NCLT sanctioned schemes cannot override subsisting attachment orders or dilute pending criminal prosecution.

The Appellant (63 Moons) challenged an order dated September 17, 2019, passed by the Appellate Tribunal for PMLA, which directed the Appellant to furnish an indemnity bond of ₹1095,27,17,055/- and an undertaking to deposit the same if attached properties were later found to be "proceeds of crime" (PoC).

Upon compliance, the Tribunal ordered the quashing of provisional attachments on the Appellant's movable properties (DEMAT accounts/bonds).

The Directorate of Enforcement (ED) also appealed against the lifting of these attachments.

Concurrently, the National Spot Exchange Limited (NSEL) obtained sanction from the National Company Law Tribunal (NCLT) for a settlement scheme to compensate investors.

The NCLT clarified that this sanction would not override subsisting attachment orders or terminate pending criminal proceedings.

The Appellant sought the implementation of this NCLT-sanctioned scheme to distribute funds to creditors through a court-appointed Monitoring Authority.

1. Whether the provisional attachment of assets under the PMLA can be lifted to facilitate a settlement scheme sanctioned by the NCLT for the benefit of investors.

2. Whether a settlement scheme between private parties and creditors can legally result in the quashing or compounding of serious criminal offences under investigation by agencies like the ED.

The Court considered the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) regarding the attachment of "proceeds of crime" and the jurisdiction of the Appellate Tribunal.

It applied the principle that criminal prosecution for serious offences is independent of civil settlements; specifically, a Civil Court (or NCLT) cannot determine or dilute the consequences of criminal prosecution through consent-based schemes.

The court also upheld the NCLT’s proviso that a scheme of arrangement under the Companies Act/IBC framework cannot override subsisting criminal proceedings or statutory attachments unless specifically ordered by the relevant competent court.

The Court balanced the need to provide relief to thousands of defrauded NSEL investors with the necessity of maintaining the integrity of criminal proceedings.

While it acknowledged the NCLT’s sanction of the settlement scheme, the Court expressed strong disapproval of Clause 24.6 of said scheme, which contemplated that parties would jointly apply for the quashing/compounding of criminal proceedings upon settlement.

The Court reasoned that such clauses are an indirect attempt by accused persons to secure exoneration for serious offences through civil mechanisms.

It held that criminal law must reach its logical conclusion independently and cannot be "countenanced" or "diluted" by a consent-based civil settlement.

Consequently, the Court allowed the distribution of funds to victims but strictly de-linked this action from the status of the criminal charges.

The lifting of the attachment and the disbursement of funds shall not be construed as a dilution of criminal charges against the accused.

The Court ordered that criminal prosecution must proceed independently and be taken to its logical end by the prosecuting agencies.

All connected appeals and petitions were disposed of in view of these directions.