Nitin Jain Liquidator PSL Limited Vs. Enforcement Directorate Through Raju Prasad Mahawar, Assistant Director PMLA - Attachment of property by ED during Liquidation process.

HC Delhi (17.03.2021) in Nitin Jain Liquidator PSL Limited Vs. Enforcement Directorate Through Raju Prasad Mahawar, Assistant Director PMLA. [W.P.(C) 3261/2021] held that; - 

• “ It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner”.

• the liquidator shall proceed in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter, ‘IBC’). However, if any moveable/immovable assets are disposed of by the liquidator, the monetary sums recovered from the same shall be placed in a separate bank account and an affidavit stating the recovered amount shall also be placed before this Court. If any amounts are to be disbursed to any of the creditors, an application shall be moved before this Court seeking permission to disburse.

• The question as to whether the moveable/immovable assets of the Corporate Debtor and the sale thereof during the liquidation process would be permitted under Section 32A of the IBC, would require consideration by this Court.

Excerpts of the order;

# 2. The present petition has been preferred by the Petitioner, who has been appointed as the liquidator of M/s PSL Limited/Corporate Debtor (hereinafter, ‘Corporate Debtor’).

# 3. The Petitioner was initially appointed as the Resolution Professional on 30th August, 2019. After the Committee of Creditors proposed a liquidator, vide order dated 11th September, 2020, the NCLT passed orders directing liquidation of the Corporate Debtor. The process of liquidation was under way when the Petitioner received summons dated 15th January 2021, issued by the Directorate of Enforcement (hereinafter, ‘ED’). The said summons was, thereafter, followed up by an email dated 25th January, 2021, by which the Assistant Director (PMLA), Delhi Zonal Office, called upon the Petitioner not to dispose of the assets of the said company. The said email reads as under:-

• “Kind Attention to :-

Mr. Nitin Jain, Official Liquidator of M/s. PSL Limited.

It is stated that a case has been recorded under PMLA, 2002 against M/s. PSL Limited and Others. It has came to the notice of this office that you have been appointed as Official Liquidator of M/s PSL Limited and auctioning the assets of this company.

You are hereby requested to not disposed off these assets as the matter is pending under PMLA, 2002 which has overriding effect over IPC (sic IBC) and other laws governing such transactions.

Raju Prasad Mahawar

Assistant Director (PMLA)

Delhi Zonal Office.”

# 4. The Petitioner, therefore, prays for setting aside the said directions of the ED.

# 5. Mr. Kirti Uppal, ld. Sr. Counsel submits that there is no proceeding presently pending against the Corporate Debtor or any of its promoters. There is not even a provisional attachment order (hereinafter, ‘PAO’) at this stage. Accordingly, the said notice is completely untenable, especially in light of the recent decision of the ld. Supreme Court in Opto Circuit India Ltd. v. Axis Bank & Ors., 2021 SCC OnLine SC 55. Mr. Zoheb Hossain, ld. Standing Counsel, confirms the fact that there is no PAO at this point.

# 6. Recently, the ld. Supreme Court in Opto Circuit (supra), dealing with the scheme of the Prevention of Money Laundering Act, 2002 (hereinafter, ‘PMLA’) observed as under:-

• “16 This Court has time and again emphasised that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner. Among others, in a matter relating to the presentation of an Election Petition, as per the procedure prescribed under the Patna High Court Rules, this Court had an occasion to consider the Rules to find out as to what would be a valid presentation of an Election Petition in the case of Chandra Kishor Jha v. Mahavir Prasad (1999) 8 SCC 266 and in the course of consideration observed as hereunder:

- “ It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner”.

• 17. Therefore, if the salutary principle is kept in perspective, in the instant case, though the Authorised Officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law. We have found fault with the Authorised Officer and declared the action bad only in so far as not following the legal requirement before and after freezing the account. This shall not be construed as an opinion expressed on the merit of the allegation or any other aspect relating to the matter and the action initiated against the appellant and its Directors which is a matter to be taken note in appropriate proceedings if at all any issue is raised by the aggrieved party.”

# 7. A perusal of the email issued by the ED clearly shows that the same is not on the basis of any proceedings initiated under Section 5 or 8 of the PMLA. The admitted position is that though investigation is going on, no PAO has been issued against the corporate debtor. Accordingly, the impugned e-mail and any other direction issued by the Respondent against the liquidator shall remain stayed. In order to maintain a balance and to ensure that there is no prejudice caused, the liquidator shall proceed in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter, ‘IBC’). However, if any moveable/immovable assets are disposed of by the liquidator, the monetary sums recovered from the same shall be placed in a separate bank account and an affidavit stating the recovered amount shall also be placed before this Court. If any amounts are to be disbursed to any of the creditors, an application shall be moved before this Court seeking permission to disburse.

# 8. The question as to whether the moveable/immovable assets of the Corporate Debtor and the sale thereof during the liquidation process would be permitted under Section 32A of the IBC, would require consideration by this Court.

# 9. Both parties are permitted to approach this Court if any further clarification is required.

# 10. Let the counter affidavit, along with a written note of arguments on the scheme of the IBC in respect of Section 32A and its applicability to the facts, be placed on record within four weeks, by both parties. Rejoinder, if any, be filed within four weeks thereafter.

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