TMI Blog2019 (5) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... e removed, parted with or otherwise dealt with without prior permission of the Deputy Director, ED. Therefore, the ownership rights of the corporate debtor are not affected by the provisional attachment order. The possession also continues to remain with the corporate debtor. It is only the right of removing, parting with or otherwise dealing with the properties has been reduced to the extent that the prior permission of the Deputy Director ED would be required. Therefore, there is no impediment to the initiation of the CIRP consequent to order made by the Adjudicating Authority under the Code. An order of attachment under PMLA does not ipso facto render illegal a prior charge of encumbrance of a secured creditor and the secured creditor can prove and as and when the secured creditor proves his bonafides and satisfies the other conditions, the property to the extent of such interest of the secured creditor would not be subjected to confiscation. Thus, the proceedings in CP (IB) No. 73/Chd/CHD/2018 for initiation of CIRP in the case of the corporate debtor be continued and not kept in abeyance and that the financial creditor and/or the Resolution Professional who may be appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ESI Act, 2002 demanding the alleged amount due as on 31.12.2017. It is stated that in Part-IV of the petition, the financial creditor has averred that pursuant to approval of restructuring package by all the consortium member banks, the corporate debtor executed a Joint Lenders Restructuring Agreement dated 27.03.2015 and as per article 3 thereof, the facilities pertaining to the financial creditor were secured by way of first pari-passu charge on current assets and second pari-passu charge on entire block of the fixed assets of corporate debtor and the mortgagor, and in Part-V of the petition, the financial creditor has even made reference to the joint deal of hypothecation dated 27.06.2015, joint memorandum of entry dated 27.06.2015 and 10.07.2015 reiterating its first charge on the entire current assets and second pari-passu charge on the fixed assets. It is submitted that the financial creditor in the petition alone is not the only banker/lender of the corporate debtor and there are other lenders also and Punjab National Bank is the lead bank. It is stated that the corporate debtor was erroneously, illegally and arbitrarily dragged into the matter pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and thus stand excluded from the purview of the Resolution Professional (RP) in terms of the Explanation appended to Section 18 of the Code. Reliance has been placed on the decision of the Hon ble National Company Law Tribunal, Allahabad in the case of Bank of Baroda Vs. Rotomac Global Private Limited. It is submitted that the financial creditor is first required to obtain appropriate orders from the Adjudicating Authority under PMLA, 2002. The hearing of CA No. 191/2019 was conducted on 25.03.2019 at the admission stage. The learned senior counsel for the financial creditor was also present during the hearing. The learned counsel for the corporate debtor referred to the provisional attachment order 03/2017 dated 15.03.2017 of ED and stated that since the virtual control of the assets is under PMLA, 2002, the RP would not be able to take over the control and custody of the assets and would not be able to discharge his duties under Section 18(1)(f) of the Code. It was argued that all the assets of the corporate debtor are covered by the provisional attachment order of the ED and that in the petition filed under Section 7 of the Code, the existence of the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PMLA, 2002 and therefore, the prayers made in CA No. 191/2019 be allowed. We have carefully considered the submissions of the learned counsel for the corporate debtor and the learned senior counsel for the financial creditor and have also perused the record. We have already discussed the facts above. The issue for consideration in the present CA No. 191/2019 is whether the financial creditor is to first approach the Adjudicating Authority under Section 8 of PMLA, 2002 for seeking appropriate orders/permission to take any action for resolution of the assets of the corporate debtor attached under provisional attachment order No. 03/2017 dated 15.03.2017 passed by the ED and whether the proceedings in CP(IB) No. 73/Chd/CHD/2018 be kept in abeyance till the final decision of the Adjudicating Authority under Section 8 of the PMLA Act, 2002. The pleadings of the learned counsel of the corporate debtor are primarily based upon the order dated 10.01.2019 of the Hon ble NCLT, Allahabad in IA No. 150/2018 in CP No. (IB) 70/ALD/2017 in the matter of Mr. Anil Goel, Liquidator, Rotomac Global Private Limited Vs. Ms. Ramanjit Kaur Sethi, Deputy Director, Directora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase stands on an entirely different footing since the prayer is for keeping the proceedings for initiation of the CIRP in abeyance till the final decision of the Adjudicating Authority under Section 8 of the PMLA, 2002. In para 49 of its order dated 10.01.2019 (supra), the Hon ble NCLT, Allahabad has stated inter alia that the conclusion is that the properties attached in the case under the provisions of PMLA, no doubt, form part of the liquidation estate. The Hon ble NCLT, Allahabad has thereby held that even though the properties are attached under PMLA, 2002, they would still be part of the liquidation estate. By implication, therefore, properties attached under PMLA, 2002 can form part of the assets of which control and custody can be taken by the RP under Section 18(1)(f) of the Code. There is no legal impediment on the powers of the Adjudicating Authority under the Code to direct initiation of CIRP in the case of a corporate debtor whose assets are subject to PMLA, 2002 proceedings. However, where an order of confiscation of a property is passed under the provisions of PMLA 2002, the property would vest absolutely in the Central Government. Therefore, under Section 18(1)(f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the corporate debtor relied upon the judgement dated 02.04.2019 of the Hon ble Delhi High Court (supra). Part No. 1 of the judgement inter alia states that the five appeals presented under Section 42 of the PMLA, 2002 are against more or less similar order of the appellate tribunal constituted under Section 25 of PMLA, 2002 and such orders have been rendered on appeals of the respondents ( banks ) vis - vis the order of provisional attachment issued by the enforcement officers under Section 5 as confirmed by the Adjudicating Authority under Section 8, give rise, inter alia, to certain common questions of law of import concerning nature of properties that may be attached under the special law as indeed the conflict arising from claim of bonafide acquisitions of interest by third parties. The Hon ble Delhi High Court has summarised the conclusions in para No. 171 of the order as follows:- ( i). The process of attachment (leading to confiscation) of proceeds of crime under PMLA is in the nature of civil sanction which runs parallel to investigation and criminal action vis-a-vis the offence of money-laundering. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vency Code (or such other laws) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other with regard to the assets respecting which there is material available to show the same to have been derived or obtained as a result of criminal activity relating to a scheduled offence and consequently being proceeds of crime , within the mischief of PMLA. ( ix). If the property of a person other than the one accused of (or charged with) the offence of money-laundering, i.e. a third party, is sought to be attached and there is evidence available to show that such property before its acquisition was held by the person accused of money-laundering (or his abettor), or it was involved in a transaction which had inter-connection with transactions concerning money-laundering, the burden of proving facts to the contrary so as to seek release of such property from attachment is on the person who so contends. ( x). The charge or encumbrance of a third party in a property attached under PMLA cannot be treated or declared as void unless material is available to show that it was created to defeat th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party. ( xv). If the bonafide third party claimant (as aforesaid) is a secured creditor , pursuing enforcement of security interest in the property (secured asset) sought to be attached, it being an alternative attachable property (or deemed tainted property), it having acquired such interest from person(s) accused of (or charged with) the offence of money-laundering (or his abettor), or from any other person through such transaction (or interconnected transactions) as involve(s) criminal activity relating to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party. ( xvi). In the situations covered by the preceding two subparagraphs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the prescribed criminal activity, the property to the extent of such interest of the third party will not be subjected to confiscation so long as the charge or the encumbrance of such third party subsists, the attachment under PMLA being valid or operative subject to satisfaction of the charge of encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party. Therefore, it has been held by the Hon ble Delhi High Court that an order of attachment under PMLA does not ipso facto render illegal a prior charge of encumbrance of a secured creditor and the secured creditor can prove and as and when the secured creditor proves his bonafides and satisfies the other conditions, the property to the extent of such interest of the secured creditor would not be subjected to confiscation. In view of the judgement of the Hon ble High Court of Delhi that the PMLA, RDBA, SARFAESI and the Insolvency Code (or such other laws) must co-exist, each to be construed and enforced in harmony, we hold that the proceedings in CP (IB) No. 73/Chd/CHD/2018 for initiation of CIRP in the case of the corporate debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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