[Insolvency] NCLT empowered to direct ED to release attached properties: Bombay High Court

The Bombay High Court recently ruled that the National Company Law Tribunal (NCLT) is empowered to direct the Enforcement Directorate (ED) to lift the attachment on properties belonging to company undergoing insolvency proceedings after resolution plan for the insolvency process is approved [Shiv Charan v. Adjudicating Authority & connected petitions].A division bench of Justices BP Colabawalla and Somsekhar Sundaresan observed that the Section 32A of the Insolvency and Bankruptcy Code (IBC) explicitly protects the company that has undergone insolvency proceedings from being prosecuted any further for any offence once the resolution plan has been approved. "As a matter of law, once the resolution plan is approved with the attendant conditions set out in Section 32A being met, further prosecution against the corporate debtor and its properties, would cease. Section 32A(3) enjoins the corporate debtor to continue to cooperate with the enforcement agencies in the continued prosecution against the individuals in question," the court held in its order. .The Court was dealing with a bunch of petitions filed by applicants who proposed the resolution plan of DSK Southern Projects Pvt Ltd, a company undergoing insolvency proceedings. The applicants pointed out that nearly 4 years before the company was admitted for insolvency, various first information reports (FIRs) were registered alleging cheating which formed scheduled offence for ED's case under the Prevention of Money Laundering Act (PMLA). ED then took steps to attach properties worth over ₹32 crores. This attachment was confirmed by the PMLA adjudicating authority in 2019 and it continued even after the commencement of the Corporate Insolvency Resolution Process (CIRP) post the NCLT order.The resolution applicants moved High Court against the continuance of attachment of property claiming that the attachment went against the NCLT order which explicitly directed ED to release all attached properties..ED also filed a cross petition in High Court questioning NCLT's jurisdiction and power to direct release of properties. The High Court did not agree with ED's argument that the NCLT does not have the power to direct the ED to lift its attachment that had been imposed under the provisions of the PMLA. "Section 32A itself mandates that once a resolution plan is approved, no action can be taken against the properties of the corporate debtor in relation to an offence committed prior to the commencement of the CIRP of the corporate debtor, where such property is covered under a resolution plan approved by it under Section 31 of the IBC, 2016. It is it is wholly untenable to contend that the NCLT, and which is the Adjudicating Authority constituted under the IBC, 2016, is incompetent and/or powerless to either interpret or to give effect to the provisions of the very Act under which it was constituted," the High Court held. The division bench thus ruled that the NCLT had all powers to direct the ED to raise its attachment concerning the attached properties of the corporate debtor once a resolution plan that qualifies for immunity under Section 32A was approved, and those very properties were the subject matter of the resolution plan..[Read order]