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IBC overides Money Laundering Act - No attachment under PMLA under Insolvency Process

In the matter of SREI Infrastructure Finance Limited vs Sterling SEZ and Infrastructure Limited, M.A 1280/2018 in C.P. 405/ 2018, before the NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, the Tribunal admitted a Section 7 petition against the Corporate Debtor on 16.07.2018 and appointed the Applicant herein as the Interim Resolution Professional who was subsequently confirmed as Resolution Professional.

The office of the Enforcement Directorate provisionally attached the assets belonging to the Corporate Debtor vide order/notice dated 29.05.2018 and corrigendum dated 14.06.2018 as part of certain proceedings initiated by the office of the Enforcement Directorate against the Corporate Debtor. On 05.09.2018, the Applicant intimated the Directorate of Enforcement about the initiation of CIRP and imposition of moratorium as mentioned in this Tribunal’s order. The Applicant also requested the Directorate of Enforcement to withdraw the attachment, if any, on the properties and assets of the company as the IRP is required to take charge and custody of the same under the provisions of the Code. The Applicant submitted that unless the attachment is withdrawn and properties are set free, he cannot proceed with the CIRP process. The Enforcement Directorate rejected the claim of the Applicant stating that the properties provisionally attached constitute the value of such proceeds of crime under the PMLA is a special act and have overriding effects in terms of section 71 of the PMLA. The main object of Insolvency and Bankruptcy Code, 2016 and PMLA are different from each other. The Code being a civil law cannot be given precedence over PMLA, 2002 and hence NCLT lacks jurisdiction in the matter. Therefore the moratorium declared by the NCLT adjudicating authority is not applicable to the criminal case initiated under the PMLA by the 
enforcement directorate and to the criminal case initiated by the CBI.

The Ld. Tribunal referring to the order of the Appellate Tribunal for PMLA in the case of Bank of India v. The Deputy Directorate of Enforcement of Mumbai, observed that the proceedings before Adjudicating Authority under PMLA in respect of attached properties is a civil proceedings. Based on the said order as well as other judgments and Section 14(1) & 63 of the IBC code, the Ld. NCLT decided that the attachment order under PMLA Act is a nullity and non-est in law and hence it will not have any binding force.

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