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The Delhi High Court has recently held that the power to attach assets as conferred by Section 5 of the Prevention of Money Laundering Act, 2002 would cease to be exercisable once any one of the measures specified in Regulation 32 of the Liquidation Regulations 2016 comes to be adopted and approved by the Adjudicating Authority.

The bench was considering the issue whether the authorities under the Prevention of Money Laundering Act, 2002, would retain the jurisdiction or authority to proceed against the properties of a corporate debtor once a liquidation measure has come to be approved in accordance with the provisions made in the Insolvency and Bankruptcy Code, 2016.

A bench of Justice Yashwant Varma held on the issue that, "The Court thus comes to hold that from the date when the Adjudicating Authority came to approve the sale of the corporate debtor as a going concern, the cessation as contemplated under Section 32A did and would be deemed to have come into effect."

The bench observed that "Section 32A in unambiguous terms specifies the approval of the resolution plan in accordance with the procedure laid down in Chapter II as the seminal event for the bar created therein coming into effect."

Thus, the Court held that the approval of the measure to be implemented in the liquidation process by the Adjudicating Authority must be held to constitute the trigger event for the statutory bar enshrined in Section 32A coming into effect.

Senior Advocate Kirti Uppal appearing for the petitioner submitted that the jurisdiction and authority of the respondent under the PMLA is legislatively mandated to cease once a resolution plan is approved by the Adjudicating Authority or the sale of liquidation assets commences.

It was further submitted that Section 32A clearly mandates that no action shall be taken against the properties of the corporate debtor, once a resolution plan comes to be approved or the corporate debtor undergoes liquidation.

Whereas, the Enforcement Directorate in its reply contended that the provisions of the IBC cannot be accorded any primacy over the PMLA and that, consequently, notwithstanding the steps taken under that enactment by the petitioner here, the right of the respondent as conferred by the PMLA to move against the assets of the corporate debtor, to follow the proceeds of crime and consequently confiscate properties stands preserved.

In addition to this Standing Counsel Zoheb Hossain appearing for the Directorate submitted that the right of the statutory authorities under PMLA cannot be hindered by the provisions of the IBC bearing in mind the fact that both statutes operate in separate and distinct fields. 

However, the bench noted that "The issue of incompatibility in the operation of two statutes should not be answered on a mere perceived or facial plane but on a deeper and meticulous examination of the operation of the competing provisions and the subject that is sought to be regulated."

The bench was hearing the plea filed seeking directions to restrain the Enforcement Directorate from directing the liquidator to stop the E-Auction.

Cause Title: Nitin Jain Liquidator PSL Limited Vs. Enforcement Directorate through: Raju Prasad Mahawar, Assistant Director PMLA