Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, has ruled that once a resolution plan is approved under the Insolvency and Bankruptcy Code, 2016 (IBC), any provisional attachment of assets by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA) automatically ceases to operate.

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The bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) held that Section 32A of the IBC extinguishes all prior criminal liabilities of the corporate debtor once a resolution plan is approved and implemented. The Tribunal emphasized that the ED cannot continue to hold or enforce attachments post-approval and that there is no requirement for the successful resolution applicant (SRA) to seek a separate release order from the PMLA authorities.

Background

The decision arose from an appeal filed by Vantage Point Asset Management Pvt. Ltd., the successful resolution applicant for Alchemist Infra Realty Ltd. The appeal challenged an order of the National Company Law Tribunal (NCLT), Delhi, which had approved the company’s resolution plan but refused to direct the ED to lift its 2019 provisional attachment order over the company’s assets. In its July 4, 2024 order, the NCLT advised the SRA to approach the PMLA adjudicating authority separately for relief, prompting Vantage Point to move the NCLAT.

Vantage Point argued that with the approval of the resolution plan, Section 32A comes into operation, extinguishing all pre-existing liabilities and rendering the ED’s attachment orders ineffective. It contended that since the attachment was merely provisional and not followed by a confiscation order, the assets remained part of the corporate debtor’s estate and were rightfully included in the resolution plan. The Enforcement Directorate, however, opposed the plea, maintaining that the provisional attachment was issued prior to the initiation of CIRP and could not be nullified by the subsequent resolution plan. The ED submitted that the assets constituted “proceeds of crime” and could not be used to discharge commercial debts under the IBC.

NCLAT’s Observations

Rejecting the ED’s contentions, the Appellate Tribunal observed that Section 32A was introduced in the IBC precisely to provide finality and certainty to the resolution process and to protect bona fide resolution applicants from the consequences of past offences. The Bench observed: “We thus are of the view that the Provisional Attachment Order shall cease to operate after the resolution plan is approved, bringing into effect Section 32A. The Provisional Attachment Order has to be treated to have ceased by virtue of the legislative scheme under Section 32A, and there is no necessity for the successful resolution applicant to obtain any order from the adjudicating authority under the PMLA.”

It further held that there was no exception under Section 32A for attachments made before the initiation or approval of the CIRP: “There is no exception in the scheme of Section 32A that where provisional attachment orders have been passed prior to initiation of CIRP or prior to approval of the resolution plan, the assets have to be kept out of the resolution. The trigger event for Section 32A is the approval of the resolution plan.”

Ownership and Inclusion in Resolution Plan

The Tribunal also clarified that mere attachment under PMLA does not divest the corporate debtor of ownership rights over the property. Referring to the scheme of the PMLA, it stated that the corporate debtor continues to enjoy the property despite attachment until confiscation is finalized.  “By the attachment of the assets, the ownership rights of the corporate debtor are not divested, nor can it be said that the corporate debtor ceases to be the owner of the asset. Despite attachment, the corporate debtor is entitled to enjoy the property,” the Bench observed. The NCLAT found no impropriety in including the attached assets in the information memorandum and the approved resolution plan, holding that the NCLT’s direction requiring the SRA to seek release from PMLA authorities was “unnecessary” and inconsistent with the legislative framework of Section 32A.

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The Tribunal conclusively held that the ED’s provisional attachment order against Alchemist Infra Realty Ltd. ceased to have effect upon the approval of the resolution plan on July 4, 2024. The ruling reinforces the primacy of IBC proceedings over conflicting actions under the PMLA and safeguards successful resolution applicants from procedural hurdles post-approval. Accordingly, the NCLAT allowed the appeal filed by Vantage Point Asset Management Pvt. Ltd., setting aside the NCLT’s observations requiring separate recourse under PMLA. “The legislative intent of Section 32A is to ensure that resolution applicants acquire the corporate debtor on a clean slate. Once a resolution plan is approved, attachments under other statutes, including PMLA, cannot survive,” the Bench concluded.

Appearance

For Appellant : Senior Advocate Dhruv Mehta, with Advocates Palash Singhai, Harshal Sareen Kartikey Shrarma, Prachi Johri, Mirgangi Parul

For Respondents: Advocate Zohab Hossain (Special Counsel for ED) Advocates Vivek Gurnami, Vivek Gaurav, Satyam Senior Advocate Krishnendu Datta, with Advocate Varsha Banerjee for Resolution Professional

Cause Title: Vantage Point Asset Management Pte. Ltd v Gaurav Misra Resolution Professional of Alchemist Infra Reality Ltd. & Anr.

Case No: Company Appeal (AT) (Ins) No. 1495 of 2024

Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)