The Hon’ble High Court of Bombay (Bombay HC/Court) in Shiv Charan and Ors. v Adjudicating Authority and Anr, has reinforced the powers of the National Company Law Tribunal (NCLT) to direct the Enforcement Directorate (ED) to release properties attached under the Prevention of Money Laundering Act, 2002 (PMLA) after the approval of a resolution plan under the Insolvency & Bankruptcy Code, 2016 (IBC).
The litigation was initiated against DSK Southern Projects Private Limited (Corporate Debtor) and its former promoters, involving scheduled offences under the PMLA. ED initiated action by filing an Enforcement Case Information Report (ECIR) in March 2018, leading to the provisional attachment of certain assets of the Corporate Debtor. Subsequently, Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor. The NCLT, in its order dated February 17, 2023, approved a resolution plan submitted by Mr. Shiv Charan and others, directing the ED to release the attached properties. Despite the NCLT’s directive, the ED persisted with the provisional attachment, prompting the resolution applicants to file a writ petition seeking the release of properties post-resolution plan approval.
The Bombay HC held that section 32A of IBC operates independently of other laws and shields the corporate debtor and its assets from liabilities arising from previous management’s actions, provided the new management is completely delinked from the previous wrongdoings. The Court emphasized the jurisdiction of the NCLT under section 60(5) of IBC, which empowers it to decide on issues arising from the CIRP, including matters related to immunity under section 32A of IBC.
The Court clarified that the NCLT’s authority extends to ensuring the effective implementation of resolution plans, as mandated under section 31 of the IBC. Therefore, the NCLT’s direction to release the attached properties was within its purview to safeguard the interests of the resolution applicants and facilitate the revival of the Corporate Debtor.