of attachment of property by the ED under the PMLA etc.
A two-member bench led by Justice A I S Cheema stated in the judgment that 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 the Corporate Insolvency Resolution Process (CIRP) is initiated, the property should become available to fulfill objects of IBC till a resolution takes place or sale of liquidation asset occurs.
The NCLT, in February 2019, 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 according to the rules of the Code, even after the ED has attached the assets of both the companies in May 2018.
The order of the Company Tribunal was challenged by the ED wherein it claimed that the assets had been attached under the right provisions of PMLA and that the rules of moratorium of IBC would not be applicable in "applicable in criminal proceedings".
It was argued by the agency that 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 established under the PMLA instead of NCLT to stake a claim on the assets of the company.
The Appellate Tribunal held that to keep a corporate debtor as a going concern, it was necessary that the resolution professional or the liquidator "have a duty and right to take over and manage assets".
It added that the properties of the corporate debtor would not be available to keep it a going concern or to get the properties valued without which resolution/sale would not be possible; the obstruction will have to be removed.