National Company Law Tribunal not empowered to hear matters falling under PMLA: NCLT Kolkata Bench

The Kolkata Bench of National Company Law Tribunal (NCLT) recently reiterated that the NCLT is not empowered to hear money laundering cases as per an order of the National Company Law Appellate Tribunal [Rahul Carbon Commercials Private Limited vs Kohinoor Steel Private Limited]..A Bench of Judicial Member Rohit Kapoor and Technical Member Harish Chander Suri held that the plea was not maintainable as it sought rejection of a notice issued under the Prevention of Money Laundering Act (PMLA)."We are of the view that this Adjudicating Authority ... is bound by the order dated January 3, 2022 passed by 3-member Bench of NCLAT which took the view that NCLT is not empowered to deal with the matters falling under PMLA," the NCLT said.The Bench were hearing an interlocutory application (IA) seeking to quash a provisional attachment order issued by the Enforcement Directorate (ED). .The present plea was filed by the Resolution Professional of a corporate debtor under Section 60(5) of the Insolvency and Bankruptcy Code.The applicant sought to declare the December 2021 attachment order null, void and not binding on the debtor, a stay on its operation, injunction to the respondent authority (the ED) from giving it any effect and be reimbursed costs. It was contended that, as communicated to the respondent earlier, the ED was not authorized to issue an attachment order until the completion of the ongoing corporate insolvency resolution process (CIRP).It was submitted that the said order was wrongfully issued, in violation of the Insolvency and Bankruptcy Code (IBC) before determining that the assets attached were proceeds of a crime.The order had essentially rendered the CIRP infructuous since valuable properties of the debtor were attached and unavailable for resolution until set aside, it was submitted. This victimises the creditor as well for no fault of their own, it was contended.It was also submitted that the NCLAT decision relied on by the respondents, that held that NCLT cannot adjudicate PLMA matters, was ex-facie per incuriam (defective on the face of it) and contrary to the provisions of the IBC. In this regard, it was contended that Section 60(5)(a) of the IBC vests the NCLT with jurisdiction to entertain and dispose of proceedings against any corporate entity. The applicant submitted that it is settled law that if a decision is passed per incuriam, even a lower forum is not bound to follow such per incuriam decision.The CIRP and its outcome cannot be held hostage to the PMLA proceedings that can go on for years which could make the CIRP redundant, it was emphasised. Responding to the debtor's contentions, the ED's counsel argued that as the definition of “proceeds of crime” under Section 2(1)(u) of PMLA, it covered any property gotten as a result of criminal activity relating to a scheduled offence, or the value of such properties. The properties that are the subject matter of the CIRP have been purchased out of the proceeds of the crime and only after a proper investigation it had come to the notice of the ED that the process was under way, it was submitted. It was further stated by the ED counsel that a moratorium does not affect either initiation or continuation of investigation under the provision of PMLA 2002 which is special statute. To support this argument, the counsel for the ED relied upon an order passedby NCLAT in Varrsana Ispat Limited. Vs. Deputy Director of Enforcement..The NCLT Bench accepted the respondent's contentions and proceeded to reject the application."In the present case since notice impugned has been issued under the Prevention of Money Laundering Act, 2002 therefore, this application is not maintainable and the same is hereby rejected," the NCLT said..Advocates Phiroze Edulji and Anamika Pandey appeared for the respondents.Senior Advocate Ratnanko Banerji with advocates Shaunak Mitra, Debabrata Ganguly and Debaleena Ganguly appeared for the applicants. .[Read Order]