Delhi HC- Power under PMLA to attach assets stops once liquidation process under IBC starts 

The Delhi High Court held that the authorities who have the power to attach assets under the Prevention of Money Laundering Act (PMLA) would stop being exercisable once the liquidation process under the Insolvency and Bankruptcy Code (IBC) is set in motion. 

Justice Yashwant Verma said that the powers bestowed with the Directorate of Enforcement (ED) under the PMLA to attach properties of a corporate debtor would stand foreclosed once the Authority under the Insolvency and Bankruptcy Code comes to approve the mode selected in the court of liquidation.

The National Company Law Tribunal was hearing a petition filed by a liquidator appointed by the NCLT to administer the affairs of a company named M/S PSL Ltd. The petitioner informed that he had to approach the Authority as summons were issued to him by the ED. 

The Petitioner argued that the jurisdiction of the ED under the PMLA is mandated to cease once a resolution plan is accepted by the Authority or the sale of liquidation assets begins. He further argued that Section 32A of IBC mandates that no action shall be taken against the properties of the corporate debtor once an RP is approved or the corporate debtor undergoes liquidation.

The Court said that "a close reading of Sec 32A(1) and (2) demonstrated that the legislature had pitched two unfaltering barricades prescribing that offenses which entail proceedings against properties must have been committed prior to commencement of the CIRP and secondly, the cessation of liability for the offense committed is to happen the moment a resolution is allowed by Adjudicating Authority".

However, Justice Verma clarified that the cessation of prosecution is not for the individuals who were in charge of its affairs.

The Court held that the liquidator is authorized to proceed with the liquidation in accordance with the IBC.

Author: Papiha Ghoshal