TMI Blog2021 (12) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the same. By virtue of Amending Act 26 of 2019, a significant amendment came to be introduced in sub-Section (1) of Section 31 and in terms thereof, it now stands clarified that the plan as approved by the Adjudicating Authority, would also bind the Central and State Governments or any local authority to whom a debt is owed. The provisions as introduced and incorporated in terms of Act 26 of 2019 have been upheld and judicially recognised to be declaratory. Section 32A and the legislative intent - HELD THAT:- Maximization of value would be clearly impacted if a resolution applicant were asked to submit an offer in the face of various imponderables or unspecified liabilities. The amendment to sub-Section (1) of Section 31 and the introduction of Section 32A undoubtedly seek to allay such apprehensions and extend an assurance of the resolution applicant being entitled to take over the corporate debtor on a fresh slate. Section 32A assures the resolution applicant that it shall not be held liable for any offense that may have been committed by the corporate debtor prior to the initiation of the CIRP. It similarly extends that warranty in respect of the properties of the cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or order of the Appellate Tribunal has the right to appeal to the High Court in accordance with the provisions of Section 42. Offences committed under the PMLA are triable by Special Courts which may be constituted in accordance with the provisions made in Chapter VII. Section 71 engrafts a non-obstante clause by providing that the provisions of the PMLA shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Issue of primacy - HELD THAT:- It is evident that the two statutes essentially operate over distinct subjects and subserve separate legislative aims and policies. While the authorities under the IBC are concerned with timely resolution of debts of a corporate debtor, those under the PMLA are concerned with the criminality attached to the offense of money laundering and to move towards confiscation of properties that may be acquired by commission of offenses specified therein. The authorities under the aforementioned two statutes consequently must be accorded adequate and sufficient leeway to discharge their obligations and duties within the demarcated spheres of the two statutes - this Court is of the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2A and upon an interpretation of the provisions of the IBC and the Regulations framed thereunder. As is evident from a careful reading of Section 32A(2), the Legislature in its wisdom has provided that no action shall be taken against the properties of the corporate debtor in respect of an offense committed prior to the commencement of the CIRP and once either a resolution plan comes to be approved or when a sale of liquidation assets takes place - Section 32A in unambiguous terms specifies the approval of the resolution plan in accordance with the procedure laid down in Chapter II as the seminal event for the bar created therein coming into effect. Drawing sustenance from the same, this Court comes to the conclusion that the approval of the measure to be implemented in the liquidation process by the Adjudicating Authority must be held to constitute the trigger event for the statutory bar enshrined in Section 32A coming into effect. Petition allowed. - W.P.(C) 3261/2021, CM APPLs. 32220/2021, 41811/2021, 43360/2021, 43380/2021 - - - Dated:- 15-12-2021 - HON'BLE MR. JUSTICE YASHWANT VARMA Petitioner Through: Mr. Kirti Uppal, Sr. Adv. with Mr. Aditya Gauri, Mr. Amar V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering Act, 2002 , would retain the jurisdiction or authority to proceed against the properties of a corporate debtor once a liquidation measure has come to be approved in accordance with the provisions made in the Insolvency and Bankruptcy Code, 2016 . The Petitioner is the Liquidator appointed by the National Company Law Tribunal [the Adjudicating Authority under the IBC] to administer the affairs and the estate of M/S PSL Ltd. The petition has been preferred seeking the following reliefs: - 1) Allow the present petition; 2) Issue a Writ of Mandamus of any other appropriate Writ, restraining the Respondent from giving directions to the Liquidator for stopping EAuction Process and not to take any coercive steps against the Petitioner for performing his duties under the Code, and/or; 3) Allowing the Liquidator to conduct the process of Liquidation, including the e-auction of assets of the corporate debtor as per the Code and/or; 4) Issue a writ of Mandamus or any other appropriate Writ restraining the Respondent from passing any attachment Orders in respect of assets of the corporate debtor and/or; 5) Pass any other order(s) may kindly be passed, which this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tachment 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 emphasized 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. List on 21st May, 2021. 3. The learned Judge noted the undisputed fact that although investigation was continuing under the PMLA, no provisional order of attachment had been issued against the corporate debtor. The Court accordingly proceeded to place the impugned e-mail and communications addressed by the respondent to the Liquidator in abeyance. While permitting the petitioner to continue with the liquidation process, it further provided that the proceeds received from any sale of movable or immovable assets of the corporate debtor which may be disposed of by the Liquidator shall be placed in a separate bank account and an affidavit be filed before this Court with respect to the amounts that may be received. The Court further provided that the question of whether the movable or immovable assets and their sale during the liquidation process would be permissible under Section 32A of the IBC, would be taken up for consideration further. B. THE BACKGROUND OF THESE PROCEEDINGS 4. The records bear out that the corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , amongst the various options of sale prescribed, the sale of the corporate debtor as a going concern was the recourse adopted. It was further disclosed that the first sale notice came to be issued on 27 November 2020. However, since no concrete offers were received, a revised sale Notice of 19 March 2021 came to be published and the same has also been placed on the record. In the sale which was ultimately conducted on 09 April 2021, a bid of ₹ 425.50 crores was received from M/s Lucky Holdings Private Limited which proposed to take over the assets of the corporate debtor and continue its functioning as a going concern. Upon finding that the said bid was the highest, a Letter of Intent came to be issued in favour of M/s Lucky Holdings Private Limited on 19 April 2021. The aforesaid successful bidder is stated to have deposited ₹ 5 crores immediately upon acceptance of bid and subsequently on 23 April 2021, deposited a further sum of ₹ 30 crores. The petitioner further apprises the Court that the balance amount of ₹ 390.5 crores plus any other additional net current operational liabilities would have to be deposited by the successful bidder in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 274.60 crores alone have been provisionally attached under the PMLA since upon investigation it was found that the same would represent proceeds of crime. On 03 December 2021, this Court passed the following order:- Mr. Zoheb Hossain, learned counsel appearing for the Enforcement Directorate apprises the Court that a Provisional Attachment Order has now been issued with respect to the properties of the Corporate Debtor. Mr. Kirti Uppal, learned Senior Counsel appearing for the petitioner is instructed to state that the aforesaid order is taken under advisement and that in any case the passing thereof shall not affect the consideration of the reliefs that are sought in the present writ petition. List for further hearing on 06.12.2021. 8. As noted above, the sale conducted by the petitioner and in which M/s Lucky Holdings Private Limited was identified as the successful auction bidder, was ultimately approved by the Adjudicating Authority on 08 September 2021. The Adjudicating Authority confirmed the sale subject to the following salient conditions: - 1) Prayer B and C have been allowed in terms of our findings in para 23 hereinbefore and liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se paragraphs are extracted hereinbelow: - G. That the Insolvency and Law Committee in its Report dated 20.02.2020 has observed that 17.10. Thus, the Committee agreed that the property of a corporate debtor, when taken over by a successful resolution applicant, or when sold to a bona fide bidder in liquidation under the Code, should be protected from such enforcement action, and the new Section discussed in paragraph 17.7 should provide for the same. Here too, the Committee agreed that the protection given to the corporate debtor s assets should in no way prevent the relevant investigating authorities from taking action against the property of persons in the erstwhile management of the corporate debtor that may have been involved in the commission of such criminal offence. 17.11. By way of abundant caution, the Committee also recognized and agreed that in all such cases where the resolution plan is approved, or where the assets of the corporate debtor are sold under liquidation, such approved resolution plan or liquidation sale of the assets of the corporate debtor s assets would have to result in a change in control of the corporate debtor to a person who was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er their regime and the new management taking over the company after going through the IBC process cannot be held responsible for the acts of omission and commission of the previous management. In other words, no criminal liability can be fixed on the successful resolution applicant or its officials. 6) In so far as the corporate debtor of its assets are concerned, after the completion of the CIR process, i.e., a statutory process under the IBC, there cannot be any attachment of confiscation of the assets of the Corporate Debtor by any enforcement agencies after approval of the Resolution Plan. 7) Resolution Plan submitted by the interested Resolution Applicants are duly examined and validated by the Resolution Professional and the Committee of Creditors ( CoC ). Once the Resolution Plan is voted upon and approved by the CoC, it is submitted to the Ld. Adjudicating Authority for its approval. The Ld. Adjudicating Authority after hearing the objections, if any, and being satisfied that the Resolution Plan is in compliance with the provisions of the law, approved the Plan. The CIR Process is desired to ensure that undesirable persons do not take control of the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfiscation of its assets by any investigating agency, after approval of the Resolution Plan. In any event, by virtue of Section 238 of the I B Code , the I B Code has an overriding effect over anything inconsistent therewith in any other law. Accordingly, it is clear that subsequent promulgation of the Ordinance is merely a clarification in this respect. Therefore, it is ex facie evident that the Ordinance being clarification in nature, must be made applicable retrospectively. 12. Referring to the provisions engrafted in Section 238 of the IBC, Mr. Uppal contends that the resolution or liquidation of a corporate debtor would be subjects which must necessarily be recognized as being exclusively governed by the provisions of the IBC and consequently orders passed in connection with the aforesaid must be held to prevail over proceedings initiated or pending under any other laws for the time being in force. It has lastly been contended that the Court must ensure that the rights of bona fide creditors are not impaired or prejudiced for the misdeeds of the erstwhile management of a corporate debtor. In support of the aforesaid proposition, Mr. Uppal has also relied upon the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the procedure prescribed under the PMLA. In any case, it was contended in the absence of a formal challenge to the provisional order of attachment, nothing further remains to be considered or decided on the writ petition which has for all purposes rendered infructuous. 15. Mr. Hossain has then taken the Court in some detail through the various provisions of the IBC for the scheme and its underlying objectives being appreciated. It was principally contended that the right of the statutory authorities under PMLA cannot be hindered by the provisions of the IBC bearing in mind the fact that both statutes operate in separate and distinct fields. Mr. Hossain contends that PMLA is essentially concerned with the investigation and trial of offences relating to money laundering. It was submitted that the powers of attachment and confiscation as conferred in terms of that statute cannot be viewed as being subservient to the IBC. It was submitted that the power to attach and to move against the assets of the corporate debtor and which represent proceeds of crime stands preserved notwithstanding the commencement of liquidation proceedings against it. 16. It was then argued that till such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal proceeding against the corporate debtor would spring into operation only once an order of liquidation had come to be passed. Continuing further in this regard, it was then submitted that the moment a resolution plan comes to be approved, the Resolution Applicant steps into the shoes of the erstwhile management. Contrary to the above, it was submitted that sale of liquidation assets is not complete till such time as a sale certificate comes to be issued on payment of the entire sale consideration. It was submitted that as would be evident from the provisions made in the Liquidation Regulations, 2016 and Schedule 1 thereof, the liquidation of the assets of a corporate debtor was to proceed through various stages till the sale could be said to have fructified upon deposit of the entire sale consideration and a certificate in evidence thereof coming to be issued. It was submitted that undisputedly although the sale has been confirmed in favour of the successful bidder, the entire sale consideration is yet to be received and that consequently the bar as contemplated in Section 32A does not stand attracted. Seeking to highlight the clear and distinct fields in which the PMLA and IBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by the report, which have been mentioned as aforesaid, are present, then, the liability of the corporate debtor, for an offence committed prior to the commencement of the CIRP, will remain unaffected . 320. Coming to sub-section (2) of Section 32-A, it declares a bar against taking any action against property of the corporate debtor. This bar also contemplates the connection between the offence committed by the corporate debtor before the commencement of the CIRP and the property of the corporate debtor. This bar is conditional to the property being covered under the resolution plan. The further requirement is that a resolution plan must be approved by the adjudicating authority and, finally, the approved plan, must result in a change in control of the corporate debtor not to a person, who is already identified and described in sub-section (1). In other words, the requirements for invoking the bar against proceeding against the property of the corporate debtor in relation to an offence committed before the commencement of the CIRP, are as follows: 327. It must be remembered that the immunity is premised on various conditions being fulfilled. There must be a resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons, have come with provisions declaring each of them to have the overriding effect . 141. This court finds it difficult to accept the proposition that the jurisdiction conferred on the State by PMLA to confiscate the proceeds of crime concerns a property the value whereof is debt due or payable to the Government (Central or State) or local authority. The Government, when it exercises its power under PMLA to seek attachment leading to confiscation of proceeds of crime, does not stand as a creditor, the person alleged to be complicit in the offence of money-laundering similarly not acquiring the status of a debtor. The State is not claiming the prerogative to deprive such offender of illgotten assets so as to be perceived to be sharing the loot, not the least so as to levy tax thereupon such as to give it a colour of legitimacy or lawful earning, the idea being to take away what has been illegitimately secured by proscribed criminal activity. 145. Noticeably, the effect of Insolvency Code on PMLA was not in issue before the Supreme Court in the aforesaid case, the prime concern being the conflict arising out of claims of revenue under Income Tax Act, 1961 vis- -vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the trial of the case [Section 8]. The jurisdiction to entertain objections to attachment conferred on the appellate tribunal on one hand and, on the special court, on the other, thus, may be coordinate, to an extent. 168. An argument, however, was raised, by the appellants that the respondent herein should have approached the special court, instead of the appellate tribunal, for consideration of their respective claims. 169. In view of above-noted legislative scheme, it must be clarified that if the order confirming the attachment has attained finality, or if the order of confiscation has been passed or, further if the trial of a case for the offence under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafideor having legitimate interest will have to be inquired into and adjudicated upon only by the special court. 19. Mr. Hossain then contended that the validity of the orders passed or proceedings initiated under the PMLA cannot be scrutinized or subjected to challenge in proceedings undertaken under the IBC. In support of the aforesaid contention, reliance has been place on the following observations as made by the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de of the appellants that an Interim Resolution Professional is duty-bound under Section 20(1) to preserve the value of the property of the corporate debtor and that the word property is interpreted in Section 3(27) to include even actionable claims as well as every description of interest, present or future or vested or contingent interest arising out of or incidental to property and that therefore the Interim Resolution Professional is entitled to move the NCLT for appropriate orders, on the basis that lease is a property right and NCLT has jurisdiction under Section 60(5) to entertain any claim by the corporate debtor. 20. Mr. Hossain has also referred to a decision of the NCLAT as rendered in Varrsana Ispat Limited vs. Deputy Director, Directorate of Enforcement 2019 SCC OnLine NCLAT 236:- 12. From the aforesaid provisions, it is clear that the Prevention of Money-Laundering Act, 2002 relates to proceeds of crime and the offence relates to money laundering resulting confiscation of property derived from, or involved in, money laundering and for matters connected therewith or incidental thereto. Thus, as the Prevention of Money Laundering Act, 2002 or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsels for parties had proceeded to address submissions. The order of attachment admittedly came to be made only on 2 December 2021 just a day before the matter was posted for further hearing. It was only upon the passing of the order of attachment that Mr. Hossain contended that the writ petition is liable to be dismissed as having become infructuous and that in any case nothing further survived for consideration in the absence of a formal challenge being laid to the order of provisional attachment. Additionally, it was contended on behalf of the respondent that even if the order of attachment was to be assailed, it cannot be questioned directly by way of a writ petition since adequate alternative statutory remedies exist and the petitioner must be held liable to invoke the same if the order of attachment was chosen to be challenged. 23. Since the petitioner has chosen not to lay any formal challenge to the order of attachment, the question of the writ petition being dismissed on the ground of alternative remedy clearly does not arise. That only leaves the Court to consider whether it is otherwise liable to be dismissed as having become infructuous. 24. Bearing in mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of an order of provisional order of attachment could be stalled. It may be noted that at that stage it was candidly admitted by learned counsel for the respondent that an objection to an interim release may not sustain in the absence of a provisional attachment order having been served. For the sake of completeness of the record, it also becomes pertinent to note that initially the respondent appeared to labour under the impression that the interim order of 17 March 2021 restrained them from proceeding further under the PMLA. During the course of the initial hearing of the writ petition, this impression was dispelled upon the Court observing and drawing the attention of Mr. Hossain, learned counsel, to the terms of that order and pointing out that no such restraint had been entered by the learned Judge. It is only thereafter that the respondent appears to have proceeded to pass the provisional order of attachment. Notwithstanding the above and for reasons aforenoted, this Court is of the considered opinion that the writ petition is not liable to be dismissed on account of the preliminary objection as urged on behalf of the respondent. 26. Having dealt with the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be subject to the rights of secured creditors. It is submitted by learned senior counsel that on acquiring an interest in the property, any directions for attachment of property under the PMLA will be valid and operative subject to the satisfaction of the claims of such third parties. He further submits that the claim of the Directorate on that third party s property will be restricted to such part of the value of the property as in excess of the claim of the third party. In support of his submission learned senior counsel relied on the following observations as entered by the learned Judge in Axis Bank:- FORFEITURE (CONFISCATION): CERTAIN OTHER LAWS 94. As was brought out at the hearing, similar provisions for attachment and forfeiture of property are also made in certain other enactments including Unlawful Activities (Prevention) Act, 1967 ( UAPA , for short), Narcotic Drugs and Psychotropic Substances Act, 1985 ( the NDPS Act , for short), the Prohibition of Benami Property Transactions Act, 2002 ( the Benami Property Act , for short) and the Fugitive Economic Offenders Act, 2018 ( the Fugitive Economic Offenders Act , for short). It would be of advantage to have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion being restricted to take over by the government of illicit gains of crime. (v). If the person accused of (or charged with) the offence of money-laundering objects to the attachment, his claim being that the property attached was not acquired or obtained (directly or indirectly) from criminal activity, the burden of proving facts in support of such claim is to be discharged by him. (vi). The objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and Insolvency Code, the latter three legislations do not prevail over the former. (vii). The PMLA, by virtue of section 71, has the overriding effect over other existing laws in the matter of dealing with money-laundering and proceeds of crime relating thereto. (viii). The PMLA, RDBA, SARFAESI Act and Insolvency 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 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainted asset and the transactions indulged in were legitimate at the time of acquisition of such interest. (xiv). If it is shown by cogent evidence by the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property) claiming that it had acquired the same at a time anterior to the commission of the proscribed 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 encumbrance of such third party subsists, the attachment under PMLA being valid or 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. (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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have participated in the said auction and made his bid. Moreover, even after the auction the sale was confirmed by the High Court only on 30-7-2003, and any objection to the sale could have been filed prior to that date. However, in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete. 28. If it is held that every confirmed sale can be set aside the result would be that no auction-sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount. It could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction-sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction-sale is advertised in well-known newspapers having wide circulation, all eligible persons can come and bid for the same, and they are themselves to be blamed if they do not come forward to bid at the time of the auction. They cannot ordinarily la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed it did, to make an order, confirming the sale and it is upon such confirmation that the sale becomes, and became, absolute in terms of Order 21 Rule 92. After the sale has become absolute, a certificate is required to be granted by the court to the purchaser, termed as certificate of sale in Order 21 Rule 94. Such certificate bears the date as on which the sale became absolute. It is on the sale becoming absolute that the property sold vests in the purchaser. The vesting of the property is thus made to relate back to the date of sale as required under Section 65 CPC. 11. Order 21 Rule 95 providing for the procedure for delivery of property in occupation of the judgment-debtor etc., requires an application being made by the purchaser for delivery of possession of property in respect of which a certificate has been granted under Rule 94 of Order 21. There is nothing in Rule 95 to make it incumbent for the purchaser to file the certificate along with the application. On the sale becoming absolute, it is obligatory on the court though, to issue the certificate. That may, for any reason, get delayed. Whether there be failure to issue the certificate or delay of action on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd prejudice to the resolution applicant. Ms. Dhir has also placed reliance on the principles enunciated in Manish Kumar to submit that the action of the respondent is in clear violation of the protection accorded to the resolution applicant by Section 32A(2). 34. In order to appreciate the rival submissions which have been noticed above, it would be apposite to firstly notice the scheme and the relevant provisions of the IBC and the PMLA. This would also enable the Court to answer the question whether one of the two competing statutes must be recognised to prevail over the other and, if so, in which situations and eventualities. H. SCHEME OF THE IBC 35. As is manifest from a reading of the preamble of the IBC, the aforesaid enactment is guided by the aim to consolidate and amend all laws relating to reorganization and insolvency resolution of corporate persons. The resolution process commences upon the submission of an application either by a financial creditor whether acting together or with others, an operational creditor or the corporate debtor in accordance with the provisions falling in Chapter II of the IBC. Section 7 of the IBC empowers a financial creditor eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. 38. The resolution plan essentially must make provision for the payment of debts of the corporate debtor owed to financial and operational creditors, workmen and others specified in Section 53 of the IBC. The resolution plans which may be received by the RP are then placed before the Committee of Creditors for their consideration. In terms of Sub-Section (4) of Section 30, a resolution plan may be approved if it is passed by a vote of not less than sixty percent of the voting share of the financial creditors in a meeting of the Committee of Creditors. The resolution plan as approved by the Committee of the Creditors is then placed before the Adjudicating Authority who upon being satisfied that the same meets the requirements as placed by Section 30(2) of the IBC, approve the same. Upon such a resolution plan as passed by the Committee of Creditors coming to be approved by the Adjudicating Authority, it binds the corporate debtor, its employees, members and other creditors. 39. By virtue of Amending Act 26 of 2019, a significant amendment came to be introduced in sub-Section (1) of Section 31 and in terms thereof, it now stands clarified that the plan as approved by the Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor s liability has ceased under this sub-section. (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not- (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation .- For the purposes of this sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... played by IBC in arresting the growth of NPAs, it is expected that effective measures within the ambit of IBC would be taken to realize better results from the process. The Committee note that out of claims of around ₹ 8.4 lakh crore, the realizable amount is around ₹ 3.57 lakh crore i.e. around 43% from the IBC process so far. Also, the average time taken for resolution has come down to 394 days. The Committee hope that the recovery percentage increases significantly in the near future and the time taken for resolution conforms to the timeline prescribed in the Code. The Committee would like to reiterate its recommendation made in previous reports about increasing the number of benches in National Company Law Tribunal (NCLT) and establishing e-courts for faster disposal of cases and speedy resolution. The Committee understand that a draft Bill on Cross Border Insolvency is in the pipeline. These types of cases have already resulted in uncertain recoveries for creditors. The Committee would like this Bill to be introduced in Parliament as soon as possible in order to further strengthen the insolvency framework. 3.7. Clause 10 reads as under: After section 32 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not- (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation .-For the purposes of this sub-section, it is hereby clarified that,- (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; (ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority filed in relation to the criminal offence. The Committee agree that this provision is essential to provide the Resolution Applicant(s) a fair chance to revive the unit which otherwise would directly go into liquidation, which may not be as beneficial to the economy. The Committee believe that this ring-fencing is essential to achieve revival or resolution without imposing additional liabilities on the Resolution Applicant, arising from malafide acts of the previous promoter or management. 42. The SOA of Act 1 of 2020 also alludes to the need to ensure that the successful bidder is kept immune from the liabilities attached to the commission of an offense by the corporate debtor prior to the commencement of the CIRP under certain circumstances. The SOA in more explicit terms alludes to Section 32A when it records that it is intended to provide immunity against prosecution of the corporate debtor and action against the property of the corporate debtor and the successful resolution applicant subject to fulfilment of certain conditions. 43. In Ghanashyam Mishra, the Supreme Court also took note of the statement of the Hon ble Finance Minister in the Rajya Sabha on 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof for an offense committed prior to the commencement of the CIRP. A close reading of Section 32A (1) and (2) establishes that the legislature in its wisdom has erected two unfaltering barriers. It firstly prescribes that the offense, which may entail either prosecution of the debtor or proceedings against its properties, must be one which was committed prior to the commencement of the CIRP. Secondly the cessation of liability for the offense committed is to occur the moment when a resolution is approved by the Adjudicating Authority or upon sale of liquidation assets. The provision in unequivocal terms terminates the prospect of prosecution or coercive action against properties on the happening of either of two critical events: - (a) the date from which a resolution plan comes to be approved by the Adjudicating Authority, or (b) the sale of liquidation assets. 45. The constitutional validity of 32A came to be challenged before the Supreme Court in Manish Kumar. The Court while evaluating the merits of the challenge that was raised took note of the following contemporaneous material which was placed before it in order to discern the legislative policy and intent underly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the property of the corporate debtor in the CIRP and liquidation process, respectively. Thus, in most cases, the provisions of the Code effectuate a change in control of the corporate debtor that results in a clean break of the corporate debtor from its erstwhile management. However, the legal form of the corporate debtor continues in the CIRP, and may be preserved in the resolution plan. Additionally, while the property of the corporate debtor may also change hands upon resolution or liquidation, such property also continues to exist, either as property of the corporate debtor, or in the hands of the purchaser. 17.2. However, even after commencement of CIRP or after its successful resolution or liquidation, the corporate debtor, along with its property, would be susceptible to investigations or proceedings related to criminal offences committed by it prior to the commencement of a CIRP, leading to the imposition of certain liabilities and restrictions on the corporate debtor and its properties even after they were lawfully acquired by a resolution applicant or a successful bidder, respectively. LIABILITY WHERE A RESOLUTION PLAN HAS BEEN APPROVED 17.3. It was bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Given this, the Committee felt that a distinction must be drawn between the corporate debtor which may have committed offences under the control of its previous management, prior to the CIRP, and the corporate debtor that is resolved, and taken over by an unconnected resolution applicant. While the corporate debtor's actions prior to the commencement of the CIRP must be investigated and penalised, the liability must be affixed only upon those who were responsible for the corporate debtor's actions in this period. However, the new management of the corporate debtor, which has nothing to do with such past offences, should not be penalised for the actions of the erstwhile management of the corporate debtor, unless they themselves were involved in the commission of the offence, or were related parties, promoters or other persons in management and control of the corporate debtor at the time of or any time following the commission of the offence, and could acquire the corporate debtor, notwithstanding the prohibition under Section 29-A. 17.7. Thus, the Committee agreed that a new section should be inserted to provide that where the corporate debtor is successfully resolved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution plan is approved, or where the assets of the corporate debtor are sold under liquidation, such approved resolution plan or liquidation sale of the assets of the corporate debtor's assets would have to result in a change in control of the corporate debtor to a person who was not a related party of the corporate debtor at the time of commission of the offence, and was not involved in the commission of such criminal offence along with the corporate debtor. COOPERATION IN INVESTIGATION 17.12. While the Committee felt that the corporate debtor and bona fide purchasers of the corporate debtor or its property should not be held liable for offences committed prior to the commencement of insolvency, the Committee agreed that the corporate debtor and any person who may be required to provide assistance under the applicable law should continue to provide assistance and cooperation to the authorities investigating an offence committed prior to the commencement of the CIRP. Consequently, the Committee recommended the new section should provide for such continued cooperation and assistance. . 316.4. The Additional Solicitor General also places reliance on the Sixth R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious promoter or management. 46. Proceeding then to rule upon the validity of the provision itself the Supreme Court held: - 326. We are of the clear view that no case whatsoever is made out to seek invalidation of Section 32-A. The boundaries of this Court's jurisdiction are clear. The wisdom of the legislation is not open to judicial review. Having regard to the object of the Code, the experience of the working of the Code, the interests of all stakeholders including most importantly the imperative need to attract resolution applicants who would not shy away from offering reasonable and fair value as part of the resolution plan if the legislature thought that immunity be granted to the corporate debtor as also its property, it hardly furnishes a ground for this Court to interfere. The provision is carefully thought out. It is not as if the wrongdoers are allowed to get away. They remain liable. The extinguishment of the criminal liability of the corporate debtor is apparently important to the new management to make a clean break with the past and start on a clean slate. We must also not overlook the principle that the impugned provision is part of an economic mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e very often needs delicate balancing of conflicting interests. As to what priority must be accorded to which interest must remain a legislative value judgment and if seemingly the legislature in its pursuit of the greater good appears to jettison the interests of some, it cannot unless it strikingly ill squares with some constitutional mandate, suffer invalidation. 330. There is no basis at all to impugn the section on the ground that it violates Articles 19, 21 or 300-A. 47. It is equally important to recollect the doctrine of a clean or a fresh slate as was originally propounded by the Supreme Court in Committee of Creditors of Essar Steel Ltd Vs. Satish Kumar Gupta (2020) 8 SCC 531 in the following terms: - 107. For the same reason, the impugned Nclat judgment [ Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388] in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has recognised a pressing and imperative need to insulate the implementation of measures for restructuring, revival or liquidation of a corporate debtor from the vagaries of litigation or prosecution once the process of resolution or liquidation reaches the stage of the adjudicating authority approving the course of action to be finally adopted in relation to the corporate debtor. The Supreme Court in Manish Kumar also took note of the sufficient safeguards and the prerequisite conditions that stand attached to the cessation of liabilities to ultimately come to the conclusion that the Legislature had undertaken a well-considered balancing exercise to ensure that larger public interest was subserved. J. LIQUIDATION UNDER THE IBC 52. IBC essentially seeks to put in place a unitary platform on which all matters relating to insolvency resolution of a corporate debtor may be decided. The legislation is a measure forged out of the experience of liquidation proceedings dragging on for years resulting in further losses to the creditors of the corporate debtor and deterioration in the value of the liquidation estate or even its dissipation. It was accordingly thought expedient to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y person or body corporate, or to sell the same in parcels in such manner as may be specified; Provided that the Liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant. 54. The Liquidator in terms of the provisions engrafted in Section 36 is obliged to form a corpus comprising of various assets of the corporate debtor which constitutes the liquidation estate . The Liquidator is then by law mandated to collect and consolidate all claims of creditors that may be received pursuant to the public announcement of its liquidation. The functions of the Liquidator and the various steps that he is obliged to take are more elaborately spelt out in the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 . Regulation 5 spells out the initial steps that the Liquidator is supposed to take upon being appointed as under:- 5. Reporting. (1) The Liquidator shall prepare and submit: (a) a preliminary report; (b) an asset memorandum; (c) progress report(s); (d) sale report(s); (e) minutes of consulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectively; (d) the assets in parcels; (e) the corporate debtor as a going concern; or (f) the business(s) of the corporate debtor as a going concern: Provided that where an asset is subject to security interest, it shall not be sold under any of the clauses (a) to (f) unless the security interest therein has been relinquished to the liquidation estate. 57. Regulations 32(A) and 33 of the Liquidation Regulations, 2016 which deal with the mode of sale of the corporate debtor read as follows: - 32A. Sale as a going concern- (1) Where the committee of creditors has recommended sale under clause (e) or (f) of regulation 32 or where the Liquidator is of the opinion that sale under clause (e) or (f) of regulation 32 shall maximise the value of the corporate debtor, he shall endeavour to first sell under the said clauses. (2) For the purpose of sale under sub-regulation (1), the group of assets and liabilities of the corporate debtor, as identified by the committee of creditors under sub-regulation (2) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 shall be so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) The Liquidator shall distribute the proceeds from realization within 22[ninety days] from the receipt of the amount to the stakeholders. (3) The insolvency resolution process costs, if any, and the liquidation costs shall be deducted before such distribution is made. 59. For the purposes of considering the issues which arise in the present petition, it would be pertinent to note the provisions made in Regulation 44 which reads thus:- 44. Completion of liquidation. (1) The Liquidator shall liquidate the corporate debtor within a period of one year from the liquidation commencement date, notwithstanding pendency of any application for avoidance of transactions under Chapter III of Part II of the Code, before the Adjudicating Authority or any action thereof: Provided that where the sale is attempted under sub-regulation (1) of regulation 32A, the liquidation process may take an additional period up to ninety days. (2) If the Liquidator fails to liquidate the corporate debtor within 24[one year], he shall make an application to the Adjudicating Authority to continue such liquidation, along with a report explaining why the liquidation has not been comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Intimation about decision of acceptance/ rejection of claim Within 7 days of admission or rejection of claim T + 67 9 Reg.31(2) Filing the list of stakeholders and announcement to public Within 45 days from the last date of receipt of claims T + 75 10 Section 42 Appeal by a creditor against the decision of the Liquidator Within 14 days of receipt of such decision T + 81 11 Reg. 13 Preliminary report to the AA Within 75 days of LCD T + 75 12 Reg. 34 Asset memorandum Within 75 days of LCD T + 75 13 Reg. 15 (1), (2), (3), (4) and (5), and 36 Submission of progress reports to AA; Asset Sale report to be enclosed with every Progress Report, if sales are made First progress report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow:- SCHEDULE I MODE OF SALE (Under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016) 1. AUCTION (1) Where an asset is to be sold through auction, a Liquidator shall do so the in the manner specified herein. (2) The Liquidator shall prepare a marketing strategy, with the help of marketing professionals, if required, for sale of the asset. The strategy may include- (a) releasing advertisements; (b) preparing information sheets for the asset; (c) preparing a notice of sale; and (d) liaising with agents. (3) The Liquidator shall prepare terms and conditions of sale, including reserve price, earnest money deposit as well as pre-bid qualifications, if any. (4) The reserve price shall be the value of the asset arrived at in accordance with regulation 35. (4A) Where an auction fails at the reserve price, the Liquidator may reduce the reserve price by up to twenty-five percent of such value to conduct subsequent auction. (4B) Where an auction fails at reduced price under clause (4A), the reserve price in subsequent auctions may be further reduced by not more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld through private sale, a Liquidator shall conduct the sale in the manner specified herein (2) The Liquidator shall prepare a strategy to approach interested buyers for assets to be sold by private sale. (3) Private sale may be conducted through directly liaising with potential buyers or their agents, through retail shops, or through any other means that is likely to maximize the realizations from the sale of assets. (4) The sale shall stand completed in accordance with the terms of sale. (5) Thereafter, the assets shall be delivered to the purchaser, on receipt of full consideration for the assets, in the manner specified in the terms of sale. K. STATUTORY PROVISIONS UNDER PMLA 62. Having traversed the IBC and the salient provisions of that code, it would now be pertinent to advert to the relevant provisions of the PMLA. 63. The PMLA essentially represents the commitment of the Union to frame a comprehensive legislation to deal with the pernicious crime of money laundering as flowing from the Political Declaration and Global Programme of Action as adopted by the General Assembly of the United Nations on 23 February 1990, the Political Declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely:- (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever; (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever. 67. The punishment for the offence of money laundering is then specified in Section 4 which provides that a person who commits that offence shall be punishable with rigorous imprisonment for a term of not less than three years which may extend to seven years and shall also be liable to the imposition of a fine. Section 5 of PMLA incorporates provisions relating to attachment, adjudication and confiscation. That provision is in the following terms: - 5. Attachment of property involved in money-laundering. - [(1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under [sub-section (3)] of section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation .-For the purposes of this sub-section, person interested , in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. 68. As is evident from a reading of the aforesaid provision, the competent authority, if it has reason to believe that any person is in possession of proceeds of crime, and that such proceeds are likely to be concealed, trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority shall, after- (a) considering the reply, if any, to the notice issued under sub section(1); (b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf; and (c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. (3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under subsection (1) of section 5 or retention of property or [record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property] or record shall- (a) continue during investigation for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or release of the property, as the case may be, involved in the offence of money-laundering after having regard to the material before it. (8) Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering: Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering: Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed. 70. In terms of sub-Section (3) of Section 8, the adjudicating authority is obliged in law to confirm any provisional order of attachment that may have been made under Section 5(1) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in force. L. ISSUE OF PRIMACY 73. The discussion on the issue of the overriding effect of the two competing statutes as urged by respective parties, must be prefaced with the acknowledgment of the fact that both the PMLA as well as IBC employ non obstante clauses by virtue of Sections 71 and 238 respectively. Both statutes, admittedly, are legislations promulgated by Parliament in 2005 and 2016. Both enactments have undergone recent amendments with PMLA seeing the passing of Finance (No.2) Act, 2019 and the IBC which was amended by virtue of Act 1 of 2020 pursuant to which Section 32A came to be included in the statute book. It, therefore, cannot possibly be presumed that the legislature was oblivious of the reach and ambit of the two enactments. The submissions canvassed by respective sides on this score must be evaluated firstly on the well settled precept of the Court identifying the core and fundamental purport and object of the statutes. This principle obliges the Court to examine and decipher the intent and objective of the statute, the essential subject of legislation and the field of activities that it seeks to regulate. While discharging that burden, especially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uth Africa (2 years). The World Bank's Ease of Doing Business Index, 2015, ranked India as country number 135 out of 190 countries on the ease of resolving insolvency based on various indicia. 75. The principal objectives of the IBC were lucidly explained by the Supreme Court in Swiss Ribbons (P) Ltd. Vs. Union of India (2019) 4 SCC 17 as follows: - 27. As is discernible, the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent decisions of the Supreme Court and which would even otherwise be relevant for deciding the question that falls for our consideration here. The Court deems it apposite to extract the following parts of the decision of the Supreme Court in Manish Kumar and more particularly paragraph 237 of the report: - 237. The object of the law is clear. A radical departure was contemplated from the erstwhile regime, which was essentially contained in the Sick Industrial Companies (Special Provisions) Act, 1985, and which manifested a deep malaise, which impacted the economy itself. To put it shortly, the procedures involved under the Act, simply meant procrastination in matters, where speed and dynamic decisions were the crying need of the hour. The value of the assets of the company in distress, was wasted away both by the inexorable and swift passage of time and tardy rate at which the forums responded to the problem of financial distress. The Code was an imperative need for the nation to try and catch up with the rest of the world, be it in the matter of ease of doing business, elevating the rate of recovery of loans, maximisation of the assets of ailing concerns and also, balancing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision delivered by the Appellate Tribunal under the PMLA which had held that the rights of banks and financial institutions as recognised under SARFESI, RDB or the IBC would rank superior and that the PMLA would have to take a back seat. While a number of other important aspects pertaining to the provisions of the PMLA have also been considered, we are, for the purposes of the present matter, concerned only insofar as the said decision deals with the question posited above. 79. Dealing with the interplay of the statutes concerned, the learned Judge held: - 139. From the above discussion, it is clear that the objects and reasons of enactment of the four legislations are distinct, each operating in different field. There is no overlap. While RDBA has been enacted to provide for speedier remedy for banks and financial institutions to recover their dues, SARFAESI Act (with added chapter on registration of secured creditor) aims at facilitating the secured creditors to expeditiously and effectively enforce their security interest. In each case, the amount to be recovered is due to the claimant i.e. the banks or the financial institutions or the secured creditor, as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former. There is no inconsistency. The purpose, the text and context are different. This court thus rejects the argument of prevalence of the said laws over PMLA. 80. Dealing with the effect of an order of attachment on the rights of creditors or persons in whose favour interests in property may have been created bona fide, the learned Judge proceeded to hold as follows: - 148. In view of the conclusions reached as above, rejecting the argument of prevalence of RDBA, SARFAESI Act and Insolvency Code over PMLA, the said laws (or similar other laws, some referred to above) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other, with regard to 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 rendering the same proceeds of crime , within the mischief of PMLA. The PMLA, declares, by virtue of Section 71, that it has over-riding effect over other existing laws, such provision containing non-obstante clause with regard to inconsistency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law, being treated as void (Section 9). 162. But, in case an otherwise untainted asset (i.e. deemed tainted property) is targeted by the enforcement authority for attachment under the second or third part of the definition of proceeds of crime , for the reason that such asset is equivalent in value to the tainted asset that was derived or obtained by criminal activity but which cannot be traced, the third party having a legitimate interest may approach the adjudicating authority to seek its release by showing that the interest in such property was acquired bona fide and for lawful (and adequate) consideration, there being no intent, while acquiring such interest or charge, to defeat or frustrate the law, neither the said property nor the person claiming such interest having any connection with or being privy to the offence of money-laundering. 163. Having regard to the above scheme of the law in PMLA, it is clear that if a bonafide third party claimant had acquired interest in the property which is being subjected to attachment at a time anterior to the commission of the criminal activity, the product whereof is suspected as proceeds of crime, the acquisition of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate debtors, adoption of means for their revival, securing the interests of creditors and for adoption of steps for effective and timely resolution of corporate insolvency. The PMLA, on the other hand, is a statute fundamentally concerned with trying offenses relating to money laundering, following the proceeds of crime and for confiscation of properties obtained in the course of commission of those offenses or connected therewith. It sets up an investigative and adjudicatory mechanism in respect of offenses committed, attachment of tainted properties and other related matters. It sets up Special Courts for trial of offenses and to bring the guilty to book. 85. Viewed in that backdrop, it is evident that the two statutes essentially operate over distinct subjects and subserve separate legislative aims and policies. While the authorities under the IBC are concerned with timely resolution of debts of a corporate debtor, those under the PMLA are concerned with the criminality attached to the offense of money laundering and to move towards confiscation of properties that may be acquired by commission of offenses specified therein. The authorities under the aforementioned two st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the IBC. According to learned counsel, a comprehensive reading of the aforesaid Chapters in the IBC together with the Liquidation Regulations, 2016 would establish that a sale is complete only when a certificate in respect thereof comes to be issued upon payment of the entire consideration. According to learned counsel, since the sale is not liable to be viewed as having reached fruition till such time as that certificate is issued, the right of the respondent to invoke Section 5 of the PMLA stands secured. According to Mr. Hossain, the expression sale of liquidation assets as occurring in Section 32A(2) must be understood and interpreted accordingly. M. THE RESOLUTION AND LIQUIDATION CAUSEWAYS 89. There cannot be any dispute with respect to the contention of Mr. Hossain that resolution and liquidation constitute two separate and distinct tracks under the IBC. While the former is governed by the provisions enshrined in Chapter II, the process of liquidation is to be initiated and completed in accordance with Chapter III. The process of resolution envisages the identification of a resolution applicant whose proposal is found viable to resurrect the corporate debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r continuation of suits and legal proceeding involving the corporate debtor, the statutory injunct against the transfer, alienation or disposal of assets of the corporate debtor and the action to foreclose, recover or enforce a security interest, ceasing to operate. Of some significance for our purpose is sub section (4) of Section 31 which mandates that the resolution applicant shall, within a period of 1 year or within such extended period as may be permissible in law, obtain all approvals as may be independently required in respect of the various measures forming part of the resolution plan. The import of Section 31(4) shall be elaborated in the subsequent parts of this decision. 91. The conduct of the CIRP is further detailed in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The RP in terms of Regulation 36 of the Resolution Regulations, 2016 upon his appointment is required to firstly draw up an Information Memorandum containing particulars such as the assets and liabilities of the corporate debtor, its financial statements, its creditors and the number of workers and employees. Expressions of Interest a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the Adjudicating Authority; and (c) liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are made by the financial creditors who voted in favour of the resolution plan. (1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor. (2) A resolution plan shall provide: (a) the term of the plan and its implementation schedule; (b) the management and control of the business of the corporate debtor during its term; and (c) adequate means for supervising its implementation. (3) A resolution plan shall contain details of the resolution applicant and other connected persons to enable the committee to assess the credibility of such applicant and other connected persons to take a prudent decision while considering the resolution plan for its approval. Explanation : For the purposes of this sub-regulation,- (i) details shall include the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case, what needs to be appreciated and highlighted is that under both sets of regulations noticed above, the measures to be adopted under Regulation 32 or 37 in order to liquidate the debts of the corporate entity and to revive it if possible, cannot be accomplished or completed on the mere approval of the resolution plan or acceptance of one of the methods permissible under those Regulations. The sale of the whole or part of the assets, the restructuring of the corporate debtor, the acquisition or transfer of its shares, its merger or consolidation are neither envisaged nor mandated to be measures which must stand completed or accomplished on the date when the resolution plan is approved. This necessarily since the resolution plan is the repository of the steps or measures that are accepted and recommended by the Committee of Creditors and then placed for the approval of the Adjudicating Authority. It is only once that resolution plan stands approved that the question of further steps for implementation of the mode adopted would logically arise. This is further buttressed from the provisions contained in Section 31(4) which makes provision for a situation where the mode of res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on stands engrafted in the IBC. It becomes apposite to note that Order XXI Rule 92 of the Civil Procedure Code unequivocally spells out and mandates that the sale shall become absolute upon its confirmation. The decisions cited by Mr. Malhotra in this respect are also not consequently being elaborately dealt with for the purposes of answering this particular issue. 96. This Court is of the opinion that the answer to determining when the bar under Section 32A would come into play must be answered bearing in mind the ethos of Section 32A and upon an interpretation of the provisions of the IBC and the Regulations framed thereunder. As is evident from a careful reading of Section 32A(2), the Legislature in its wisdom has provided that no action shall be taken against the properties of the corporate debtor in respect of an offense committed prior to the commencement of the CIRP and once either a resolution plan comes to be approved or when a sale of liquidation assets takes place. The objective underlying the introduction of this provision has been eloquently explained by the Supreme Court in Manish Kumar. The intent of the mischief sought to be addressed is clearly borne out from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this aspect when it held that the creation or cessation of an offense is ultimately an issue of legislative policy. The Parliament upon due consideration deemed it appropriate and expedient to infuse the clean slate doctrine bearing in mind the larger economic realities of today. Regard must also be had to the fact the cessation of prosecution stands restricted to the corporate debtor and not the individuals in charge of its affairs. The PMLA as well as the IBC for that matter stand steadfast against its dilution against persons who were in control of the corporate debtor in respect of offenses committed prior to the commencement of the CIRP. It was this delicate balance struck by the Legislature which met with approval in Manish Kumar. 98. As was observed earlier, Section 32A in unambiguous terms specifies the approval of the resolution plan in accordance with the procedure laid down in Chapter II as the seminal event for the bar created therein coming into effect. Drawing sustenance from the same, this Court comes to the conclusion that the approval of the measure to be implemented in the liquidation process by the Adjudicating Authority must be held to constitute the trigg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot strike a position of not cooperating with the competent authorities under the PMLA. Regard must be had to the fact that upon appointment, the Liquidator steps into the shoes of the erstwhile management and is the custodian of the properties and all relevant papers and documents relating to the corporate debtor. That material and any other information that may be gathered and collated by the Liquidator may be of significance and import to the investigation being undertaken under the PMLA. Viewed in that background, it would be necessary to recognize the obligation of the Liquidator to provide such material and other information that may be required. The Liquidator cannot strike the position of being immune from answering to the requests for information that may be directed towards him by the investigating authorities under the PMLA. P. SUMMATION 101. Upon a conspectus of the aforesaid discussion, the Court records the following conclusions: - A. The Court notes that the reliefs as framed in the writ petition essentially seek a restraint against the respondent from interfering in the liquidation process which had been set in motion. That challenge cannot stand eclipsed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within strict and regimented time lines. E. The PMLA on the other hand is a statute fundamentally concerned with trying offenses relating to money laundering, following the proceeds of crime and for confiscation of properties obtained in the course of commission of those offenses or connected therewith. It sets up an investigative and adjudicatory mechanism in respect of offenses committed, attachment of tainted properties and other related matters. F. Viewed in that backdrop, it is evident that the two statutes essentially operate over distinct subjects and subserve separate legislative aims and policies. While the authorities under the IBC are concerned with timely resolution of debts of a corporate debtor, those under the PMLA are concerned with the criminality attached to the offense of money laundering and to move towards confiscation of properties that may be acquired by commission of offenses specified therein. The authorities under the aforementioned two statutes must be accorded sufficient leeway to discharge their obligations and duties within the spheres of the two statutes. G. In a case where in exercise of their respective powers a conflict does arise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the corporate debtor once a resolution plan stands approved or in case of a sale of liquidation assets. K. A close reading of Section 32A (1) and (2) establishes that the legislature in its wisdom has erected two unfaltering barriers. It firstly prescribes that the offense, which may entail either prosecution of the debtor or proceedings against its properties, must be one which was committed prior to the commencement of the CIRP. Secondly the cessation of liability for the offense committed is to occur the moment a resolution is approved by the Adjudicating Authority or upon sale of liquidation assets. L. The principal consideration which appears to have weighed was the imperative need to ensure that neither the resolution nor the liquidation process once set into motion and fructifying and resulting in a particular mode of resolution coming to be duly accepted and approved, comes to be bogged down or clouded by unforeseen or unexpected claims or events. The IBC essentially envisages the process of resolution or liquidation to move forward unhindered. M. The Legislature in its wisdom has recognised a pressing and imperative need to insulate the implementation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature which met approval in Manish Kumar. R. Section 32A in unambiguous terms specifies the approval of the resolution plan in accordance with the procedure laid down in Chapter II as the seminal event for the bar created therein coming into effect. Drawing sustenance from the same, this Court comes to the conclusion that the approval of the measure to be implemented in the liquidation process by the Adjudicating Authority must be held to constitute the trigger event for the statutory bar enshrined in Section 32A coming into effect. It must consequently be held that the power to attach as conferred by Section 5 of the PMLA would cease to be exercisable once any one of the measures specified in Regulation 32 of the Liquidation Regulations 2016 comes to be adopted and approved by the Adjudicating Authority. S. The expression sale of liquidation assets must be construed accordingly. The power otherwise vested in the respondent under the PMLA to provisionally attach or move against the properties of the corporate debtor would stand foreclosed once the Adjudicating Authority comes to approve the mode selected in the course of liquidation. To this extent and upon the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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