Supreme Court Upholds Restoration of Attached Properties to Successful Resolution Applicant in Major Insolvency Case Directorate of Enforcement's Appeal Dismissed; Supreme Court Confirms Restoration Under PMLA and IBC Provisions
In a significant ruling, the Supreme Court of India has upheld the restoration of attached properties to V Hotels Limited, the Successful Resolution Applicant (SRA), under the Insolvency and Bankruptcy Code (IBC) framework. This decision comes in the wake of the Directorate of Enforcement's (ED) appeal challenging the Bombay High Court’s judgment, which had set aside a Provisional Attachment Order against V Hotels Limited.
The judgment, delivered by Justices M.M. Sundresh and Satish Chandra Sharma, confirms that the properties, previously attached under the Prevention of Money Laundering Act (PMLA), are to be restored to the SRA. This move is part of the larger effort to respect the legitimate interests of bonafide claimants as outlined in Section 8(8) of the PMLA.
V Hotels Limited was the Successful Resolution Applicant under a resolution plan approved by the National Company Law Tribunal (NCLT). The Supreme Court's decision affirms that the SRA steps into the shoes of the Corporate Debtor and is entitled to restoration of assets, provided they are not beneficiaries of proceeds from criminal activities.
The court has also ordered the deletion of the Corporate Debtor's name from the array of accused, while maintaining the prosecution against the former directors and conspirators. The Directorate of Enforcement had challenged the approval of the resolution plan by the NCLT; however, the Supreme Court has directed that this challenge be closed, allowing the resolution plan's substantial implementation.
While the judgment addresses the specific facts of the case and has been consented to by the parties, it explicitly states that the order should not be treated as a precedent for future cases. All legal questions arising from the judgment remain open for adjudication in appropriate cases.
This landmark ruling not only clarifies the application of Section 32A of the IBC but also underscores the judiciary's stance on balancing insolvency proceedings with anti-money laundering measures. The court highlighted that the benefits of Section 32A are conditional upon the SRA's lack of connection to the previous directors or any involvement in the proceeds of crime.
The Supreme Court commended the Directorate of Enforcement's officers for their efforts in restoring the attached properties, emphasizing the importance of securing justice. The funds deposited by V Hotels Limited with the Directorate of Enforcement will be released with accrued interest, marking a significant step in the resolution process.
The decision has been met with positive reception from the business community, which views it as a reinforcement of the insolvency framework's integrity. Legal experts suggest that this ruling will have implications for future cases involving similar circumstances under the PMLA and IBC.
Bottom Line:
Restoration of attached properties under Section 8(8) of the Prevention of Money Laundering Act, 2002 (PMLA) to a Successful Resolution Applicant (SRA) under the Insolvency and Bankruptcy Code, 2016 (IBC), upheld by the Supreme Court.
Statutory provision(s): Prevention of Money Laundering Act, 2002 - Section 8(8), Insolvency and Bankruptcy Code, 2016 - Section 32A
Directorate of Enforcement v. V Hotels Limited, (SC) : Law Finder Doc Id # 2817076
