The Bombay High Court recently ruled that the National Company Law Tribunal (NCLT) has the authority to instruct the Enforcement Directorate (ED) to lift the attachment on properties belonging to a company undergoing insolvency proceedings after the resolution plan for the insolvency process is approved [Shiv Charan v. Adjudicating Authority & connected petitions].
A division bench of Justices BP Colabawalla and Somsekhar Sundaresan observed that Section 32A of the Insolvency and Bankruptcy Code (IBC) explicitly protects the company undergoing insolvency proceedings from further prosecution for any offence once the resolution plan has been approved.
The Court was handling a series of petitions filed by applicants who proposed the resolution plan of DSK Southern Projects Pvt Ltd, a company undergoing insolvency proceedings.
The applicants highlighted that nearly four years before the company was admitted for insolvency, various first information reports (FIRs) were registered alleging cheating, which formed the scheduled offence for the ED’s case under the Prevention of Money Laundering Act (PMLA).
The ED then took steps to attach properties worth over ₹32 crores. This attachment was confirmed by the PMLA adjudicating authority in 2019 and it continued even after the commencement of the Corporate Insolvency Resolution Process (CIRP) post the NCLT order.
The resolution applicants moved the High Court against the continuation of attachment of property, claiming that the attachment went against the NCLT order which explicitly directed the ED to release all attached properties.
The High Court rejected the ED’s argument that the NCLT does not have the power to direct the ED to lift its attachment imposed under the provisions of the PMLA.
The division bench ruled that the NCLT had the power to direct the ED to lift its attachment concerning the attached properties of the corporate debtor once a resolution plan that qualifies for immunity under Section 32A was approved, and those very properties were the subject matter of the resolution plan.
