The conflict between the Insolvency and Bankruptcy Code, 2016 (“IBC”) and the Prevention of Money-Laundering Act, 2002 (“PMLA”) has once again surfaced with a stay order being passed by the National Company Law Appellate Tribunal (“NCLAT”) in the case of JSW Steel Limited v. Mahender Kumar Khandelwal (Company Appeal (AT) (Insolvency) No. 957 of 2019) on October 14, 2019.
On September 5, 2019, the National Company Law Tribunal, Principal Bench, New Delhi had passed an order approving the resolution plan submitted by JSW Steel Limited (“JSW Steel”) for the insolvency resolution of Bhushan Power and Steel Limited (“Bhushan Power”) (“NCLT Order”). Thereafter, on October 10, 2019, properties of Bhushan Power in Odisha were attached by ED, the same being declared as “proceeds of crime” under the PMLA. The attachment of the property of the Bhushan Power was opposed by the Ministry of Corporate Affairs, Government of India (“MCA”), JSW Steel and the committee of creditors of Bhushan Power.
The following issues arose for consideration before NCLAT:
The following submissions were made by the MCA:
Decision of NCLAT:
After taking into consideration the submissions, NCLAT stayed the order of attachment passed by the ED and also prohibited it from attaching property of Bhushan Power without seeking prior approval of the NCLAT. NCLAT also directed the that the property already attached by the ED be realised in favour of the resolution professional immediately.
It may be noted that the NCLAT has permitted the ED and Central Bureau of Investigation to file their reply affidavits, if necessary. In the meanwhile, to ensure that the resolution plan is not given effect before deciding the aforementioned issues, the NCLAT also stayed the NCLT Order passed on September 5, 2019, so far as it relates to payment of the creditors.
This update has been contributed by Adity Chaudhury (Partner) and Radhika Kothari (Associate).
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