Calcutta High Court (Appellete Side)
Ramsarup Industries Limited And Others vs Union Of India And Another on 26 August, 2022
Ct No.09
26.08.2022
WPA No. 18938 of 2022
Ramsarup Industries Limited and others
Vs.
Union of India and another
Mr. Ratnanko Banerji,
Mr. Joy Saha,
Mr. Jishnu Chowdhury,
Mr. S. Mitra,
Ms. Sristi Barman Roy,
Ms. Vaibhavi Pandey,
Mr. K. Tibarewal
.... for the petitioners
Mr. Shailendra Kr. Mishra
.... for the Union of India
Mr. Phiroze Edulji,
Ms. Anamika Pandey
.... for the Enforcement Directorate
1. The moot question that has arisen in the present
writ petition, insofar as the grant of interim order
is concerned, is the mutual interplay between two
statutes - the Prevention of Money-Laundering
Act, 2002 (for short, "the PMLA") and the
Insolvency and the Bankruptcy Code, 2016 (for the
sake of brevity, "the IBC"). The petitioner no.2
along with others took out a resolution application
as contemplated in the IBC in respect of the
corporate debtor, the petitioner no.1-Company.
2
Ultimately, the said resolution applicants
succeeded and a resolution plan was approved.
2. The corporate insolvency resolution process
commenced on January 8, 2018. The resolution
plan was approved by the National Company Law
Tribunal (NCLT) on September 4, 2019. The
National Company Law Appellate Tribunal (NCLAT)
affirmed such approval on March 4, 2021. A
Special Leave Petition preferred against such
approval was dismissed on May 4, 2021.
3. The respondent-Authorities have passed an order
of provisional attachment on February 16, 2022 (Annexure P-7 to the writ petition), which has been challenged by the writ petitioners.
4. The learned Senior Advocate appearing for the petitioners contends that Section 238 of the IBC confers overriding effect to the provisions of the IBC over other laws.
5. Section 32-A of the IBC protects the corporate debtor from any liability for an offence committed prior to the commencement of the Corporate Insolvency Resolution Process (for short, 'the CIRP'), from prosecution for such offence from the date of approval of the Resolution Plan as well as from any action being taken against the property of the 3 corporate debtor in relation to similar offences after the approval of the Resolution Plan.
6. It is contended that Section 32-A of the IBC also commences with a non obstante clause, giving an overriding effect to the said Section over any other law and other provisions contained in the IBC.
7. On the other hand, it is further argued by the learned Senior Advocate for the petitioners, the PMLA was given effect from the year 2002, which precedes the enactment of the IBC, the latter having come into force in the year 2016. The legislature, it is argued, ought to be presumed to have been fully aware of the provisions of the PMLA at the time of enactment of the IBC. Hence the provisions of attachment under Section of the PMLA are circumscribed by the IBC, in particular Section 32-A thereof.
8. The learned Senior Advocate places reliance on Section 2(1)(u) of the PMLA, which defines "proceeds of crime" as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property.
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9. Section 5 contemplates attachment of property involved in money laundering in case of any person who is in possession of any proceeds of crime and in respect of situations where such proceeds of crime are a likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceeding relating to confiscation of such proceeds of crime.
10. As such, it is argued that the entire proceeding under the PMLA against the corporate debtor, that is, the petitioner no.1 has been rendered infructuous upon approval of the Resolution Plan by the NCLT, subsequently affirmed by the Appellate Authority as well as the Supreme Court.
11. Learned counsel appearing for the respondent-
Authorities places reliance on Section 71 of the PMLA, which lends overriding effect to the provisions of the said Act notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
12. It is argued that Section 5(4) of the PMLA specifically stipulates that nothing in the Section shall prevent the present interest in the enjoyment of the immovable property attached 5 under sub-section (1) of Section 5 from such enjoyment. As such, the petitioners are not prevented in any manner from their enjoyment of the said property due to the attachment order.
13. Secondly, it is argued that the writ petition itself is not maintainable in view of the availability of an equally efficacious alternative remedy by way of an appeal under Section 26 of the PMLA before the Appellate Tribunal, after which a further appeal is provided to this Court against such order of the Appellate Tribunal under Section 42 of the PMLA. Hence, it is argued that in the event this Court interferes at this stage under Article 226 of the Constitution of India, the parties shall lose one forum. It is further contended that a self-imposed restriction ought to deter this Court from interfering in the matter under Article 226 of the Constitution in view of such availability of appeal.
14. It is further contended that, subsequent to the attachment order impugned in the present writ petition, a final order of attachment has been passed in respect of the property under Section 8(3) of the PMLA. Since the provisional order of 6 attachment has merged with such final order, in the absence of any challenge to the final order, the present writ petition against the provisional order of attachment does not lie, it is argued.
15. Learned counsel for the respondents seeks to impress upon this Court that the scheme of Section 8 of the PMLA is self-sufficient and is not circumscribed by Section 32-A of the IBC.
16. Learned counsel for the respondents cites, in support of his contentions, the recent Three- Judge Bench decision of the Supreme Court in Vijay Madanlal Choudhary and Others v. Union of India and Others, reported at 2022 SCC OnLine SC 929.
17. Upon considering the submissions of the parties, the interrelation between the PMLA and the IBC, both Central Acts framed by the Parliament, becomes clear.
18. It must be taken note of that the IBC came into effect in the year 2016, that is, 14 years subsequent to the enactment of the PMLA in 2002. As rightly contended on behalf of the petitioners, a presumption operates in favour of the legislature being well-aware and conscious of prevailing legislation at the time of enacting 7 a statute. Hence, vis-à-vis the PMLA, the IBC is a subsequent statute and, even at the first blush, the non obstante clauses in the IBC ought to prevail over that of the PMLA.
19. That apart, Section 71 of the PMLA provides that the provisions of the Act shall have effect notwithstanding anything inconsistent therewiith contained in any other law "for the time being in force". It is noteworthy that the IBC was not in force at the juncture of enactment of the PMLA but was promulgated subsequently.
20. That apart, as compared to the bald non obstante clause in Section 71 of the PMLA, Section 238 of the IBC gives overriding effect to the same, notwithstanding anything consistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law at the time of enactment of the IBC in 2016.
21. Insofar as Section 32-A of the IBC is concerned, sub-section (1) thereof provides that the same would operate notwithstanding anything to the contrary contained in the IBC or any other law for the time being in force, giving precedence to 8 the said provision even over other Sections of the IBC, apart from other prevailing statutes.
22. Moreover, it has been held repeatedly by the Supreme Court on several occasions that upon a Resolution Plan being approved, further claims against the corporate debtor get extinguished.
23. Inasmuch as the maintainability of the writ petition is concerned, the attachment order contemplated in Section 5 of the PMLA takes within its fold a provisional attachment of the proceeds of the crime in general. The property which falls within the category of "proceeds of crime" is defined in Section 2(1)(u) of the PMLA. Again, Section 8 of the PMLA provides for adjudication upon receipt of a complaint under Section 5(5) or in other cases where the adjudicating authority has reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of crime.
24. In the present case, however, in view of the operation of Section 32-A(2)of the IBC, no action can be taken against the property of a corporate debtor in relation to an offence committed prior to the commencement of the 9 CIRP of the corporate debtor, where such property is covered under a Resolution Plan approved by the Adjudicating Authority under Section 31 of the IBC, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets to an entity who was not a promoter or in the management or control of the corporate debtor or is related to such person.
25. The yardsticks of Section 32-A squarely apply to the present case, since the petitioner no.2, the successful resolution applicant, cannot be held liable, as envisaged under Section 32-A of the IBC, for any offence committed prior to the commencement of the CIRP.
26. In the present case, the allegations levelled against the corporate debtor (petitioner no.1) admittedly happened much prior to the commencement of the CIRP and, as such, fall within the specified exclusion contemplated in Section 32-A. As such, it cannot but be observed that the provisional order of attachment dated February 16, 2022 and all consequential actions, including any order which might have been passed under Section 10 8(3) of the PMLA, are prima facie vitiated and de hors the lawful authority of the respondents.
27. Insofar as the cited judgment is concerned, the issues which fell for consideration before the Supreme Court in Vijay Madanlal Choudhary (supra) were the validity and interpretation of certain provisions of the PMLA and the procedure followed by the Enforcement Directorate while inquiring into/investigating offences under the PMLA. The said issues are not germane in the present case, since the validity of the PMLA and/or the procedure followed thereunder has not been questioned at all. The moot consideration which arises in the present case, as iterated in the first sentence of this order, is the mutual interplay between the PMLA of 2002 and the IBC of 2016.
28. The Supreme Court, in paragraph nos. 304 to 307 of Vijay M. Choudhary (supra), which were specifically relied on by the Respondent/Enforcement Directorate in the instant lis, deal with the interpretation of Sections 5 and 8 of the PMLA, which is not a relevant consideration in the instant case, since the vires of those Sections are not challenged. 11
29. Paragraph no. 310 of the said cited judgment, also relied on here by the ED, deals with the primacy of certain provisions of the PMLA over some Sections of the Criminal Procedure Code, 1973. Section 65 of the PMLA was discussed. It specifically refers to the 1973 Code.
30. Again, Section 4 (2) of the 1973 Code was taken into account by the Supreme Court in paragraph no. 310, which pertains to offences under other laws than the Indian Penal Code which are required to be investigated, inquired into, tried, and otherwise dealt with according to the same provisions but subject to any enactment for the time being in force regulating the manner or place of investigating, etc.
31. Apart from the fact that the said mitigating provisions are absent in the IBC (rather, the IBC contains blanket non obstante clauses), the 1973 Code, as opposed to the IBC of 2016, was already in force when the PMLA saw the light of day. Hence, the rigours of Section 71 of the PMLA might, arguably, grant supremacy to the said Act over the 1973 Code.
32. In the case at hand, however, the comparison is between the PMLA of 2002 and the subsequent IBC of 2016. Hence, the analogy and 12 precedentiary value of Vijay Madanlal Choudhary (supra) are entirely inapplicable to the instant case.
33. Moreover, Section 5 of the 1973 Code was considered by the Supreme Court. It envisages that nothing in the 1973 Code shall, in the absence of a specific provision to the contrary, affect any special or local law for the time being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force.
34. Thus, it cannot but be said that the reliance placed by the ED on the said decision is misplaced in the present context.
35. Hence, the writ petition is required to be heard on merits on the above questions.
36. The respondents are, thus, directed to file their Affidavits-in-Opposition within three weeks from date. Reply, if any, shall be filed within one week thereafter.
37. The matter shall be enlisted for hearing before the regular Bench having determination one week after the reopening of this court subsequent to the upcoming Annual Vacation. 13
38. The operation of the provisional attachment order dated February 16, 2022 (Annexure P-7 of the writ petition) and all consequential actions shall remain stayed and the respondents are restrained by an order of injunction from giving effect to the impugned order of provisional attachment dated February 16, 2022 and/or any further consequential action, if taken subsequent thereto, both till November 30, 2022 or until further order, whichever is earlier.
(Sabyasachi Bhattacharyya, J.)