Insolvency & Bankruptcy Code (IBC) vs. Prevention of Money Laundering Act (PMLA)
The National Company Law Appellate Tribunal (NCLAT) ruled that the IBC cannot override the PMLA concerning assets of a debt-ridden firm attached by the Directorate of Enforcement (ED) and confirmed by a competent authority.
Key Rulings by NCLAT
- Assets alleged to be "proceeds of crime" adjudicated under a penal statute cannot be included in the resolution estate under section 14 of the IBC.
- An attachment by ED under PMLA, if validly made and confirmed, cannot be undone by IBC.
- Section 238 of the IBC, which has an overriding effect over other laws, does not apply to proceedings involving proceeds of crime under PMLA.
Distinct Operations of PMLA and IBC
NCLAT emphasized that:
- PMLA and IBC operate in distinct spheres without any "irreconcilable inconsistency."
- ED acts as a public enforcement agency, not a creditor, with attached assets aimed at upholding penal objectives and international obligations.
Judicial Reference
NCLAT cited a Supreme Court directive in the Embassy Property matter, noting its lack of jurisdiction to interfere with the Provisional Attachment Order confirmed by the PMLA Adjudicating Authority.
Conclusion
NCLAT's 36-page order affirms that the PMLA's provisions take precedence over the IBC in cases involving the proceeds of crime, emphasizing the non-overlapping jurisdictions of both legislative frameworks.
