The Allahabad Bench of the National Company Law Tribunal (NCLT) has sought the Centre’s views on the validity of the provisional attachment order under the Prevention of Money Laundering Act (PMLA) and whether the Insolvency and Bankruptcy Code (IBC) would have an overriding effect on the order or not.
This was on an application filed by Anil Goel, who was appointed by the NCLT as liquidator for Rotomac Global Private Limited.
Mr. Goel had sought a direction to the Directorate of Enforcement for de-attachment and restoration of properties lying in the name of the firm and its directors.
The properties were attached by a provisional Attachment Order dated May 28, 2018.
These properties are a part of the liquidation estate.
The provisional attachment order by the Directorate of Enforcement under PMLA violated Section 33(5) read with Section 238 of IBC, 2016, the liquidator said in his application.
Provisions of Section 33(5) of IBC, 2016, state that when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor (the company under the insolvency proceedings).
The liquidator also cited a recent judgment of the Supreme Court that the the Insolvency and Bankruptcy Code (IBC) would override income tax rules on claims, in the PR Commissioner of Income Tax-6, New Delhi, vs Monnet Ispat & Energy Limited case.
“Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the code will override anything inconsistent contained in any other enactment, including income tax,” the SC had said in that case.
The liquidator also cited some high court judgments that laid down that the attachment proceedings under PMLA were civil in nature.
However, the ED argued that the IBC could not override the provisions of the PMLA as the scope and objective of both statutes were different.
The proceedings under the provisions of PMLA 2002 were distinct and criminal in nature and different from Insolvency and Bankruptcy Code, 2016 (hereinafter referred as IBC).
The purpose and scope of both Acts were altogether different, the Directorate of Enforcement contended.
Rotomac was sanctioned non-fund based and fund based limits of ₹2,129.00 crore under the consortium of seven banks.
Presently, the outstanding amount in the books of accounts of different banks is ₹2,919.39 crore, according to the petition.
The Directorate of Enforcement had attached assets worth ₹177 crore of Rotomac and its directors after preliminary investigation.
The NCLT has sought the clarification from the Centre and also asked the liquidator to provide details of properties on which the bank had relinquished security interests, within 15 days from the date of order.
The tribunal then posted the case for hearing on October 3.