Janhavi Dixit VS. Rajat Mukherjee Liquidator of Enviiro Bulkk Handling Systems Pvt Ltd - Sale of CD as a Going Concern during Liquidation Process.

 NCLT Mumbai-1 (21.06.2021) in Janhavi Dixit VS. Rajat Mukherjee Liquidator of Enviiro Bulkk Handling Systems Pvt Ltd [I.A. No. 741 of 2021 in C.P. (IB) No. 1319/MB/2017] held that; 

•  . . .since the Liquidator has already accepted the bid for ₹. 15.30 Crores and the auction sale of the Corporate Debtor as a going concern is completed on 18.03.2021, no specific order or ratification of the sale is required. The action of the Liquidator is in accordance with the relevant provisions of the Code and consequences thereof would follow according to law. Reiteration by the Tribunal is neither contemplated nor necessary.

 

Excerpts of the order;

# 1. The Applicants herein, being the successful bidders in the auction sale of the Corporate Debtor as a going concern, are before us with the following prayers: 

• a) That the Hn. Bench may approve and accept their bid for the amount of Rs.15.30 Crores in terms of the Auction Sale conducted on 18.03.2021 for the sale of M/s Enviiro Bulkk Handling Systems Pvt. Ltd. (under Liquidation) as a going concern

• b) That the Hn. Bench may consider and grant the reliefs as more particularly stated in Para 8(b) of the Application and as stated in the bid offer of the Applicants.

• c) That upon compliance of the terms of auction sale, all concerned authorities and parties be advised about the sale of the Corporate Debtor on going concern basis without antecedent liabilities of any kind as may be relevant for the operation of the Company post its release from the liquidation.

• d) That the Applicants be permitted to conduct the affairs of the company post its release from the liquidation in the manner as they may considered appropriate for the operation of the company’s business.

• e) Any other reliefs as the Hn. Bench may considered just and appropriate in the facts and circumstances of the case matter.

# 2. The facts leading to the present Application are as under.

i. On a Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code), the Corporate Debtor was put under Corporate Insolvency Resolution Process (CIRP) by an order dated 04.12.2017 of this Bench

ii. Upon failure of the Resolution process, the Committee of Creditors (CoC) of the Corporate Debtor in its 10th meeting recommended for the liquidation of the Corporate Debtor as a going concern. This Tribunal vide Order dated 27.03.2019 ordered the Corporate Debtor to be liquidated as a going concern and appointed Mr. Rajat Mukherjee as the Liquidator.

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vi. This Tribunal vide its order dated 26.02.2021 disposed of IA No. 02 of 2021, giving directions to the Liquidator to issue fresh advertisement for the sale of the Corporate Debtor as a going concern and also allowed the Applicants to take part in the auction after depositing ₹.75,00,000/- in the Liquidator's Account. The Application of the Liquidator (IA No. 2131 of 2020) was kept pending for hearing.

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viii. The Applicants in response to the said e-auction, submitted an expression of interest along with 5% upfront payment of ₹. 76,50,000/- on 06.03.2021 and subsequently participated in the e-auction held on 18.03.2021, wherein the Applicants were declared as the successful bidders/the sole eligible bidder. The Applicants have submitted a bid amount of ₹. 15,30,00,000/-. The Applicants paid 20% of the bid amount on 23.03.2021, aggregating the payment to 25% of bid amount which is ₹.3.825 Crores.

ix. The Liquidator then sent a Letter of Intent to the Applicants stating that the Applicants are bound to implement the successful bid.

x. The Applicants have mentioned consequential reliefs in their offer, which are prayed to be sanctioned under the present Application, for smooth and successful sale of the Corporate Debtor as a going concern.

xi. In the above circumstances, the Applicants are before us with the following consequential reliefs (Para 8(b) of the Application):

• a) The promoters be permitted to restructure the capital account of the company by cancellation of existing capital and substituting with the investment of the bid amount in such manner and for such amount as it may consider appropriate for the working of the capital base of the company.

• b) The direction be issued that after payment of the entire bid amount, the Consortium gets all the rights, title and interest in the whole and every part of the Corporate Debtor including contracts, free from security interest, encumbrances, claim, counter claim, or any demur in the Consortium and the sale proceeds shall be disturbed against accordance with section 53 of the IBC.

• c) A direction be issued that upon completion of the sale of the Corporate Debtor as a going concern all the claims or demands made by or liabilities or obligations owned or payable to any actual or potential creditors of the Corporate Debtor including Government dues whether direct or indirect, whether admitted or not, due or contingent, asserted or unasserted, crystalized or uncrystallized known or unknown, secured or unsecured, disputed or undisputed in relation to any period prior to the e auction date or arising on account of the acquisition of control by the consortium over corporate debtor pursuance to e-auction, will be written off in full and shall stand permanently extinguished.

• d) A direction be issued that the cases pending/decreed against the Corporate Debtor by any court and/or tribunal and/or any quasi-Judicial authority will not be enforced against the Consortium or the Corporate Debtor.

• e) A direction be issued that upon all the existing shares of the Corporate Debtor be extinguished and existing shareholders will become claimants from liquidation proceeds u/s 53 of the Code. 

• f) A direction be issued that to show that status of the corporate debtor in the ROC records as ‘active’ from the status of ‘liquidation’.

• g) A direction be issued that upon sale of the company as going concern, the Board of Director of the Corporate Debtor be re-constituted as per the Companies Act and that consortium be permitted to nominate Directors of the corporate debtor duly appointed under the provisions of the Companies Act, 2013, and direct the Registrar of Companies to do all such acts, deeds and things that are necessary to appoint the consortium nominee individuals as directors of the corporate debtor, who are individuals recommended by the consortium, in order to enable the company to file relevant returns required by applicable law;

• h) A direction be issued that all subsisting consents, licenses, approval, rights, entitlements, benefits and privileges whether under law, contracts, lease or license, granted in favour of the corporate debtor or to which the corporate debtor is entitled to shall notwithstanding any provision to the contrary in their terms, be deemed to continue without disruption for the benefit of the corporate debtor and all additional licenses, registrations and consents to operate required by the corporate debtor be made available immediately on payment of the entire bid amount.

• i) A direction be issued that the corporate debtor shall have a right to review and terminate any contract that was entered into prior to the date of liquidation order.

•  j) A direction be issued that all the benefits availed by the corporate debtor as MSME company, will be continued to new Corporate Debtor.

• k) A direction be issued exempting the corporate debtor from payment of registration fee/stamp duty and other local levies, taxes, duties with respect to transfer of the bid amount.

• l) Pass an order to provide the applicant 100% exemption on stamp duty and registration fee and all local taxes and levies imposed by the appropriate Government, applicable in respect of any transaction required to be undertaken pursuant to the e-auction, and taxes thereon.

• m) A direction be issued that upon completion of sale of the corporate debtor as a whole as a going concern all the assets specified in the complete e-auction process document shall continue to be the assets of the corporate debtor, towards which the consortium has made payment without encumbrances of any kind.

• n) That the Secured creditors be directed to handover the title documents deleting all encumbrances mentioned in the assets secured to them including by way of assignment to any person other than the Corporate Debtor.

xii. The Applicants have submitted that they are the promoters of the Corporate Debtor which is a MSME company and are eligible to make application u/s. 29A read with Section 240A of the Code. That the Corporate Debtor has been conducting business in regular manner even while the company was under liquidation.

xiii. The Applicants submit that, for resumption and restructuring of the company after the auction sale and for the compliance of the statutory regulations subsequent to the auction sale, the consequential reliefs sought, may be considered and granted as they are in administrative nature and also for other statutory compliances. Hence the Application.

# 3. The Applicants have relied upon the following judgements in support of the grant of the above reliefs:

• a) Gaurav Jain V/s Sanjay Gupta – IA No. 2264 of 2020 in CP (IB) No. 1239/MB/2018 – NCLT Mumbai.

• b) Kalpana G, Liquidator of Southern Online Bio- Technologies Ltd. V/s Satish Kumar and Ors – IA No. 122/2020 in CP (IB) 343/7/HDFB/2018, NCLT, Hyderabad Bench 1I.

• c) Bank of India V/s Southern Online Bio-Technologies Ltd., IA No. 1083/2019 in CP (IB) 343/7/HDFB/2018, NCLT, Hyderabad Bench – I.

# 4. The Liquidator has filed a reply to the Application and has reiterated all the above facts. It is submitted by the Liquidator that the Applicants have paid the entire bid amount of ₹. 15.30 Crores and accordingly the e-auction process has been successfully completed. With respect to the consequential reliefs sought by the Applicants, the Liquidator has submitted that the Adjudicating Authority has power to grant such reliefs and such reliefs maybe granted as per the discretion of the Tribunal.

# 5. It is submitted that unless the said reliefs are granted, the Corporate Debtor cannot function as a going concern and the revival and working of the Company as a going concern will be adversely affected post its release from the liquidation.

# 6. We have heard the learned counsel appearing for the Applicant as well as the Liquidator. It would be beneficial to refer to the following paras of the Judgment of this Bench in Gaurav Jain V/s Sanjay Gupta – (IA No. 2264 of 2020 in CP (IB) No. 1239/MB/2018 – decided on 09.03.2021):  . . . . .

# 7. As a consequence to the above discussions and on perusal of the pleadings and submissions made by the learned counsel for the Applicants and the Liquidator the following order is passed.

ORDER

The Application be and the same is allowed subject to the following.

I. In respect of prayer 1.(a), since the Liquidator has already accepted the bid for ₹. 15.30 Crores and the auction sale of the Corporate Debtor as a going concern is completed on 18.03.2021, no specific order or ratification of the sale is required. The action of the Liquidator is in accordance with the relevant provisions of the Code and consequences thereof would follow according to law. Reiteration by the Tribunal is neither contemplated nor necessary.

II. As far as the consequential reliefs sought for in Para 8(b) of the Application are concerned, the following orders are passed.

• a. The promoters are permitted to restructure the Capital account as prayed for.

• b. The Liquidator shall distribute the sale proceeds as per Section 53 of the Code. No separate order in that regard is required.

• c. As far as prayer “c” is concerned, since already the purchase consideration is paid by the Applicants, the Applicants shall not have any more liability as far as the debts of the Corporate Debtor are concerned.

• d. The Applicants will not be responsible for any cases/proceedings pending or decreed against the Corporate Debtor till this date.

• e. The existing share capital of the Corporate Debtor shall stand extinguished. 

• f. The Registrar of Companies (RoC) concerned is directed to show the status of the Company as “Active” from “Liquidation” in their records.

• g. The Applicants are at liberty to reconstitute the Board of Directors as per provisions of the Companies Act, 2013 and the appropriate filings may be effected before the RoC concerned.

• h. All subsisting licenses, approvals, rights, entitlements, benefits, privileges, contract, lease etc., wherein the Corporate Debtor is entitled / involved will continue, subject to payment of statutory dues with effect from this date.

• i. Prayer “h” is allowed subject to the payment of renewal fees, if any, from this date to the licensing authorities.

• j. Prayers “i” & “j” are allowed. 

• k. In respect of the prayers “k” & “l” the Applicants are required to approach the Authorities concerned for exemptions, if any, and the said Authorities will decide the issue in accordance with the law. 

• l. In respect of the prayers “m” & “n”, since the Applicants are the successful bidders in the auction sale, they become the owners of the assets mentioned in the auction sale. The secured creditors are directed to handover the title documents of the properties covered under the auction sale process by deleting all the encumbrances created previously.

III. No order as to costs.

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The Directorate of Enforcement Vs Manoj Kumar Agarwal & Ors. - Attachment of property under PMLA & moratorium U/s 14.

 NCLAT (09.04.2021) in The Directorate of Enforcement Vs Manoj Kumar Agarwal & Ors..  [Company Appeal (AT)(Insolvency) NO.575 & 576 of 2019] held that;

• Taking aid from this, it appears to us that after the attachment when matter goes before the Adjudicating Authority under PMLA, proceeding before Adjudicating Authority for confirmation would be civil in nature. That being so, Section 14 of IBC would be attracted and applies.

• Thus to quasi-criminal proceeding as regards Corporate Debtor, Section 14 applies has been found. Considering this as well as the nature of proceedings that takes place before the Adjudicating Authority under PMLA, it appears to us that even if the Authority issues order of provisional attachment, the institution and continuation of proceedings before the Adjudicating Authority for confirmation would be hit by Section 14 of IBC.

• Thus if the Authorities under PMLA on the basis of the attachment or seizure done or possession taken under the said Act resist handing over the properties of the Corporate Debtor to the IRP/RP/Liquidator the consequence of which will be hindrance for them to keep the Corporate Debtor a going concern till resolution takes place or liquidation proceedings are completed, the obstructions will have to be removed.

• 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 in terms of Section 32A.

Excerpts of the order;

Company Appeal (AT)(Insolvency) NO.575 of 2019

This appeal has been filed by the Directorate of Enforcement being aggrieved by impugned order dated 12.02.2019 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench, Mumbai in MA No.1280 of 2018 in the matter of Sterling SEZ Infrastructure Ltd. (Corporate Debtor) through Resolution Professional Vs Deputy Director, Directorate of Enforcement, Headquarters Investigation Unit, New Delhi in Company Petition IB No.405/IB/2018. The Miscellaneous Application was filed by the Resolution Professional of the Corporate Debtor and after hearing the parties the Adjudicating Authority, NCLT, Mumbai by the impugned order directed that the attachment order dated 29.05.2018 and the Corrigendum dated 14.6.2018 issued by the deputy Director, Directorate of Enforcement, under the provisions of Prevention of Money Laundering Act,2002 (PMLA in short) which has been confirmed by the Adjudicating Authority under PMLA was nullity and nonest in law in view of Sections 14(1)(a), 63 and 238 of Insolvency and Bankruptcy Code (IBC). By the impugned order the Adjudicating Authority, NCLT, Mumbai permitted the Resolution Professional to take charge of the properties and deal with them under IBC as if there is no attachment order. The concerned sub-registrars are also directed to give effect to this order. The Adjudicating Authority clarified that the attachment only in respect of the properties of Corporate Debtor were covered by this impugned order. Thus the present appeal

 

Company Appeal (AT)(Insolvency) NO.576 of 2019

# 2. This appeal relates to impugned order dated 12.02.2019 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai in the matter of SREI Infrastructure Finance Ltd Vs Sterling International Enterprises Ltd (Corporate Debtor) (represented by the Resolution Professional Mr. Vishal Ghisulal Jain) in MA No.1299/2018 in CP No. 402 of 2018. The Miscellaneous Application was filed by the Resolution Professional of Corporate Debtor-Sterling International Enterprises Ltd and the Adjudicating Authority, NCLT, Mumbai after hearing the parties directed that the attachment order dated 29.5.2018 and the Corrigendum dated 14.6.2018 issued by the Deputy Director, Directorate of Enforcement which was confirmed by the Adjudicating Authority under PMLA was nullity and nonest in law in view of Sections 14(1)(a), 63 and 238 of IBC. The Adjudicating Authority by impugned order allowed the Resolution Professional to take charge of the properties and deal with them under IBC as if there is no attachment. The concerned sub-registrars were also given directions to give effect to this order. The Adjudicating Authority clarified that the attachment in respect of the properties of Corporate Debtor only were covered by the impugned order. Thus the present appeal.

 

# 3. The above two appeals have been filed and the impugned order in both the appeals being similar and relating to the same group companies, similar issues are being raised in both the matters. For the sake of convenience, the Company Appeal (AT)(Insolvency) No.575/2019 is treated as lead appeal and the arguments and documents will be referred from the record of this appeal (unless mentioned otherwise). The arguments have also been advanced referring to record in Company Appeal (AT)(Insolvency) no.575/2019.

 

Active Attachments, seizure etc. abstract acts as above

# 34. It appears to us that if the aims and objects of IBC are to be achieved, and maximisation of value is material so as to reach a resolution, above acts in time bound manner are to be performed and there cannot be obstructions of attachments and seizures existing. If the property is under attachment or seizure, or possession is taken over, keeping the corporate debtor a going concern would be serious issues. Without the properties in possession of IRP/RP getting valuation done during CIRP or even liquidation stage, would be issues. Attachment remaining in force would affect value of the property and prospective applicants may not respond in the manner in which they would, if the property is not under active attachment or seizure.

 

Section 14 of IBC applies

# 35. Coming to the question of moratorium, the Appellant is relying on the Judgment in the matter of “Varrsana Ispat Ltd.” (Supra) which was passed by this Tribunal on 2nd May, 2019. Now Respondent Nos. 1 and 3 have referred to Judgment in the matter of “Pareena Swarup Vs. Union of India”; 2008 14 SCC 107 (Diary No. 25059)  this was a matter where Ms. Pareena Swarup member of Bar had filed Writ Petition under Article 32 of the Constitution of India by way of Public Interest Litigation to declare various sections of PMLA such as Section 6 which deals with Adjudicating Authorities, composition, powers, etc. and other sections of PMLA as ultra vires of Articles 14, 19(1)(g), 21, 50, 323-B of Constitution of India. . . . . . .

 

# 36. The Learned Counsel for the Respondents are submitting that the Judgment shows that Government accepted that under PMLA, functions of Adjudicating Authority are civil in nature and not Criminal. 

 

# 37. The Learned Counsel for the Appellant submitted that these were proposed provisions and thus the Judgment is not helpful. Having reproduced the relevant portions from the Judgment, what appears to us is that the Government did save Issue No. 7 dealing with attachment and confirmation of the same by the Adjudicating Authority by claiming that the acts were civil in nature. Provisions on this count were not proposed provisions as argued. This being so, it does appear to have been accepted that the proceedings before the Adjudicating Authority under PMLA are civil in nature. Apart from above Section 11 and Section 41 of PMLA also give insight. They read as under: 

• “11. Power regarding summons, production of documents and evidence, etc.— 

• (1) The Adjudicating Authority shall, for the purposes of this Act, have the same powers as are vested in a civil court under the Code of civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:— 

• (a) discovery and inspection;

• (b) enforcing the attendance of any person, including any officer of a banking company or a financial institution or a company, and examining him on oath; 

• (c) compelling the production of records; 

• (d) receiving evidence on affidavits; 

• (e) issuing commissions for examination of witnesses and documents; and 

• (f) any other matter which may be prescribed. 

• (2) All the persons so summoned shall be bound to attend in person or through authorised agents, as the Adjudicating Authority may direct, and shall be bound to state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required. 

• (3) Every proceeding under this section shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860). 

• 41. Civil court not to have jurisdiction.—No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Director, an Adjudicating Authority or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.” 

 

Section 41 does not refer to Special Courts which on the face of the provisions are Criminal Courts. Section 41 was required to protect actions of Director and adjudication before Adjudicating Authority and Appeal to Appellant Tribunal under PMLA, which are Civil in nature from being challenged in regular Civil Courts. 

 

# 38. In PMLA offence of money laundering is defined and punishment prescribed in Chapter 2. Chapter 7 deals with special courts for trial of offence punishable under Section 4 which is found in Chapter 2. The offences are triable by Special Courts under Section 44 and the offence are cognizable and non-bailable as per Section 45. Section 46 applies Code of Criminal Procedure before Special Court. There is provision of Appeal and Revision to the High Courts under Section 47 of PMLA. Thus, there is demarcation with regard to the attachment of property done under Section 5 of PMLA which is to be adjudicated under Section 8 before the Adjudicating Authority who has to deal with confirmation of attachment under Section 8 (3) of PMLA. On confirmation, the attachment continues during investigation for a period not exceeding 365 days or pendency of the proceedings relating to the offence under PMLA before a Court or under the corresponding law of any other country or before the Competent Court of any jurisdiction outside India as the case may be. The attachment confirmed by Adjudicating Authority becomes final after an order of confiscation passed under sub-section 5 or sub-section 7 of Section 8 or Section 58B or sub-section (2-A) of Section 60 by the special Court. It appears that because of such demarcations, the Government stated before the Hon’ble Supreme Court of India that the functions as regards the Adjudicating Authority are civil in nature to the extent that it does not decide on the criminality of the offence nor does it has power to impose penalty or impose punishment.

 

# 39. Taking aid from this, it appears to us that after the attachment when matter goes before the Adjudicating Authority under PMLA, proceeding before Adjudicating Authority for confirmation would be civil in nature. That being so, Section 14 of IBC would be attracted and applies. In present matter, the Provisional Attachment took place on 29th May, 2018 and corrigendum was issued on 14th June, 2018. The CIRP started on 16th July, 2018. Once moratorium was ordered, even if the Appellant moved the Adjudicating Authority under PMLA, further action before Adjudicating Authority under PMLA must be said to have been prohibited. Even if confirmation has been done as stated to have been done on 20th November, 2018, the same will have to be ignored. Section 14 of IBC will hit institution and continuation of proceedings before Adjudicating Authority under PMLA. The CIRP will of course not affect prosecution before Special Court, till contingencies under Section 32A of IBC occur.

 

40. In Judgment in the matter of “P. Mohanraj & Ors. Vs. Shah Brothers Ispat Pvt. Ltd.” (2021) SCC Online SC 152, Hon’ble Supreme Court of India considered the provisions of Section 138 of the Negotiable Instrument Act and Liabilities of the Corporate Debtor and Directors in the light of Section 14 of IBC and observed in Paragraph 63 as under: 

• “63. A conspectus of these judgments would show that the gravamen of a proceeding under Section 138, though couched in language making the act complained of an offence, is really in order to get back through a summary proceeding, the amount contained in the dishonoured cheque together with interest and costs, expeditiously and cheaply. We have already seen how it is the victim alone who can file the complaint which ordinarily culminates in the payment of fine as compensation which may extend to twice the amount of the cheque which would include the amount of the cheque and the interest and costs thereupon. Given our analysis of Chapter XVII of the Negotiable Instruments Act together with the amendments made thereto and the case law cited hereinabove, it is clear that a quasi-criminal proceeding that is contained in Chapter XVII of the Negotiable Instruments Act would, given the object and context of Section 14 of the IBC, amount to a “proceeding” within the meaning of Section 14(1)(a), the moratorium therefore attaching to such proceeding.”

 

Thus to quasi-criminal proceeding as regards Corporate Debtor, Section 14 applies has been found. Considering this as well as the nature of proceedings that takes place before the Adjudicating Authority under PMLA, it appears to us that even if the Authority issues order of provisional attachment, the institution and continuation of proceedings before the Adjudicating Authority for confirmation would be hit by Section 14 of IBC.

 

# 41. Alternatively, even if for any reason it was to be held that Section 14 of IBC would not help, it appears to us that Section 238 of IBC would still apply. Although it is argued that PMLA is a special statute and has an overriding effect still Section 238 of IBC is also a special statute and which is subsequent statute. IBC has specific object, which is to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of value of assets of such persons and to promote entrepreneurship, availability of credit and balance the interest of all stakeholders including alteration in the order of priority of payment of Government dues.

 

Section 238 of IBC reads as under:

• “238. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

 

If this Section is perused, the provisions of this Code would have effect notwithstanding anything inconsistent therewith contained “in any other law” for the time being in force. Section 238 of IBC does not give over riding effect merely to Section 14. The other provisions also are material, and will have effect if there is anything inconsistent therewith contained in any other law for the time being in force. Thus if the Authorities under PMLA on the basis of the attachment or seizure done or possession taken under the said Act resist handing over the properties of the Corporate Debtor to the IRP/RP/Liquidator the consequence of which will be hindrance for them to keep the Corporate Debtor a going concern till resolution takes place or liquidation proceedings are completed, the obstructions will have to be removed. We have already referred to the various Acts required to be performed by IRP/RP/Liquidator to achieve the aims and objects of IBC in time bound manner. If properties of 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. To take over properties of Corporate Debtor, and manage the same, and keep Corporate Debtor a going concern are acts which fall within purview of IBC. IRP/RP/Liquidator under IBC have duty and right to take over and manage assets of Corporate Debtor as long as the assets are property of the Corporate Debtor, so that the other duties conferred on them by the statute are performed. These are issues relating to resolution/liquidation. If hindrance is being created by the attachment or by taking over the possession, it would be a question of priority arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor and such question can be decided by the Adjudicating Authority under Section 60 (5) (c) of IBC which reads as under:

• “60(5)(c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.

 

42. 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 in terms of Section 32A.

 

43. For the above reasons, we find no substance in these Appeals. We do not find any reason to interfere with the Impugned Order in both the Appeals.

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Nitin Jain Liquidator PSL Limited Vs. Enforcement Directorate Through Raju Prasad Mahawar, Assistant Director PMLA - Attachment of property by ED during Liquidation process.

 HC Delhi (17.03.2021) in Nitin Jain Liquidator PSL Limited Vs. Enforcement Directorate Through Raju Prasad Mahawar, Assistant Director PMLA. [W.P.(C) 3261/2021] held that; - 

• “ It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner”.

• the liquidator shall proceed in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter, ‘IBC’). However, if any moveable/immovable assets are disposed of by the liquidator, the monetary sums recovered from the same shall be placed in a separate bank account and an affidavit stating the recovered amount shall also be placed before this Court. If any amounts are to be disbursed to any of the creditors, an application shall be moved before this Court seeking permission to disburse.

• The question as to whether the moveable/immovable assets of the Corporate Debtor and the sale thereof during the liquidation process would be permitted under Section 32A of the IBC, would require consideration by this Court.

Excerpts of the order;

# 2. The present petition has been preferred by the Petitioner, who has been appointed as the liquidator of M/s PSL Limited/Corporate Debtor (hereinafter, ‘Corporate Debtor’).

# 3. The Petitioner was initially appointed as the Resolution Professional on 30th August, 2019. After the Committee of Creditors proposed a liquidator, vide order dated 11th September, 2020, the NCLT passed orders directing liquidation of the Corporate Debtor. The process of liquidation was under way when the Petitioner received summons dated 15th January 2021, issued by the Directorate of Enforcement (hereinafter, ‘ED’). The said summons was, thereafter, followed up by an email dated 25th January, 2021, by which the Assistant Director (PMLA), Delhi Zonal Office, called upon the Petitioner not to dispose of the assets of the said company. The said email reads as under:-

• “Kind Attention to :-

Mr. Nitin Jain, Official Liquidator of M/s. PSL Limited.

It is stated that a case has been recorded under PMLA, 2002 against M/s. PSL Limited and Others. It has came to the notice of this office that you have been appointed as Official Liquidator of M/s PSL Limited and auctioning the assets of this company.

You are hereby requested to not disposed off these assets as the matter is pending under PMLA, 2002 which has overriding effect over IPC (sic IBC) and other laws governing such transactions.

Raju Prasad Mahawar

Assistant Director (PMLA)

Delhi Zonal Office.”

# 4. The Petitioner, therefore, prays for setting aside the said directions of the ED.

# 5. Mr. Kirti Uppal, ld. Sr. Counsel submits that there is no proceeding presently pending against the Corporate Debtor or any of its promoters. There is not even a provisional attachment order (hereinafter, ‘PAO’) at this stage. Accordingly, the said notice is completely untenable, especially in light of the recent decision of the ld. Supreme Court in Opto Circuit India Ltd. v. Axis Bank & Ors., 2021 SCC OnLine SC 55. Mr. Zoheb Hossain, ld. Standing Counsel, confirms the fact that there is no PAO at this point.

# 6. Recently, the ld. Supreme Court in Opto Circuit (supra), dealing with the scheme of the Prevention of Money Laundering Act, 2002 (hereinafter, ‘PMLA’) observed as under:-

• “16 This Court has time and again emphasised that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner. Among others, in a matter relating to the presentation of an Election Petition, as per the procedure prescribed under the Patna High Court Rules, this Court had an occasion to consider the Rules to find out as to what would be a valid presentation of an Election Petition in the case of Chandra Kishor Jha v. Mahavir Prasad (1999) 8 SCC 266 and in the course of consideration observed as hereunder:

- “ It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner”.

• 17. Therefore, if the salutary principle is kept in perspective, in the instant case, though the Authorised Officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law. We have found fault with the Authorised Officer and declared the action bad only in so far as not following the legal requirement before and after freezing the account. This shall not be construed as an opinion expressed on the merit of the allegation or any other aspect relating to the matter and the action initiated against the appellant and its Directors which is a matter to be taken note in appropriate proceedings if at all any issue is raised by the aggrieved party.”

# 7. A perusal of the email issued by the ED clearly shows that the same is not on the basis of any proceedings initiated under Section 5 or 8 of the PMLA. The admitted position is that though investigation is going on, no PAO has been issued against the corporate debtor. Accordingly, the impugned e-mail and any other direction issued by the Respondent against the liquidator shall remain stayed. In order to maintain a balance and to ensure that there is no prejudice caused, the liquidator shall proceed in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter, ‘IBC’). However, if any moveable/immovable assets are disposed of by the liquidator, the monetary sums recovered from the same shall be placed in a separate bank account and an affidavit stating the recovered amount shall also be placed before this Court. If any amounts are to be disbursed to any of the creditors, an application shall be moved before this Court seeking permission to disburse.

# 8. The question as to whether the moveable/immovable assets of the Corporate Debtor and the sale thereof during the liquidation process would be permitted under Section 32A of the IBC, would require consideration by this Court.

# 9. Both parties are permitted to approach this Court if any further clarification is required.

# 10. Let the counter affidavit, along with a written note of arguments on the scheme of the IBC in respect of Section 32A and its applicability to the facts, be placed on record within four weeks, by both parties. Rejoinder, if any, be filed within four weeks thereafter.

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