The Hon'ble National Company Law Appellate Tribunal (NCLAT), after considering the submissions of the Ministry of Corporate Affairs (MCA) and the steps were taken by the 'Directorate of Enforcement', held that 'Directorate of Enforcement' is prohibited from the attachment of any property of the 'Corporate Debtor' without prior permission of the National Company Law Appellate Tribunal (NCLAT). Moreover, the property which has been already attached shall be released in favour of the 'Resolution Professional' immediately.
In the instant case titled JSW Steel Ltd. Vs. Mahender Kumar Khandelwal & Ors the issue that was raised before the NCLAT was:
Whether after the approval of a ‘Resolution Plan’ under Section 31 of the Insolvency and Bankruptcy Code, 2016, is it open to the Directorate of Enforcement to attach the assets of the ‘Corporate Debtor’ on the alleged ground of money laundering by erstwhile Promoters?
The NCLAT held that once a Resolution Plan is approved by NCLT, it is binding on the Corporate Debtor, its employees, creditors including the Central Government, any State Government or any local authority.
NCLAT said the intent of the ‘I&B Code’ affected the attachment of the assets of the ‘Corporate Debtor’ by the Directorate of Enforcement after approval of the ‘Resolution Plan’. In this background, the intent and purpose of the insertion of Section 32A are to provide certainty to the ‘Resolution Applicant’ that the assets of the ‘Corporate Debtor’ as represented to him and for which he proposes to pay value/ consideration in terms of the ‘Resolution Plan’, would be available to him in the same manner as at the time of submissions of the ‘Resolution Plan’. A mere assertion of the Directorate of Enforcement in its reply, that it needs to further investigate the matter to examine or comment if there has been any abetment or conspiracy by the Appellant establishes that it has no reason to believe on the basis of material in possession of Directorate of Enforcement, as on date, that meets the criteria under Section 32A(1)(b) of the ‘I&B Code’ for denial of immunity to the Appellant and the ‘Corporate Debtor’.
The tribunal categorically held that:
“While deciding the issue NCLAT held that Directorate of Enforcement has not been empowered under ‘I&B Code’ to decide the question. Even if they stand taken by the Directorate of Enforcement is accepted that ‘JSW Steel Limited’ is a ‘related party’ of ‘M./s. Bhushan Power & Steel Ltd.’- (‘Corporate Debtor’), the Directorate of Enforcement cannot decide whether ‘JSW Steel Limited’ is ineligible under Section 29A or Section 32A(1)(a) which can be determined by the ‘Committee of Creditors’/ Adjudicating Authority”.
Thus, NCLAT upheld the decision of NCLT and also noted that the Judgment passed by the Adjudicating Authority (National Company Law Tribunal) and this Appellate Tribunal will not come in the way of the Directorate of Enforcement or the ‘Serious Fraud Investigation Office’ or the ‘Central Bureau of Investigation’ to proceed with the investigation or to take any action in accordance with law against erstwhile promoters, officers and others of the ‘Corporate Debtor’.