Tribunal Rules IBC Moratorium Does Not Restrict PMLA Actions, Confirms Limited Jurisdiction of IBC Tribunals
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) has upheld the authority of the Enforcement Directorate (ED) to proceed with actions under the Prevention of Money Laundering Act (PMLA), regardless of the moratorium imposed under the Insolvency and Bankruptcy Code (IBC). The judgment, delivered by a bench consisting of Justice N. Seshasayee, Mr. Arun Baroka, and Mr. Indevar Pandey, dismissed appeals filed by the Liquidator of M/s Siddhi Vinayak Logistics Ltd., challenging the ED's actions during the corporate debtor’s moratorium period.
The dispute arose when the ED withdrew a substantial sum of Rs. 2.29 crore from the corporate debtor's account and attached assets, including 6,170 vehicles, during the moratorium period under the IBC. The Liquidator contended that these actions violated the statutory protection offered by the moratorium and frustrated the insolvency resolution process.
However, the NCLAT ruled that the PMLA operates in a distinct domain with the objective of addressing proceeds of crime, which is a matter of national interest. The tribunal emphasized that actions under PMLA are not restricted by the IBC moratorium, as PMLA addresses proceeds of crime, which require immediate and uncompromising legal action.
The judgment clarified that the jurisdiction of the National Company Law Tribunal (NCLT) and NCLAT is limited to the administration of the IBC and does not extend to matters under the PMLA. It further stated that the appropriate forum for adjudicating disputes arising from PMLA actions is the adjudicatory mechanism under the PMLA itself.
Citing the Supreme Court's decision in "Embassy Property Developments Pvt. Ltd. v. State of Karnataka," the tribunal reaffirmed that the NCLT/NCLAT cannot entertain challenges to proceedings initiated under PMLA, as both legislations operate independently with distinct objectives.
This ruling underscores the precedence of national interest and the non-compromisable nature of actions taken under the PMLA, even during insolvency proceedings. The judgment serves as a crucial reference point for cases involving conflicts between insolvency proceedings and actions under special statutes like the PMLA.
Bottom line:-
Insolvency and Bankruptcy Code (IBC) vis-a-vis Prevention of Money Laundering Act (PMLA) - Tribunals constituted under IBC do not have jurisdiction to interfere with attachment proceedings or actions initiated under PMLA. Moratorium under Section 14 of IBC does not apply to criminal proceedings or penal actions under PMLA, as the latter operates in a distinct domain with the objective of addressing proceeds of crime.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 14, 33(5), 60(5); Prevention of Money Laundering Act, 2002 Sections 8(4), 8(7), 8(8), 50.
