TMI Blog2021 (5) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Pincon Group Companies had fraudulently accepted the deposits and all the money went to Corporate Debtor and the Corporate Debtor had purchased the attached properties with the money of the depositors. In this regard, the appellant placed reliance on the findings of the designated court - There is nothing on record that Corporate Debtor had raised any objection under Section 14(3) of the WBPIDFE Actthat the properties were wrongfully attached and produced before the court. In such circumstances, we are unable to convince with the argument of Ld. counsel for the respondent that the findings of the designated court are not binding on the Corporate Debtor - thus, the properties of the corporate debtor can be attached. Whether High Court of Calcutta in WP No. 24110(W)of 2016 vide order dated 23.04.2019 directed that the assets of the Corporate Debtor should be kept outside the purview of sale? - HELD THAT:- High Court have not placed on record any objection which has been filed under section 14 (3) of WBPIDFE Act. In such a situation, it cannot be said that the Hon ble High Court directed that the assets of the Corporate Debtor be kept outside the purview of sale. Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the attached property is not in possession and control of the DEO, WB. Therefore, as per the impugned order DEO, WB cannot de-attach the property which is already confiscated by the Designated Court of Economic Offences. The impugned order is not sustainable in law therefore, the order is hereby set aside - Appeal allowed. - COMPANY APPEAL (AT) (INS) No. 935 of 2020 - - - Dated:- 4-5-2021 - [Justice Jarat Kumar Jain] Member (Judicial) And [Mr. Kanthi Narahari] Member (Technical) For the Appellant : Ms Nandini Sen, Advocate For the Respondent : Mr. Gaurav Mitra, Mr Kanishk Khetan, Mr Nipun Gautam, Advocates JUDGMENT Jarat Kumar Jain: J. The Appellant Directorate of Economic Offences, Government of West Bengal (DEO, WB) filed this Appeal against the order dated 19.02.2020 passed by Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) in CP (IB) No. 93/KB/2018 whereby Respondent No.1 s Application CA(IB) 1741/KB/2018 under Sections 33 (5), 60 (5) (c) and 238 of Insolvency and Bankruptcy Code, 2016 (IBC) was allowed directing the Appellant to de-attach all the properties attached vide notice dated 16.04.2018 and to restore posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The DEO, WB is directed to look after all the properties, movable and immovable, and also which are given in Zimma till realisation of the liability with the help of the local police stations. 4. Liquidator (Respondent No. 1) filed an Application under Sections 33 (5), 60 (5) (c) and 238 of the IBC (IA No. 1741 of 2019) stating that the registered office of the Corporate Debtor was attached and sealed by DEO, WB under Section 3 of WBPIDFE Act. The documents kept in the registered office are essential to conduct the liquidation process. Hence, the interest of the Creditors to recover their dues from the Corporate Debtor is jeopardized. Therefore, Liquidator requested to pass an order directing the DEO, WB to de-attach all the properties attached as per notice dated 16.04.2018 and to handover the possession of properties to the Liquidator for the purpose of liquidation process. 5. The DEO opposed the Application on two grounds. Firstly, although the Appeal CA(AT) (Ins) No. 1361-1362 of 2019 filed by DEO before this Appellate Tribunal challenging the order of admission of the Petition, wherein CIRP had been initiated against the Corporate Debtor, was dismissed, the DEO is prepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the Appellant submitted that Ld. Adjudicating Authority has allowed the Liquidator s Application mainly on the ground that the earlier application filed by the DEO, WB was dismissed vide order dated 30.09.2019 assuming that the earlier findings attained finality. 9. It is further submitted that after attaching the property of Corporate Debtor the same was produced before the Designated Court of Economic Offence and the Court vide its Judgment dated 03.10.2020 confiscated the attached property anddirected that such property will be in the custody of Court for realisation of dues of the depositors under Sections 15 to 18 of WBPIDFE Act subject to the decision of the Appellate Court. In the present situation, when the attached property is in custody of the Court, the DEO, WB (Appellant) cannot de-attach the property and handover possession to the liquidator as the property is not in the possession and control of the DEO, WB (Appellant). 10. It is also submitted that the attached properties of the Corporate Debtor and the properties confiscated by the Designated Court are same. In this regard, he drew our attention towards the Annexure A -2 to A-5 which contain the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was restricted only to payment of costs and was not pressed qua merits. Therefore, this Appellate Tribunal vide order dated 05.02.2020 set aside the costs only. Thus, the order dated 30.09.2019 attained finality and same cannot be re-agitated once again in this Appeal. 15. It is submitted that M/s Pincon Spirits Ltd. Corporate Debtor (Respondent No. 3) is not a Chit fund company, does not have any depositors, is not a financial establishment as defined in Section 2(e) of WBPIDFE Act and on the contrary is a company engaged in the manufacture and supply of alcohol. Respondent No. 1 intervened in the proceedings before the Hon ble High Court of Calcutta and vide orders dated 09.04.2019 and 23.04.2019, it inter alia directed the Appellant to co-operate with Respondent No. 1 and assist him in discharging his statutory duties and functionsand also keep the assets and properties of M/s Pincon Spirits Ltd. Corporate Debtor outside the purview of sale of assets and properties under the WBPIDFE Act. However, despite such direction, the Appellant failed to assist/cooperate with Respondent No. 1 thereby frustrating the entire CIRP of Corporate Debtor. 16. Ld. Counsel for the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 while dismissing the Application CA (IB) No. 577/KB/2019 filed by the DEO, WB. Ld. Adjudicating Authority, vide order dated 30.09.2019 also decided another application being CA (IB) No. 1122/KB/2018 filed by the RP for lifting attachment of the various properties of the Corporate Debtor attached by the DEO, WB. The operative part of the order is as under: - 7. The Hon ble Delhi High Court in Dy. Director, Directorate of Enforcement, Delhi Vs. Axis Bank Ors. (Cr.Appeal No. 143 of 2018) has held that:- Object of PMLA being distinct from the purpose of the RDDA, SARFAESI and the Code. The later three legislations do not prevail over the former 8. It appears to us that provisions of Act of 2013 do prevail over the provision of the code and therefore, we could not determine the title in regard to the disputed property under attachment by the DEO, WB and unable to pass an order for de- attaching of the property by DEO, WB Act, 2013 as prayed for by the RP. It is self-contained Act wherein Section 19 enables the liquidator to prefer an Appeal against the order of the authorities before the Hon ble High Court at Calcutta. That being so we cannot pass any order in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 243 to 247 of Affidavits and Documents Diary No. 25314). 25. Ld. Adjudicating Authority by the impugned order has only directed to de-attach the property attached vide notice dated 16.04.2018. We have mentioned above that on 16.04.2018, the registered office of the Corporate Debtor was sealed. It means, the impugned order is not in regard to the assets which were attached on different dates mentioned above in Para 24. 26. Now, we have to consider whether the property of a person who is not financial establishment as per the definition of Section 2(e) of the WBPIDFE Act can be attached. For this purpose, it is useful to refer Section 5 of the WBPIDFE Act, which reads as under:- 5. (1) Notwithstanding anything contained in any other law for the time being in force, (a) ------ - (b) ------ -- (c) (d) where the State Government is satisfied that any financial establishment committing a default in repayment of deposit fraudulently, has transferred (whether after the commencement of the Act or not) any of the property otherwise than in good faith and for consideration, it may, in order to protect the interest of the depositors of such financial establishment, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Designated Court or any judicial forum, as the case may be, for passing appropriate orders to give effect to the provisions of this. 27. Section 5 (1)(d) of the WBPIDFE Act provides that where the State Government is satisfied that any financial establishment committing a default in repayment of deposit fraudulently, has transferred any of the property otherwise then in good faith and for consideration, it may in order to protect the interest of the depositors of such financial establishment by an order to be published in official gazette and recording reasons in writing attach the money or other property acquired either in the name of such financial establishment or in the name of any other person on behalf of such financial establishment. 28. Sub-section 5 of Section 5 of the WBPIDFE Act provides that the Competent Authority may make an Application to Special Court or Designated Court for adjudicating any issue or subject matter pertaining to money or property or assets belonging to or ostensibly belonging to a financial establishment or any person mentioned in the order under Sub-Section (1) situated within the territorial jurisdiction of the Designated Court may be, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auction and realize the sale proceeds and for the equitable distribution of the money so realized among the depositors. (6) If cause is shown or any objection is raised as aforesaid, the Designated Court shall proceed to investigate the matter. (7) After investigation under sub-section (6), the Designated Court shall pass an order within a period of 180 days from the date of receipt of an application under sub-section (4) of section 5 either by making the ad interim order of attachment passed under sub-section (5) absolute or by varying itby releasing a portion of the property from attachment or cancelling the ad interim order of attachment and direct the Competent Authority to sell the property so attached by public auction and realize the sale proceeds: Provided that the Designated Court shall not release from attachment any interest in property, which it is satisfied that the financial establishment or the person referred to in sub-section (1) has in the property unless it is also satisfied that there will remain under attachment an amount or property of value not less than the value that is required for repayment to the depositors of such financial establishment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Respondent Nos. 1 3 raised the objection that the findings of the designated court are not binding on the Corporate Debtor because the Corporate Debtor was not a party before the designated court. We have considered this objection. Admittedly, accused Monoranjan Roy is a director of Pincon Spirits Ltd. (Corporate Debtor) and designated court found him guilty for the offence under Sections 406, 409, 420 and 120-B of I.P.C and Section 3 of the WBPIDFE Act. In this case, the properties of the Corporate Debtor attached and produced before the court and on conclusion ofthe trial, such properties have been confiscated. It cannot be said that the Corporate Debtor was unaware of the proceedings before designated court. There is nothing on record that Corporate Debtor had raised any objection under Section 14(3) of the WBPIDFE Actthat the properties were wrongfully attached and produced before the court. In such circumstances, we are unable to convince with the argument of Ld. counsel for the respondent that the findings of the designated court are not binding on the Corporate Debtor. 32. In this regard it is useful to refer to the findings of the Designated Court of Economic Offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in that Writ many times before this court and looked with red eyes. Page 222 So Monoranjan Roy has challenged the judiciary regarding PSL. It will reveal from the bank statements that the companies which were acquired by Monoranjan in the name of his persons and directors, some of which hasonly paper existence or fake, which does not do any profitable business according to Companies Act, used to make monitory transactions with each other illegally without any justification .Those did not follow the legal procedure and the money was syphoned through these ultimately to PINCON SPIRIT Ltd. which is the heart of accused Monoranjan Roy. The DEO had indicated that in the annexures with the charge sheet. Page 225 PSL is the heart of Monoranjan Roy . In examination u/s 313 he admitted that he is the owner of this company. This is the actual culprit company. All money was syphoned to this company which has connection with foreign countries. Monorajan Roy is successful to protect his heart by suppressing the actual fact. 33. With the aforesaid findings of designated court we hold that the properties of the corporate debtor can be attached. Issue No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates to declaration of Moratorium for prohibiting some of the actions as mentioned therein and it reads as under: 14. Moratorium─ (1) Subject to provisions of subsections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment,decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. (2) The supply of essential goods or services to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility arising out of impracticable or commercially not viable promises made while accepting such deposit; or (e) commits such default due to deployment of money or assets acquired out of the deposits in such a manner as it involves inherent risk in recovering the same when needed, such financial establishment and every person including the promoter, partner, director, manager, member, employee or any other person responsible for the management of, or for conducting the business or affairs of such financial establishment, shall be deemed to have committed a default in repayment of deposit fraudulently. (2) Every person including the promoter, partner, director, manager, member, employee or any other person responsible for the management, or for conducting the business or affairs, of a financial establishment who has committed a default in repayment of deposit fraudulently within the meaning of sub-section (1),shall, on conviction, be punishable with imprisonment for life or imprisonment for either description for a term which may extend to ten years and such financial establishment shall also be liable to a fine which may extend to an amount equivalent to five lakh rupees, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.04.2018, the registered office of M/s. Pincon Spirits Ltd. (Corporate Debtor) was sealed. Thereafter, on 26.04.2018 and 25.02.2019, various properties of M/s Pincon Spirits Ltd. were attached by the DEO, WB. Meanwhile, on 19.07.2018 initiated CIRP against M/s Pincon Spirits Ltd. Thus, admittedly, the properties of M/s Pincon Spirits Ltd. were seized and the registered office was sealed much prior to the initiation of CIRP. We can say that the moratorium has been declared after the properties were attached by the DEO, WB and produced before the Designated Court of Economic Offences. Thus, we hold that Section 14 of the IBC has no overriding effect on Section 3 of the WBPIDFE Act. 45. Now, we have to consider whether Section 33 (5) of the IBC prevails over Section 3 of the WBPIDFE Act. 46. Hon ble Supreme Court in the case of Manish Kr. (supra) upheld the validity of this provision inserted as Section 32-A of the IBC. Hon ble Supreme Court in this case clarified the liability of a Corporate Debtor for an offence committed prior to commencement of CIRP. It is useful to refer to the relevant paragraphs of this judgment (para 252 to 255) as under: - 252. Section 32A has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 31 and a prosecution has been instituted during the CIRP against the corporate debtor, the corporate debtor will stand discharged. This is, however, subject to the condition that the requirements in sub-Section (1), which have been elaborated by us, have been fulfilled. In other words, if under the approved Resolution plan, there is a change in the management and control of the corporate debtor, to a person, who is not a promoter, or in the management and control of the corporate debtor, or a related party of the corporate debtor, or the person who acquires control or management of the corporate debtor, has neither abetted nor conspired in the commission of the offence, then, the prosecution, if it is instituted after the commencement of the CIRP and during its pendency, will stand discharged against the corporate debtor. Under the second proviso to sub- Section (1), however, the designated partner in respect of the liability partnership or the Officer in default, as defined under Section 2(60) of the Companies Act, 2013, or every person, who was, in any manner, in-charge or responsible to the corporate debtor for the conduct of its business, will continue to be liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or control of the corporate debtor or (c) a related party of the corporate debtor; (d) a person with regard to whom the investigating authority, had, on the basis of the material, reason to believe that he has abetted or conspired for the commission of the offence and has submitted a Report or a complaint. If all these aforesaid conditions are fulfilled then the Law Giver has provided that no action can be taken against the property of the corporate debtor in connection with the offence. The Explanation to sub-Section (2) has clarified that the words an action against the property of the corporate debtor in relation to an offence , would include the attachment, seizure, retention or confiscation of such property under the law applicable to the corporate debtor. Since the word include is used under sub- clause (i) of the Explanation, the word action against the property of the corporate debtor is intended to have the widest possible amplitude. There is a clear nexus with the object of the Code. The other part of the clarification, under the Explanation, is found in the second sub-clause of the Explanation (ii). Under the second limb of the Explanation, the Law Giver has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest (EoI), however, not even a single EoI was received. The statutory period of 180 days for completion of CIRP was extended and even after the expiry of270 days of CIRP, no EoI or resolution plan was received. Thereafter, in the 7th meeting of CoC held on 05.04.2019, the CoC, by majority voting share of the committee members, has decided not to proceed with CIRP and recommended liquidation. However, the liquidation process is not commenced because the registered office of the Corporate Debtor was sealed by the DEO, WB on 16.04.2018 and the record kept in the registered office was ultimately seized by the DEO, WB on 26.04.2018. As, in this case, no resolution plan was received, therefore, there is no question of approval of resolution plan. 50. No resolution plan was approved which resulted in the change in control of the Corporate Debtor, therefore, there is no bar to take action against the property of the Corporate Debtor in connection with the offence. The explanation to sub-section (2)has clarified that the words and actions against the Corporate Debtor in relation to an offence would include the attachment, seizure, retention or confiscation ofsuchproperty under the l ..... 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