A bench of Justice Prathiba Singh in the Delhi High Court has stayed proceedings arising out of the attachment of properties of Deccan Chronicles Holding Ltd by the Enforcement Directorate (ED), on a plea by Union Bank of India (UBI) stating that corporate insolvency resolution process (CIRP) was already initiated against Deccan Chronicles and that the attachment by ED has been done after such initiation.
The court has, however, imposed the condition that the stay shall be subject to the Bank placing on record any details of steps taken to monetize the assets and the recovery made, if any.
UBI has claimed before the High Court that the proceedings are therefore liable to be stayed, as such attachment has had a "negative impact" on the CIRP and realization of the debt of Deccan Chronicles by the Union Bank of India.
Relying on the recent judgment of the Supreme Court in the case of Manish Kumar v. Union of India (WP(C) No. 26/2020), Justice Singh held that, "Considering the fact that the resolution plan has already been approved in this matter, and that the ED's order of provisional attachment of the properties of Respondent No. 4 (Deccan Chronicles) has been passed after the approval of the resolution plan by the NCLT, the said provisional attachment would prima facie be contrary to Section 32A of the IBC."
Section 32A of the Code provides that a Corporate Debtor shall not be prosecuted for an offence committed prior to commencement of Corporate Insolvency Resolution Process (CIRP) once Resolution Plan has been approved by Adjudicating Authority (AA).
There has been a tussle between the Enforcement Directorate and the Ministry of Corporate Affairs on the question of attachment of properties undergoing corporate insolvency resolution ever since the Enforcement Directorate attached properties of Bhushan Steel and Power Ltd, after the approval of JSW Steel's resolution plan for the steel giant.
The issue at hand dealt with criminal liability under the Prevention of Money Laundering Act (PMLA) on one hand, and the corporate insolvency resolution process on the other.
The government had therefore brought about the Amendment to the Insolvency and Bankruptcy Code, 2016 through Section 32A, under which immunity is provided to the new management of a corporate debtor from the criminal liability under PMLA for offences committed before the approval of the resolution plan.
In this regard, the Supreme Court has stated recently that, "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 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."
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