Gujarat High Court: Protection Granted U/S 32A(2) & 33(5) Of IBC Overrides The Power Of Enforcement Directorate To Attach The Properties Under PMLA

A single bench of Justice Vaibhavi D. Nanavati said that the Enforcement Directorate has proceeded to confirm the order of provisional attachment passed under Section 5(1) of PMLA without any application of mind.

“In the opinion of this Court, confirmation of attachment interdicts and interferes with the consummation of the sale process which is part of liquidation of ABG Shipyard in the opinion of this Court, is in teeth of the provisions of Sections 32A, 33(5) and 238 of the IBC”

The Bench was hearing a writ petition filed by AM Mining India Private Limited ("Petitioner") against an order dated 21.09.2022 passed by the Enforcement Directorate (“Respondent No. 1”) for provisionally attaching the subject land under Section 5 of PMLA against ABG Shipyard. (“Corporate Debtor”)

Liquidation proceedings were initiated against the Corporate Debtor on 25.4.2019, and the Petitioner came out to be the successful bidder. After, making the necessary payments, an agreement to sell was drawn on 21.3.2022.

On 21.9.2022, Respondent No. 1 passed an order under PMLA, for the attachment of the subject land thereby preventing the parties from completing the sale process.

The Petitioner contended before the court that attaching of property under the PMLA by Respondent No.1 is a clear breach of Section 32A(2), 33(5) and 238 of IBC as the Petitioner was a successful bidder and entered into the Agreement to Sell for the acquisition of the Subject Land, and has paid a substantial part of the Purchase Consideration.

Respondent No.1 referred to Section 5 of PMLA and argued that no interference is needed as the ED has the power to provisional attach property.

The court, however, opined that the protection granted under Section 33(5) and Section 33(a)(2) of the IBC Act would override the power of the respondent No.1 to attach the properties under the PMLA. The Bench further stated that Section 238 of IBC provides that the provisions of IBC would override anything inconsistent with any other law.

“Section 32A of the IBC Act would govern to the extent to which the nonobstante clause enshrined in the IBC would operate and exclude the operation of PMLA. The protection granted under Section 33(5) and Section 32A(2) of the IBC Act would override the power of the respondent No.1 to attach the properties under the PMLA Act. Further Section 238 of the Act provides that the provisions of IBC would override anything inconsistent with any other law. Though the PMLA has similar provision under Section 71, the same is subservient to the provisions of IBC Act, since IBC Act was enacted after PMLA Act.” the Court observed.

Case Title: AM Mining India Private Limited vs Union of India.

Case No.: R/SPECIAL CIVIL APPLICATION NO. 808 of 2023

Counsel For Petitioner: Mr Rashesh Sanjanwala, Senior Advocate with Mr Keyur Gandhi, Mr Raheel Patel, Ms Ananya Ghoshi and Mr Aalay Shah for Gandhi Law Associates (12275) for the Petitioner(s) No. 1

Counsel For Respondents: Mr Kshitij Amin, Mr Devang Vyas(2794) for Respondent(s) No. 1 Mr SN Soparkar, Senior Counsel with Mr Mohaal J Davawala(6514) for Respondent(s) No 2,3 Mr Parth H Bhatt(6381) for the Respondent(s) No. 1

Click Here To Read/Download Order

LL Citation: 2023 LiveLaw (Guj) 183