NCLAT on the IBC and PMLA

In a case related to Rotomac Global Private Limited, the National Company Law Appellate Tribunal (NCLAT) has made following observations related to Insolvency and Bankruptcy Code (IBC) and Prevention of Money Laundering Act (PMLA):

  • Prevention of Money Laundering Act (PMLA), 2002 can be invoked simultaneously with the Insolvency and Bankruptcy Code and neither of the laws has an overriding effect over the other.
  • If the property relates to ‘proceeds of crime and the offence relates to ‘money-laundering, then Section 14 of the Insolvency and Bankruptcy Code (IBC) is not applicable to such proceeding.

 Section 14 of the Insolvency and Bankruptcy Code (IBC)

Section 14 of the Code authorizes adjudicating authority to pass an order of moratorium during which there is a prohibition on the institution of suits or continuation of pending suits against the corporate debtor, transfer of property of the corporate debtor or any action to foreclose or enforce any security interest.

What was the case?

Bank of Baroda had initiated insolvency proceedings against Rotomac Global Private Limited. Since the resolution process did not attract any viable and feasible resolution plan, the National Company Law Tribunal, Allahabad had ordered liquidation.

In the meantime, ED had launched an investigation against the company and its directors and found that the accused had misappropriated/diverted bank funds, committed criminal breach of trust and laundered the money so diverted. Hence ED had provided for a provisional attachment of the properties lying in the name of the company and its directors.

Rotomac had sought the release of assets attached by the Directorate of Enforcement.

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