Dash Exports Private Limited vs Directorate Of Enforcement
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 13.10.2026
Pronounced on: 06.11.2026
Uploaded on: 06.11.2026
# CNR No. DLHC011085312025
+ MISC. APPEAL(PMLA) 4/2026
DASH EXPORTS PRIVATE LIMITED .....Appellant
Through: Mr.Sanjay Jain, Sr. Adv. with
Mr.Abhijit Mittal, Mr.Anukalp
Jain, Ms.Harshita Sukhija,
Ms.Rishika Agrawal,
Ms.Ankita Bhattacharjee and
Ms.Niharika Sinha, Advs.
versus
DIRECTORATE OF ENFORCEMENT .....Respondent
Through: Mr.Rajat Nair, Adv.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
HON'BLE MR. JUSTICE ARUN BHARDWAJ
J U D G M E N T
NAVIN CHAWLA, J.
1. The present appeal has been filed under Section 42 of the
Prevention of Money Laundering Act, 2002 (hereinafter referred as,
‘PMLA’), challenging the order dated 12.08.2025 passed by the
learned Appellate Tribunal under SAFEMA (hereinafter referred to as
‘the Tribunal’) in Appeal No. 5922/DLI/2023, praying for the
following reliefs:
―(a) Set aside and quash the Impugned
Judgment dated 12.08.2025 passed by the Ld.
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Appellate Tribunal under the Prevention of
Money Laundering Act, 2002, in Appeal No.
5922/DLI/2023;
(b) Direct the Respondent to forthwith
release the Subject Property from attachment
and to restore all consequential rights, title,
and interests of the Appellant free from any
encumbrance arising out of the said
attachment proceedings;‖
2. The present appeal raises an important question of law with
regard to the effect of approval of a resolution plan under Section 31
of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to
as, ‘IBC’) on the property provisionally attached under Section 5 of
the PMLA.
BRIEF BACKGROUND OF THE FACTS:
3. To give a brief background of the facts in which the present
appeal arises, the Corporate Insolvency Resolution Process
(hereinafter referred to as ‘CIRP’) was initiated for Dash Exports
Private Limited, the appellant herein, by the learned National
Company Law Tribunal, New Delhi (hereinafter referred to as,
‘NCLT’), vide Order dated 26.02.2020.
4. Asteroid Shelter Homes Private Limited (hereinafter referred to
as ‘Asteroid’) submitted a resolution plan which was approved by the
Committee of Creditors (hereinafter referred to as ‘CoC’) of the
appellant by 99.22% votes in favour, on 27.11.2020.
5. Accordingly, an application was filed by Asteroid before the
learned NCLT under Section 31 of the IBC for seeking approval of the
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resolution plan.
6. The learned NCLT reserved the order on such application on
26.03.2021; however, before the order could be pronounced on
25.08.2021, the respondent, by Provisional Attachment Order No.
05/2021 dated 25.08.2021, provisionally attached the property at 228-
P, Village Habibpur, Pargana District, Tehsil & District Gautam
Buddh Nagar, UP belonging to the appellant.
7. The learned NCLT, by its order dated 29.09.2021, after
recording its satisfaction that Asteroid had complied with Section
30(2) of the IBC and also did not stand disqualified under Section 29A
of the IBC, approved the resolution plan under Section 31 of the IBC.
We quote from the Order as under:
―13. In view of the above discussion that the
resolution plan, as approved by the CoC, is in
accordance with the sub-section 2 of Section
30 read with Section 31 of the Code and as the
Resolution Applicant is not disqualified under
Section 29A of the Code; we hereby approve
the Resolution Plan under sub-section (1) of
Section 31 of the Code.‖
8. The Adjudicating Authority confirmed the Provisional
Attachment Order by its order dated 26.05.2022 passed in Original
Complaint (OC) No. 1526/2021 in PAO No. 05/2021 dated
25.08.2021 in ECIR/DLZO-1/12/2021.
9. Aggrieved by the said order, the appellant filed a Writ Petition,
being W.P.(C) 10771/2022, titled Dash Exports Private Limited &
Anr. v. Union of India & Ors. , challenging the same. The said Writ
Petition was disposed of by this Court vide its Judgment dated
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13.04.2023, observing and directing as under:
―9. As can be seen from the above order,
the stand of the Bank was that it acquired
knowledge of the Provisional Attachment
th
Order (‗PAO‘) dated 25 August, 2021 only
th
on 14 October, 2021. Further, the CIRP had
th
been initiated on 26 February, 2020, when
the moratorium order was passed and finally,
the resolution plan was approved by the
th
creditors on 27 November, 2020. The
resolution plan was also approved by the
th
NCLT on 29 September, 2021.
10. The Court is informed that no appeals
have been filed challenging the final approval
of the resolution plan dated 29th September,
2021. In effect, the Petitioner No.2 has stepped
into the management of the Petitioner No.1
company. The Petitioners had deposited a sum
of Rs.28 crores, which was kept at the disposal
of the ‗Committee of Creditors‘ and has also
been distributed amongst the various creditors
and lenders.
11. The issue, that has obviously arisen
today, is that despite the payment of Rs.28
crores, the title deeds of the land continued to
remain with the Bank in view of the fact that
the attachment by the ED took place
subsequent to the commencement of CIRP.
Ideally, the Bank ought to have informed the
Petitioner no.2 of the PAO, when it acquired
knowledge in October 2021, as the amounts
were deposited by the Petitioner no.2 only in
March 2022, which for inexplicable reasons, it
did not.
12. In order to resolve this stalemate, a
suggestion was put forth as recorded in
th
paragraph 9 of the order dated 24 March
2023 extracted above. Today, Mr. Zoheb
Hossain, ld. Counsel for the ED submits that
the ED is agreeable, in the unique facts and
circumstances of this case, for the deposit of
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Rs.3.01 crores, which is the value which has
been ascribed to the property by the ED. He
has placed an email received from the
concerned official of the ED, before the Court.
In order to avoid any further complications
and conflict of interest between the various
stakeholders, it is deemed appropriate to pass
directions securing the interest of the
Petitioners, the bank as also the ED.
13. Considering the ED‘s instructions that
have been communicated to the Court, and the
Petitioners‘ willingness to deposit a sum of Rs.
3.01 crores, in the peculiar facts and
circumstances of the present case, the
following directions are issued:
(1) The Petitioners shall be
permitted to challenge the PAO order dated
th
25 August 2021 and the confirmation order
th
dated 26 May 2022 before the PMLA
Appellate Tribunal, within four weeks.
(2) The Petitioner No.2 shall within
four weeks, deposit a sum of Rs.3.01 crores by
means of an FDR in favour of the ED, which
shall be on an auto renewal mode and subject
to orders, which would now be passed by the
PMLA Appellate Tribunal.
(3) Subject to the above deposit
being made and the confirmation of the said
deposit being given to the SBI Bank, all the
title deeds, which are lying deposited with the
Bank, shall be released to the Petitioners
within one week.
(4) The appeal, if filed within 4
weeks before the PMLA Tribunal, shall not be
dismissed on the ground of limitation
considering the fact that the present writ
petition has been pending before this Court.
14. The legal issues raised in this petition
have not been adjudicated upon by this Court.
Mr. Zoheb Hossain, ld. Counsel shall inform
the Petitioners of the name of the official with
whom the Petitioners shall coordinate for the
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submission of the FDR of Rs.3.01 crores.‖
10. In terms of the liberty granted by the above judgment, the
appellant filed an appeal under Section 26 of the PMLA before the
learned Tribunal, being FPA-PMLA-5922/DLI/2023, on which the
impugned order has been passed by the learned Tribunal.
11. Before the learned Tribunal and even before us, it is the case of
the appellant that with the approval of the resolution plan by the
learned NCLT and in terms of Section 32A(2) of the IBC, the property
of the appellant would become free of the provisional attachment, as
in terms of the resolution plan, there is change in the control of the
appellant (corporate debtor) to Asteroid, which is neither alleged to be
a promoter or in the management or control of the corporate debtor or
a related party of the appellant, nor against which any allegation of
abetment or conspiracy of having committed the offence or a final
report or a complaint has been filed.
12. The learned Tribunal, by its impugned order, however, has
dismissed the appeal filed by the appellant by, inter alia , observing
that Section 32A of the IBC would come into effect subject to the
satisfaction of many conditions, including that such attachment of
property has been passed post the approval of the resolution plan. The
learned Tribunal was of the opinion that the approval of the resolution
plan does not affect a provisional attachment order passed prior to
such approval. The learned Tribunal further held that unless there is a
finding from the Special Court that the person taking control of the
corporate debtor has not abetted or conspired in the commission of
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offence and that the corporate debtor is discharged, the Provisional
Attachment Order shall continue to operate.
13. Aggrieved by the impugned order, the appellant has filed the
present appeal.
SUBMISSIONS OF THE LEARNED COUNSEL FOR THE
PETITIONER:
14. The learned counsel for the petitioner, placing reliance on the
judgment of the Supreme Court in Manish Kumar v. Union of India
& Anr. , 2021 (5) SCC 1, as also on the judgment of the High Court of
Bombay in Shiv Charan & Ors. v. Adjudicating Authority under the
Prevention of Money Laundering Act, 2002, Department of
Revenue, Ministry of Finance, New Delhi & Anr. , 2024 SCC OnLine
Bom 701, and the Order dated 16.07.2026 passed by the Supreme
Court in Civil Appeal Nos. 9692-9693/2024, titled Deputy Director,
Directorate of Enforcement vs. Shiv Charan & Ors ., submits that the
above finding of the learned Tribunal is erroneous and contrary to
Section 32A (2) of the IBC and cannot be sustained.
15. He submits that once the resolution plan has been approved and
the person taking over the control of the corporate debtor satisfies the
condition of Section 29A of the IBC and is not accused of having
abetted or conspired in the commission of the offence by the corporate
debtor, any action taken against the property of the corporate debtor in
relation to the offence committed prior to the commencement of the
CIRP shall abate.
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16. He further submits that pursuant to the approval of the
resolution plan of Asteroid by the learned NCLT, Asteroid has been
declared the Successful Resolution Applicant and is unrelated to the
erstwhile management of the appellant. Consequently, in terms of
Section 32A of the IBC, Asteroid would not be liable to be prosecuted
for any offence committed by the corporate debtor prior to the
commencement of the CIRP.
17. He submits that the respondent has neither alleged that
Asteroid, being the new management of the appellant, is related to the
erstwhile management in any manner, nor attributed any role to
Asteroid as an abettor in the prosecution complaint filed before the
learned Special Judge.
18. He submits that Asteroid had acquired the assets of the
corporate debtor, that is, the appellant herein, and had paid Rs. 28
Crores as consideration towards the approved resolution plan. He
submits that the State Bank of India, being the lead creditor with
whom the title deeds of the property attached herein were placed as
collateral, had issued a no dues confirmation for the said property to
Asteroid.
SUBMISSIONS OF THE LEARNED COUNSEL FOR THE
RESPONDENT:
19. On the other hand, the learned counsel for the respondent
submits that the protection contemplated under Section 32A of
the IBC gets attracted only when the attachment order is passed post
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the approval of the resolution plan. He submits that Section 32A of
the IBC does not provide that an attachment order lawfully passed
under the PMLA would stand nullified retrospectively.
20. He submits that PMLA and IBC operate in distinct fields,
having distinct objects, and the property of the corporate debtor which
stands attached as proceeds of crime, cannot be treated at par with an
unencumbered asset of the corporate debtor available for insolvency
resolution.
21. In support of his submission, he places reliance on the
judgments in Deputy Director, Directorate of Enforcement v. Axis
Bank & Ors. , 2019 SCC OnLine Del 7854; Varrsana Ispat Ltd. v.
Deputy Director, Directorate of Enforcement , 2019 SCC OnLine
NCLAT 236; P. Mohanraj & Ors. v. Shah Brothers Ispat (P) Ltd. ,
(2021) 6 SCC 258 and S. Rajendran & Ors. v. Deputy Commissioner
of Income Tax (Benami Prohibition) , (2026) 5 SCC 563.
22. He submits that PMLA and IBC being distinct, the power of
attachment under PMLA does not fall within the ken of Section
14(1)(a) of the IBC, and the NCLT being a creature of statute,
exercising specifically conferred jurisdiction, cannot be elevated to the
status of a superior Court exercising judicial review over
governmental or statutory action falling within the realm of the public
law. In support, he places reliance on the judgments of Rajiv
Chakraborty, Resolution Professional of EIEL v. Directorate of
Enforcement , 2022 SCC OnLine Del 3703 and Embassy Property
Developments (P) Ltd. v. State of Karnataka &Ors. , (2020) 13 SCC
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308.
23. He submits that Section 32A of the IBC is conditional and is
triggered only upon approval of a resolution plan or completion of a
liquidation sale to an unconnected third party. In the absence of any
statutory trigger, the immunity contained therein does not arise. In
support, he places reliance on the judgments of the Supreme Court in
Manish Kumar (supra); S. Rajendran (supra); Rajiv Chakraborty
(supra) and Nitin Jain, Liquidator of PSL Limited v. Enforcement
Directorate , 2021 SCC OnLine Del 5281.
24. He submits that, therefore, the present appeal deserves to be
dismissed.
ANALYSIS AND FINDINGS:
25. We have considered the submissions made by the learned
counsels for the parties.
26. As noted hereinabove, the issue to be determined by this Court
is of the effect of the approval of the resolution plan under Section 31
of the IBC on the provisional attachment order passed against the
property of a corporate debtor before the approval of such resolution
plan. The answer to this question is on the interpretation of Section
32A of the IBC, which we quote hereinbelow:-
― Section 32A: Liability for prior offences,
etc.
(1) Notwithstanding anything to the
contrary contained in this Code or any other
law for the time being in force, the liability of
a corporate debtor for an offence committed
prior to the commencement of the corporate
insolvency resolution process shall cease, and
the corporate debtor shall not be prosecuted
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for such an offence from the date the
resolution plan has been approved by the
Adjudicating Authority under section 31, if the
resolution plan results in the change in the
management or control of the corporate
debtor to a person who was not—
(a) a promoter or in the management or
control of the corporate debtor or a related
party of such a person; or
(b) 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:
Provided that if a prosecution had been
instituted during the corporate insolvency
resolution process against such corporate
debtor, it shall stand discharged from the date
of approval of the resolution plan subject to
requirements of this sub-section having been
fulfilled:
Provided further that every person who was a
―designated partner‖ as defined in clause (j)
of section 2 of the Limited Liability
Partnership Act, 2008, or an ―officer who is in
default‖, as defined in clause (60) of section
2 of the Companies Act, 2013, or was in any
manner incharge of, or responsible to the
corporate debtor for the conduct of its
business or associated with the corporate
debtor in any manner and who was directly or
indirectly involved in the commission of such
offence as per the report submitted or
complaint filed by the investigating authority,
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
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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-
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
process under this Code and fulfils the
requirements specified in this section, against
whom such an action may be taken under such
law as may be applicable.
(3) Subject to the provisions contained in
sub-sections (1) and (2), and notwithstanding
the immunity given in this section, the
corporate debtor and any person who may be
required to provide assistance under such law
as may be applicable to such corporate debtor
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or person, shall extend all assistance and co-
operation to any authority investigating an
offence committed prior to the commencement
of the corporate insolvency resolution
process.]‖
27. In Manish Kumar (supra), the Supreme Court considered in
detail the object of introduction of Section 32A in the IBC by way of
the Amendment Act 1 of 2020 with effect from 28.12.2019, and held
as under:-
― Is Section 32A unconstitutional?
313. Section 32A is challenged by allottees
in Writ Petition No.75 of 2020. The petitioners
in Writ Petition No.27 of 2020 and Writ
Petition No. 579 of 2020, who are creditors
(money lenders) also challenge Section 32A.
314. The petitioners contend that immunity
granted to the corporate debtors and its assets
acquired from the proceeds of crimes and any
criminal liability arising from the offences of
the erstwhile management for the offences
committed prior to initiation of CIRP and
approval of the resolution plan by the
adjudicating authority further jeopardizes the
interest of the allottees/creditors. It will cause
huge losses which is sought to be prevented
under the provisions of the Prevention of
Money Laundering Act, 2002.
315. Section 32A is arbitrary, ultra vires and
violative of Article 300A and Articles 14, 19
and 21.
316. The stand of the Union, on the other
hand, is as follows:
316.1. Section 32A provides immunity to the
corporate debtor and its property when there
is approval of the resolution plan resulting in
the change of management of control of
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corporate debtor. This is subject to the
successful resolution applicant being not
involved in the commission of the offence.
Statutory basis has now given under Section
32A to the law laid down by this Court in the
decision of Essar Steel India Ltd. Committee
of Creditors. This Court took the view therein
that successful resolution applicant cannot be
faced with undecided claim after its resolution
plan has been accepted. The object is to
ensure that a successful resolution applicant
starts of on a fresh slate.
316.2. The relevant extracts of the Statement of
Objects and Reasons relied upon by the Union
of India are as follows:
―Statement of Objects and Reasons
*
2. A need was felt to give the highest
priority in repayment to last mile funding to
corporate debtors to prevent insolvency, in
case the company goes into corporate
insolvency resolution process or liquidation, to
prevent potential abuse of the Code by certain
classes of financial creditors, 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, and in order to fill the critical gaps
in the corporate insolvency 69 framework, it
has become necessary to amend certain
provisions of the Insolvency and Bankruptcy
Code, 2016.
3. The Insolvency and Bankruptcy Code
(Second Amendment) Bill, 2019, inter alia,
provides for the following, namely:—
*
(vii) to insert a new section 32A so as to
provide that the liability of a corporate debtor
for an offence committed prior to the
commencement of the corporate insolvency
resolution process shall cease under certain
circumstances.‖
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316.3. Reliance is also placed on the report of
the Insolvency Law Committee. Relevant
extracts which have been relied on are as
follows:
― PREFACE
v. Liability of corporate debtor for offences
committed prior to initiation of CIRP- in order
to address the issue of liability that fall upon
the resolution applicant for offences
committed prior to commencement of CIRP, it
has been recommended that a new section
should be inserted which provides that when
the corporate debtor is successfully resolved,
it should not be held liable for any offence
committed prior to the commencement of the
CIRP, unless the successful resolution
applicant was also involved in the commission
of the offence, or was a related party,
promoter or other person in management and
control of the corporate debtor at the time of
or any time following the commission of the
offence. Notwithstanding this, those persons
who were responsible to the corporate debtor
for the conduct of its business at the time of the
commission of such offence, should continue to
be liable for such an offence, vicariously or 70
otherwise.
The newly inserted section as mentioned above
shall also include protection of property from
enforcement action when taken by successful
resolution applicant. Also, it was
recommended that cooperation and assistance
to authorities investigating the offences
committed prior to commencement of CIRP
shall be continued by any person who is
required to provide such assistance under the
applicable law.
Chapter 1: RECOMMENDATIONS
REGARDING THE CORPORATE
INSOLVENCY RESOLUTION PROCESS
*
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17. LIABILITY OF CORPORATE DEBTOR
FOR OFFENCES COMMITTED PRIOR
TO INITIATION OF CIRP *
17.1. Section 17 of the Code provides that on
commencement of the CIRP, the powers of
management of the corporate debtor vest with
the interim resolution professional. Further,
the powers of the Board of Directors or
partners of the corporate debtor stand
suspended, and are to be exercised by the
interim resolution professional. Thereafter,
Section 29A, read with Section 35(1)(f), places
restrictions on related parties of the corporate
debtor from proposing a resolution plan and
purchasing 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 71
properties even after they were lawfully
acquired by a resolution applicant or a
successful bidder, respectively.
Liability where a Resolution Plan has been
approved
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17.3. It was brought to the Committee that
this had created apprehension amongst
potential resolution applicants, who did not
want to take on the liability for any offences
committed prior to commencement of CIRP. In
one case, JSW Steel had specifically sought
certain reliefs and concessions, within an
annexure to the resolution plan it had
submitted for approval of the Adjudicating
Authority. Without relief from imposition of
the such liability, the Committee noted that in
the long run, potential resolution applicants
could be disincentivised from proposing a
resolution plan. The Committee was also
concerned that resolution plans could be
priced lower on an average, even where the
corporate debtor did not commit any offence
and was not subject to investigation, due to
adverse selection by resolution applicants who
might be apprehensive that they might be held
liable for offences that they have not been able
to detect due to information asymmetry. Thus,
the threat of liability falling on bona fide
persons who acquire the legal entity, could
substantially lower the chances of its
successful takeover by potential resolution
applicants.
17.4. This could have substantially hampered
the Code‘s goal of value maximisation, and
lowered recoveries to creditors, including
financial institutions who take recourse to the
Code for resolution of the NPAs on their
balance sheet. At the same time, the
Committee was also conscious that authorities
are duty bound to penalize the commission of
any offence, especially in cases involving
substantial public interest. Thus, two
competing concerns need to be balanced.
17.5 The Committee noted that the
proceedings under the Code, which are
designed to ensure maximization of value,
generally require transfer of the corporate
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debtor to bona fide persons. In fact, Section
29A casts a wide net that disallows any
undesirable person, related party or defaulting
entity from acquiring a corporate debtor.
Further, the Code provides for an open
process, in which transfers either require
approval of the Adjudicating Authority, or can
be challenged before it. Thus, the CIRP
typically culminates in a change of control to
72 resolution applicants who are unrelated to
the old management of the corporate debtor
and step in to resolve the insolvency of the
corporate debtor following the approval of a
resolution plan by the Adjudicating Authority.
17.6. 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 29A.
17.7. Thus, the Committee agreed that a new
Section should be inserted to provide that
where the corporate debtor is successfully
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resolved, it should not be held liable for any
offence committed prior to the commencement
of the CIRP, unless the successful resolution
applicant was also involved in the commission
of the offence, or was a related party,
promoter or other person in management and
control of the corporate debtor at the time of
or any time following the commission of the
offence.
17.8. Notwithstanding this, those persons who
were responsible to the corporate debtor for
the conduct of its business at the time of the
commission of such offence, should continue to
be liable for such an offence, vicariously or
otherwise, regardless of the fact that the
corporate debtor‘s liability has ceased.
Actions against the Property of the Corporate
Debtor
17.9. The Committee also noted that in
furtherance of a criminal investigation and
prosecution, the property of a company, which
continues to exist after the resolution or
liquidation of a corporate debtor, may have
been liable to be attached, seized or
confiscated. For instance, the property of a
corporate debtor may have been at risk of
attachment, seizure or confiscation where
there was any suspicion that such property
was derived out of proceeds of crime in an
offence of money laundering. It was felt that
taking actions against such property, after it is
acquired by a resolution applicant, or a bidder
in liquidation, could be contrary to the interest
of value maximisation of the corporate
debtor‘s assets, by substantially reducing the
chances of finding a willing resolution
applicant or bidder in liquidation, or lowering
the price of bids, as discussed above.
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
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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 recognised 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 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.‖
(emphasis supplied)
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316.4. The Additional Solicitor General also
places reliance on the Sixth Report of the
Standing Committee of Lok Sabha made in
March, 2020. The relevant portion according
to the learned ASG are as follows:
― 3.8 ―The stakeholders on the above
clause furnished the following suggestion:-
‗Though the Bill gives immunity
to the corporate debtor (company as a legal
entity) from prior offences, the individuals
responsible for committing such offences on
behalf of the debtor will still be held liable.
The question is whether the debtor should be
absolved of all kinds of prior offences with
such a blanket immunity.‘
3.9. The Secretary, Ministry of
Corporate Affairs during the sitting held on
15th January, 2020 remarked:-
‗If the bidder, who is coming and
participating under the court supervised
competitive process, does not get security and
is not indemnified, there may be a problem.‘
3.10. Further, the Ministry furnished the
following comment on the above suggestion:
‗…this provision would only apply
where the CIRP culminates in a change in
control to a 75 completely unconnected
resolution applicant. As such, a resolution
applicant has nothing to do with the
commission of any pre-CIRP offence
whatsoever, and the corporate debtor is now
fundamentally not the same entity as the one
that committed the crime.‘
3.11. The Committee are in agreement with
the intent of this amendment to safeguard the
position of the Resolution Applicant(s) by ring-
fencing them from prosecution and liabilities
under offences committed by erstwhile
promoters etc. The Committee understand the
need for treating the company or the
Corporate Debtor as a cleansed entity for
cases which result in change in the
management or control of the corporate
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debtor to a person who was not a promotor or
in the management control of the corporate
debtor or related party of such person, or to a
person against whom there are material
evidence and pending complaint or report by
the investigating 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.‖
316.5. Apart from the fact that it is intended to
give a clean break to the successful resolution
applicant, it is pointed out that it is hedged in
with ample safeguards to avoid any
exploitation. The same are as follows:
―106. Section 32A was inserted to give a
clean break to successful resolution applicants
from the erstwhile management by shielding
them and immunizing them from prosecution
and liabilities for offences that may have been
committed prior to the commencement of the
CIRP. Further, ample safeguards have been
incorporated in the said provision to prevent
any exploitation, namely:
i. The immunity is attracted only
when a resolution plan is approved by the
Adjudicating Authority under section 31 and
the resolution plan results in the change in
management or control of the corporate
debtor.
ii. The immunity is granted only to
the corporate debtor and its property, where
such property is covered under the resolution
plan approved by the Adjudicating Authority
under section 31, from any liability or
prosecution with regard to offences committed
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prior to the commencement of the corporate
insolvency resolution process.
iii. Any person who was a promoter
or in the management or control of the
corporate debtor or a related party or was in
any manner incharge of, or responsible to the
corporate debtor for the conduct of its
business and who was directly or indirectly
involved in the commission of such offence
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.
iv. Section 32A does not bar an
action against the property of any person
other than the corporate debtor against whom
such an action may be taken under such law as
may be applicable.
v. Notwithstanding the immunity
given under Section 32A, the corporate debtor
and any person, who may be required to
provide assistance under such law as may be
applicable to such corporate debtor or person,
shall extend all assistance and co-operation to
any authority investigating an offence
committed prior to the commencement of the
corporate insolvency resolution process.‖
317. Section 32A has been divided into three
parts consisting of sub-Sections (1) to (3).
Under sub-Section (1), notwithstanding
anything contained, either in the Code or in
any other law, liability of a corporate debtor,
for an offence committed prior to the
commencement of the CIRP, shall cease.
Further, the corporate debtor shall not be
liable to be prosecuted for such an offence.
Both, these immunities are subject to the
following conditions:
317.1. A resolution plan, in regard to the
corporate debtor, must be approved by the
Adjudicating Authority under Section 31 of the
Code;
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317.2. The Resolution Plan, so approved, must
result in the change in the management or
control of the corporate debtor.
317.3. The change in the management or
control, under the approved Resolution Plan,
must not be in favour of a person, who was a
promoter, or in the management and control of
the corporate debtor, or in favour of a related
party of the corporate debtor.
317.4. The change in the management or
control of the corporate debtor must not be in
favour of a person, with regard to whom the
relevant Investigating Authority has material
which leads it to entertain the reason to
believe that he had abetted or conspired for
the commission of the offence and has
submitted or filed a Report before the relevant
Authority or the Court. This last limb may
require a little more demystification. The
person, who comes to acquire the management
and control of the corporate person, must not
be a person who has abetted or conspired for
the commission of the offence committed by
the corporate debtor prior to the
commencement of the CIRP. Therefore,
abetting or conspiracy by the person, who
acquires management and control of the
corporate debtor, under a Resolution Plan,
which is approved under Section 31 of the
Code and the filing of the report, would
remove the protective umbrella or immunity
erected by Section 32A in regard to an offence
committed by the corporate debtor before the
commencement of the CIRP. To make it even
more clear, if either of the conditions, namely
abetting or conspiring followed 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.
318. The first proviso in sub-Section (1)
declares that if there is approval of a
Resolution Plan under Section 31 and a
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prosecution has been instituted during the
CIRP against the corporate debtor, the
corporate debtor will stand discharged. This
is, however, subject to the condition that the
requirements in sub-Section (1), which have
been elaborated by us, have been fulfilled. In
other words, if under the approved resolution
plan, there is a change in the management and
control of the corporate debtor, to a person,
who is not a promoter, or in the management
and control of the corporate debtor, or a
related party of the corporate debtor, or the
person who acquires control or management
of the corporate debtor, has neither abetted
nor conspired in the commission of the
offence, then, the prosecution, if it is instituted
after the commencement of the CIRP and
during its pendency, will stand discharged
against the corporate debtor. Under the
second proviso to sub- Section (1), however,
the designated partner in respect of the
liability partnership or the Officer in default,
as defined under Section 2(60) of the
Companies Act, 2013, or every person, who
was, in any manner, in- charge or responsible
to the corporate debtor for the conduct of its
business, will continue to be liable to be
prosecuted and punished for the offence
committed by the corporate debtor. This is
despite the extinguishment of the criminal
liability of the corporate debtor under sub-
Section (1). Still further, every person, who
was associated with the corporate debtor in
any manner, and, who was directly or
indirectly involved in the commission of such
offence, in terms of the Report submitted and
Report filed by the Investigating Authority,
will continue to be liable to be prosecuted and
punished for the offence committed by the
corporate debtor.
319. Thus, the combined reading of the
various limbs of sub-Section (1) would show
that while, on the one hand, the corporate
debtor is freed from the liability for any
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offence committed before the commencement
of the CIRP, the statutory immunity from the
consequences of the commission of the offence
by the corporate debtor is not available and
the criminal liability will continue to haunt the
persons, who were in in-charge of the assets of
the corporate debtor, or who were responsible
for the conduct of its business or those who
were associated with the corporate debtor in
any manner, and who were directly or
indirectly involved in the commission of the
offence, and they will continue to be liable.
320. Coming to sub-Section (2) of Section
32A, 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:
32.01. There must be Resolution Plan, which
is approved by the Adjudication Authority
under Section 31 of the Code.
320.2. The approved Resolution Plan must
result in the change in control of the corporate
debtor to a person, who was not – (a) a
promoter; (b) in the management or control of
the corporate debtor or (c) a related party of
the corporate debtor; (d) a person with regard
to whom the investigating authority, had, on
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the basis of the material, reason to believe that
he has abetted or conspired for the
commission of the offence and has submitted a
Report or a complaint. If all these aforesaid
conditions are fulfilled then the Law Giver has
provided that no action can be taken against
the property of the corporate debtor in
connection with the offence;
321. The Explanation to sub-Section (2) has
clarified that the words ―an action against the
property of the corporate debtor in relation to
an offence‖, would include the attachment,
seizure, retention or confiscation of such
property under the law applicable to the
corporate debtor. Since the word ―include‖ is
used under sub-clause (i) of the Explanation,
the word ―action‖ against the property of the
corporate debtor is intended to have the widest
possible amplitude. There is a clear nexus with
the object of the Code. The other part of the
clarification, under the Explanation, is found
in the second sub-clause of the Explanation
(ii).
322. Under the second limb of the
Explanation, the Law Giver has clearly
articulated the point that as far as the property
of any person, other than the corporate debtor
or any person who had acquired the property
of the corporate debtor through the CIRP or
liquidation process under the Code and who
otherwise fulfil the requirement under Section
32A, action can be taken against the property
of such other person.
323. Thus, reading sub-Section (1) and sub-
Section(2) together, two results emerge –
323.1. Subject to the requirements embedded in
sub- Section (1), the liability of the corporate,
debtor for the offence committed under the
CIRP, will cease.
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323.2. The property of the corporate debtor is
protected from any legal action again subject
to the safeguards, which we have indicated.
323.3. The bar against action against the
property, is available, not only to the
corporate debtor but also to any person who
acquires property of the corporate debtor
under the CIRP or the liquidation process. The
bar against action against the property of the
corporate debtor is also available in the case
of a person subject to the same limitation as
prescribed in sub-Section (1) and also in sub-
Section (2), if he has purchased the property of
the corporate debtor in the proceedings for the
liquidation of the corporate debtor.
324. The last segment of Section 32A makes
it obligatory on the part of the corporate
debtor or any person, to whom immunity is
provided under Section 32A, to provide all
assistance to the Investigating Officer qua any
offence committed prior to the commencement
of the CIRP.
325. The contentions of the petitioners
appear to be that this provision is
constitutionally anathema as it confers an
undeserved immunity for the property which
would be acquired with the proceeds of a
crime. The provisions of the Prevention of
Money-Laundering Act, 2002 (for short, the
PMLA) are pressed before us. It is contended
that the prohibition against proceeding
against the property, affects the interest of
stakeholders like the petitioners who may be
allottees or other creditors. In short, it
appears to be their contention that the
provisions cannot stand the scrutiny of the
Court when tested on the anvil of Article 14 of
the Constitution of India. The provision is
projected as being manifestly arbitrary. To
screen valuable properties from being
proceeded against, result in the gravest
prejudice to the home buyers and other
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creditors. The stand of the Union of India is
clear. The provision is born out of experience.
The Code was enacted in the year 2016. In the
course of its working, the experience it has
produced, is that, resolution applicants are
reticent in putting up a Resolution Plan, and
even if it is forthcoming, it is not fair to the
interest of the corporate debtor and the other
stake holders.
326. We are of the clear view that no case
whatsoever is made out to seek invalidation of
Section 32A. 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 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
measure. The reverence courts justifiably hold
such laws in cannot but be applicable in the
instant case as well. The provision deals with
reference to offences committed prior to the
commencement of the CIRP. With the
admission of the application the management
of the corporate debtor passes into the hands
of the Interim Resolution Professional and
thereafter into the hands of the Resolution
Professional subject undoubtedly to the
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control by the Committee of Creditors. As far
as protection afforded to the property is
concerned there is clearly a rationale behind
it. Having regard to the object of the statute
we hardly see any manifest arbitrariness in the
provision.
327. It must be remembered that the
immunity is premised on various conditions
being fulfilled. There must be a resolution
plan. It must be approved. There must be a
change in the control of the corporate debtor.
The new management cannot be the disguised
avatar of the old management. It cannot even
be the related party of the corporate debtor.
The new management cannot be the subject
matter of an investigation which has resulted
in material showing abetment or conspiracy
for the commission of the offence and the
report or complaint filed thereto. These
ingredients are also insisted upon for claiming
exemption of the bar from actions against the
property. Significantly every person who was
associated with the corporate debtor in any
manner and who was directly or indirectly
involved in the commission of the offence in
terms of the report submitted continues to be
liable to be prosecuted and punished for the
offence committed by the corporate debtor.
328. The corporate debtor and its property in
the context of the scheme of the code constitute
a distinct subject matter justifying the special
treatment accorded to them. Creation of a
criminal offence as also abolishing criminal
liability must ordinarily be left to the
judgement of the legislature. Erecting a bar
against action against the property of the
corporate debtor when viewed in the larger
context of the objectives sought to be achieved
at the forefront of which is maximisation of the
value of the assets which again is to be
achieved at the earliest point of time cannot
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become the subject of judicial veto on the
ground of violation of Article 14.
329. We would be remiss if we did not remind
ourselves that attaining public welfare very
often needs delicate balancing of conflicting
interests. As to what priority must be accorded
to which interest must remain a legislative
value judgement 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 300A.‖
28. We have quoted from the judgment in Manish Kumar (supra)
extensively hereinabove only because we are of the opinion that the
above judgment authoritatively decides the question of law raised in
the present appeal in favour of the appellant.
29. The Supreme Court while deciding on the challenge to the
constitutional validity of Section 32A of the IBC, has held that where
the person acquiring the control of a corporate debtor pursuant to a
resolution plan approved under Section 31, satisfies the conditions
contained in Section 32A of the IBC, such person must get the
property of a corporate debtor on a clean slate.
30. The above ratio was reiterated by this Court in its judgment in
Nitin Jain (supra), wherein this Court held as under:
―49. The learned Judges of the Supreme Court
in Manish Kumar reiterated the principal
objective of maximization of value under the
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IBC and the corresponding requirement of
ensuring that the resolution applicant is freed
of the ghost of past offenses committed by the
corporate debtor.
50. Undisputedly and as has been explained in
the decisions of the Supreme Court noticed
above, 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 corporate debtor once a
resolution plan stands approved or in case of a
sale of liquidation assets.
51. 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.
52. The Legislature in its wisdom 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
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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.‖
31. This Court in Rajiv Chakraborty (supra) reiterated the above
harmonious reading of the provisions of the IBC and the PMLA and
the effect of Section 32A of the IBC, observing as under:
―109. More importantly and while dealing
with the question which arises for
determination in this case, the court would
have to bear in mind the undisputed fact that
while the PMLA was originally promulgated
on 1-7-2005, the IBC came to be enforced with
effect from 28-5-2016 and on subsequent dates
when its various provisions were separately
enforced. Section 238IBC came to be
energised in terms of the Notification dated
30-11-2016 and was ordained to come into
effect from 1-12-2016. Section 32-AIBC on the
other was introduced by amending Act 1 of
2020 with retrospective effect from 28-12-
2019.
110. The introduction of Section 32-A
constitutes an event of vital import since it
embodies a provision which effectively shut
out criminal proceedings including those
under the PMLA upon the CIRP reaching the
defining moment specified therein. However,
when the legislature introduced the said
provision, it was conscious and aware of the
fact that the provisions of the PMLA could be
enforced against the properties of a corporate
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debtor notwithstanding the pendency of the
CIRP. Thus the court notes in light of the
extent to which Section 14 could be recognised
to legally operate under the statutory scheme
and as has been explained hereinabove.
Notwithstanding the above, the legislature
chose to structure that provision in a manner
that the authorities under the PMLA would
cease to have the power to attach or confiscate
only when a resolution plan had been
approved or where a measure towards
liquidation had been adopted. The statutory
injunct against the invocation or utilisation of
the powers available under the PMLA was
thus ordained to come into effect only once the
trigger events envisaged under Section 32-A
came into effect. The legislature thus in its
wisdom chose to place an embargo upon the
continuance of criminal proceedings including
action of attachment under the PMLA only
once a resolution plan were approved or a
measure in aid of liquidation had been
adopted.
xxx
114. On a consideration of the aforesaid, the
court comes to the conclusion that Section 32-
A would constitute the pivot by virtue of being
the later act and thus govern the extent to
which the non obstante clause enshrined in the
IBC would operate and exclude the operation
of the PMLA. As has been observed
hereinabove, while both IBC and the PMLA
are special statutes in the generic sense, they
both seek to subserve independent and
separate legislative objectives. The subject-
matter and focus of the two legislations is
clearly distinct. When faced with a situation
where both the special legislations incorporate
non obstante clauses, it becomes the duty of
the court to discern the true intent and scope
of the two legislations. Even though the IBC
and Section 238 thereof constitute the later
enactment when viewed against the PMLA
which came to be enforced in 2005, the court
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is of the considered opinion that the extent to
which the latter was intended to capitulate to
the IBC is an issue which must be answered on
the basis of Section 32-A. The introduction of
that provision in 2020 represents the last
expression of intent of the legislature and thus
the embodiment of the extent to which the
provisions of the PMLA are to give way to
proceedings initiated under the IBC.
115. The court has independently come to the
conclusion that the power to attach under the
PMLA would not fall within the ken of Section
14(1)(a)IBC. Through Section 32-A, the
legislature has authoritatively spoken of the
terminal point whereafter the powers under
the PMLA would not be exercisable. The
events which trigger its application when
reached would lead to the erection of an
impregnable wall which cannot be breached
by invocation of the provisions of the PMLA.
The non obstante clause finding place in the
IBC thus can neither be interpreted nor
countenanced to have an impact far greater
than that envisaged in Section 32-A. The
aforesaid issue stands answered accordingly.‖
32. The artificial distinction sought to be drawn by the respondent
and accepted by the learned Tribunal, namely, that Section 32A(2) of
the IBC applies only to attachment orders passed after the approval of
the resolution plan, finds no support either in the plain language of
Section 32A of the IBC or in the judgment of the Supreme Court in
Manish Kumar (supra).
33. As rightly contended by the learned counsels for the parties, the
trigger for invocation of Section 32A of the IBC is the approval of the
resolution plan. Once the same is approved and the management and
control of the corporate debtor passes to a third party, which third
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party satisfies the conditions stipulated in Section 32A of the IBC,
such third party must get the benefit of the properties of the corporate
debtor free from all encumbrances, including the attachment order
under the PMLA. To hold otherwise would be to negate the object of
introduction of Section 32A in the IBC.
34. In reaching the above conclusion, we are also guided and
supported by the judgment of the Bombay High Court in Shiv Charan
(supra), which was considering the following issue:
―2. The implications of Section 32A of the
Insolvency and Bankruptcy Code, 2016 (for
short, the "IBC, 2016") for corporate debtors
and their assets, upon approval of resolutions,
and indeed for enforcement agencies that have
attached assets of such corporate debtors, fall
for consideration in the captioned Writ
Petitions.....‖
35. The High Court of Bombay held as under:
―16. A plain reading of the forgoing would
show that Section 32A is a non-obstante
provision. Its jurisdiction is attracted only
when a resolution plan gets approved under
Section 31. Besides, the immunity conferred by
Section 32A is available if and only if the
approved resolution plan results in a complete
change in the character of ownership and
control of the corporate debtor. Explicitly,
Section 32A(1) stipulates that the liability of
the corporate debtor for an offense committed
prior to commencement of the CIRP shall
cease. The corporate debtor is explicitly
protected from being prosecuted any further
for such an offense, with effect from the
approval of the resolution plan. Section 32A
disentitles the corporate debtor from such
immunity if the promoters or those in the
management or control of the corporate
debtor prior to the CIRP, or any related party
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of such persons, continues in management or
control of the corporate debtor under the
approved resolution plan. Likewise, the
corporate debtor would be disentitled from
immunity even if third parties, who were not
promoters or persons in management or
control of the corporate debtor come into
management or control of the corporate
debtor under the resolution plan but are
persons who the Investigating Authority has
reason to believe (based on material) had
abetted or conspired for the commission of the
offense in question.
17. Should the ingredients of Section 32A(1)
be met, it enables an automatic discharge from
prosecution, for the corporate debtor alone.
The provision takes care to ensure that the
immunity is available only to the corporate
debtor and not to any other person who was in
management or control or was in any manner,
in charge of, or responsible to, the corporate
debtor for conduct of its business, or was
associated with the corporate debtor in any
manner, and directly or indirectly involved in
the commission of the offense being
prosecuted. Such others who are charged for
the offense would continue to remain liable to
prosecution. Effectively, all other accused
remain on the hook and it is the corporate
debtor who alone gets the statutorily-
stipulated immunity, and that too only when a
resolution plan is approved under Section 31,
and such resolution plan entails a clean break
from those who conducted the affairs in the
past at the time when the offense was
committed. A complete dissociation of the
individuals involved in the management and
control at the time of commission of the
alleged offense is a fundamental requisite for
the immunity to become available.
18. Section 32A(2) goes a step further and
also protects the property of the corporate
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debtor from any attachment and restraint in
proceedings connected to the offense
committed prior to the commencement of the
CIRP. Once a resolution plan is approved
under Section 31 and a change in control and
management is effected under the resolution
plan (the same ingredients as set out in Section
32A(1) are stipulated here too), the property of
the corporate debtor would get immunity from
further prosecution of proceedings. Clause (i)
in the Explanation to Section 32A(2) removes
all doubt about what the assets are given
immunity from. The provision explicitly
stipulates that an "action against the property"
of the corporate debtor, from which immunity
would be available, "shall include the
attachment, seizure, retention or confiscation
of such property under such law" as
applicable. The reference being to any action
against the property under any law would
evidently bring within its compass,
attachments made under the PMLA, 2002.
19. Section 32A(2) also affords similar
immunity without a successful resolution
having been approved - where a successful
sale of assets of the corporate debtor is
effected to an unconnected purchaser in
liquidation proceedings. In short, action
against the property is prohibited so that the
purchaser of the property in liquidation
proceedings of the corporate debtor can enjoy
it freely, and therefore pay the best value when
bidding for it. Since that facet of the matter is
not relevant to the facts at hand, we are not
analysing it further.
20. Therefore, as a matter of law, once the
resolution plan is approved with the attendant
conditions set out in Section 32A being met,
further prosecution against the corporate
debtor and its properties, would cease. Section
32A(3) enjoins the corporate debtor to
continue to cooperate with the enforcement
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agencies in the continued prosecution against
the individuals in question.
21. Now, applying this position in law to the
facts of the case, it is common ground that
under the Approval Order, a resolution plan in
respect of the Corporate Debtor was approved
under Section 31 of the IBC, 2016. It is also
common ground that none of the Resolution
Applicants is a person in charge of or
responsible for the commission of the alleged
scheduled offense being prosecuted by the ED.
It is not the ED's case that the Resolution
Applicants are third parties who have aided
and abetted the commission of the alleged
offences. In short, it is common ground that all
the ingredients of Section 32A of the IBC,
2016 are met. However, what the ED disputes
is the power of the NCLT to rule upon the
interpretation of Section 32A when the effect
of such interpretation would lead to release of
attachment of property that had been levied
under the provisions of the PMLA, 2002.
xxx
37. In our opinion, when a resolution plan
with the ingredients that qualify for immunity
under Section 32A comes to be approved,
quasi- judicial authorities including the
Adjudicating Authority under the PMLA, 2002
(Respondent No. 1 in WP 9943) must take
judicial notice of the development and release
their attachment on their own. This is the only
means of ensuring that the rule of law as
stipulated in Section 32A of the IBC, 2016
runs its course. The Adjudicating Authority
under Section 8 of the PMLA, 2002 is a quasi-
judicial officer with a judicial role. The
judicial role of an Adjudicating Authority is
different from the role of a prosecuting
executive. In discharging such role, the
Adjudicating Authority, clothed with the
character of a judicial officer, must act
judiciously and discharge the mandate of
Article 141 of the Constitution of India, which
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makes it clear that the law declared by the
Hon'ble Supreme Court would bind all courts
in the territory of India. The process of
adjudication by the Adjudicating Authority
under Section 8 of the PMLA, 2002 is
inherently a quasi-judicial activity, akin to the
quasi-judicial process of adjudication by the
NCLT (in fact, in the IBC, 2016 the NCLT is
the ―Adjudicating Authority‖). Once the law is
declared by the Hon'ble Supreme Court,
officers presiding over judicial proceedings
must necessarily take judicial notice of the law
as declared, and act in a manner consistent
with the law as declared by the Hon'ble
Supreme Court. If such Adjudicating Authority
does not act in line with the law declared by
the Hon'ble Supreme Court, it would present a
fit case for writ petitions to be considered by a
constitutional court to issue an appropriate
writ or direction to remedy the situation.
38. We have no hesitation in holding that
there is no scope whatsoever for the
attachment effected by the ED over the
Attached Properties to continue once the
Approval Order came to be passed. We are not
opining on whether the attachment could have
continued after commencement of the CIRP.
We find that the NCLT has simply answered
the question of law arising in relation to the
resolution of the corporate debtor and that too
within the limits of the jurisdiction conferred
on it. It is Section 32A of the IBC, 2016, on
which the NCLT based its declaration that the
Attached Properties must be released, and that
is entirely correct. Whether the ED was right
in continuing the attachment between the
commencement of the CIRP and before the
Approval Order, is also something that the
April 2023 Order deals with, but in our view
that issue has been overtaken, as explained
earlier in this judgement.
xxx
Summary of Conclusions:
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53. As a result, we return the following
findings and conclusions in disposing of the
two writ petitions:-
i. The NCLT was well within its
jurisdiction in declaring, both in the Approval
Order (dated 17th February, 2023) under
Section 31 of the IBC, 2016 and in the April
2023 Order (under Section 60(5) of the IBC,
2016), that the corporate debtor would stand
discharged from the offences alleged to have
been committed prior to the CIRP and that the
Attached Properties as identified in the
Approval Order became free of attachment
from the time of approval of the resolution
plan eligible for benefit of Section 32A. On
facts, it is evident that the NCLT was accurate
in the valid exercise of its explicit jurisdiction;
ii. The jurisdiction of Section 32A
of the IBC, 2016 would be attracted from the
point at which a qualifying resolution plan is
approved under Section 31 of the IBC, 2016.
The protections afforded by Section 32A would
become available only when the resolution
plan is so approved, and such resolution plan
meets the other necessary ingredients to
qualify for the immunity, namely, that there is
a clean break with a change in ownership of,
and control over, the corporate debtor;
iii. IA 383 could be regarded as
having become infructuous since the Approval
Order had already, and rightly, protected the
corporate debtor and the Attached Properties
from continued prosecution of the scheduled
offenses and the offense of alleged money
laundering under the PMLA, 2002. However,
the April 2023 Order that disposed of IA 383
was founded on applying the provisions of
Section 32A to the facts of the case;
iv. There is one other facet that
makes the scheme and import of Section 32A
of the IBC, 2016 clear, logical and reasonable.
The attachment under Section 5 of the PMLA,
2002 is but a measure in aid of eventual
potential confiscation under Section 8(5) of the
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PMLA, 2002. Confiscation of the property of
the corporate debtor can only be effected upon
conviction of the corporate debtor for an
offence of money laundering. Where Section
32A(1) of the IBC, 2016 confers immunity to
the corporate debtor from prosecution, there
can be no conviction that can follow.
Consequently, it is but logical that the
property of the corporate debtor would have
protection from any continued attachment by
reason of March 01, 2024 Aarti
Palkar/Shraddha WPL-9943-2023 & WP-
29111-2023.docx Section 32A(2). Therefore,
when there is no potential in law for an
eventual confiscation, the attachment, which is
only an interim measure in aid of the final
measure of confiscation must necessarily
abate and come to an end, since it cannot
continue in a vacuum.
v. We are not opining on the
implications of Section 14 of the IBC, 2016 for
continuation of a prior attachment during the
course of a CIRP. In the facts at hand, the
jurisdiction of Section 14 came to an end, and
the jurisdiction of Section 32A commenced, on
th
17 February, 2023. Therefore, dealing with a
conflict between the provisions of the PMLA,
2002 and Section 14 of the IBC, 2016 was
th
rendered irrelevant with effect from 17
February, 2023;
vi. As a consequence of Section 32A
of the IBC, 2016, the ED must now necessarily
release the attachment on the Attached
Properties, without being bogged down by the
question of how to interpret the continuation
of attachment after the commencement of the
CIRP and before the Approval Order, and the
implications for the same under Section 14 of
the IBC, 2016. We are not opining on this
facet of the law as it is wholly unnecessary to
dispose of the case at hand. It is trite law that
no court should rule on questions of law in a
vacuum;
vii. The Approval Order, which
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interpreted questions of fact and answered the
question of law on implications of Section 32A
for the corporate debtor, has not been
challenged by the ED - neither in an appeal
from the Approval Order nor in WP 29111
filed before us. The ED's challenge is to the
April 2023 Order that allowed IA 383 March
01, 2024 Aarti Palkar/Shraddha WPL-9943-
2023 & WP-29111-2023.docx on the strength
of Section 32A. The April 2023 Order does
contain remarks about the interplay between
Section 14 and the attachment but that is not
the ratio of the April 2023 Order, which
explicitly relies on Section 32A of the IBC,
2016 to direct the release of the Attached
Properties. Even if purely for the sake of
argument, the April 2023 Order were to be set
aside, the Approval Order would hold the field
and that order correctly requires the ED to
release the Attached Properties owing to the
operation of Section 32A of the IBC, 2016;
viii. The NCLT in its capacity as the
Adjudicating Authority under the IBC, 2016
has only interpreted the provisions of Section
32A and applied them to the facts at hand, to
declare that the attachment of the Attached
Properties by the ED must come to an end. It
is possible that in a given case, the application
of Section 32A of the IBC, 2016 may have an
effect on existing and intended attachments
and prosecution by enforcement agencies
operating under laws such as the PMLA, 2002.
However, since both Section 32A and Section
60(5) are non-obstante provisions, they would
prevail, with no room for concern, real or
imagined, about any conflict between
legislations. We, therefore, hold that the
interpretation by the NCLT in both, the
Approval Order, and the April 2023 Order,
did not at all render nugatory, the provisions
of the PMLA, 2002 or its legislative objectives.
The NCLT has merely given effect to the
provisions of Section 32A of the IBC, 2016 in
its terms and that is an accurate decision, as
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explained by us above;
ix. Finally, quasi-judicial
authorities wielding powers of a civil court in
relation to the functioning of a State agency
such as the ED, have a role that is distinct and
separate from the executive authorities in the
same agency. The former are inherently a
statutory check and balance on the latter. As
quasi-judicial authorities exercising the
powers of civil courts and functioning within
the territory of India, the law declared by the
Hon'ble Supreme Court would bind the quasi-
judicial authorities. As required under Article
141 of the Constitution of India, such quasi-
judicial authorities must act consistent with
the law declared by the Hon'ble Supreme
Court rather than disobey the rule of law to
give rise to avoidable litigation.‖
36. While considering the challenge to the above judgement, in
Civil Appeal Nos.9692-9693/2024, as the parties therein were able to
arrive at a settlement, the Supreme Court left the question of law open
however, on an independent reading of the provision of Section 32A
of the IBC with the Judgment of the Supreme Court in Manish Kumar
(supra), we are of the opinion that once the resolution plan has been
approved under Section 31 of the IBC, the attachment order passed
under Section 5 of the PMLA can no longer subsist against the
property of the corporate debtor, provided the person taking control of
the corporate debtor satisfies the conditions mentioned in Section 32A
of the IBC.
37. The above interpretation to Section 32A of the IBC does not
place the IBC in conflict with the provisions of the PMLA nor does it
make the provisions of Section 32A of the IBC to operate
retrospectively to annul the attachment order passed prior to the
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approval of the resolution plan, but applies prospectively to release the
property from such attachment.
38. Coming back to the facts of the present case, it is not the case of
the respondent that the appellant is disqualified from the protection of
Section 32A of the IBC inasmuch as the property was not covered by
the resolution plan approved under Section 31 of the IBC by the
NCLT or that the same did not result in the change in control of the
corporate debtor or that the person taking such control of the corporate
debtor under such resolution plan, that is, Asteroid was a promoter or
in management or control of the corporate debtor or a related party of
such a person or is a person with regard to whom the relevant
investigating authority has, on 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.
39. The observation of the learned Tribunal in its impugned order
that the relief under Section 32A of the IBC cannot be given to the
appellant until the Special Court gives a finding to the effect that the
appellant is not covered by the exceptions stipulated in Section 32A of
the IBC, cannot be sustained for the reason that the occasion for the
Special Court to give such finding shall arise only if it was a case of
the respondent that the appellant/Asteroid falls in any of the
exceptions to Section 32A of the IBC. In the absence of any such case
being even set up by the respondent, the Special Court is not to give
an academic finding or a finding in vacuum. On the other hand, it has
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to be presumed that the respondent has conceded that the appellant
otherwise satisfies all the conditions mentioned in Section 32A of the
IBC for the relief contained therein.
40. The only plea taken by the respondent was that Section 32A of
the IBC does not apply to an attachment order passed under the
PMLA before the approval of the resolution plan, which we have
already negated hereinabove. Once this plea is rejected by us and no
other defence is taken by the respondent, in our view, the learned
Tribunal has erred in dismissing the appeal filed by the appellant and
denying it the relief prayed for.
41. Accordingly, we set aside the Impugned Order passed by the
learned Tribunal.
42. As noted hereinabove, the appellant deposited a fixed deposit of
Rs.3.01 crores in terms of the judgment dated 13.04.2023 passed by
this Court in W.P.(C) 10771/2022 as an equivalent value of the
property attached by the Provisional Attachment Order. In view of
Section 32A(2) of the IBC, with the approval of the resolution plan,
the Provisional Attachment Order shall no longer subsist against the
corporate debtor, that is, the appellant, as there is no allegation that the
person taking control of the corporate debtor, that is, Asteroid, does
not satisfy the conditions mentioned in the said provision.
43. We, therefore, direct that the FDR of Rs.3.01 crores, deposited
by Asteroid on behalf of the appellant in favour of the respondent, be
released to the appellant within a period of two weeks of this
judgment.
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44. The appeal is allowed in the above terms.
45. There shall be no orders as to costs.
NAVIN CHAWLA, J.
ARUN BHARDWAJ, J.
NOVEMBER 06, 2026/sg/as
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