The Delhi High Court has ruled that the jurisdiction of the authorities under the PMLA ceases over the assets of the debtor company once the liquidation is approved under the Insolvency and Bankruptcy Code.
The main issue to be resolved in this petition is whether authorities under the Prevention of Money Laundering Act 2002 would retain jurisdiction or authority to prosecute the assets of a debtor business once a liquidation measure was approved in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.
The applicant, Nitin Jain is the liquidator appointed by the National Company Law Tribunal3[the Adjudicating Authority under the IBC] administer the affairs and estate of M / S PSL Ltd.
The court noted that when it comes to two laws which can independently use a legislative order so that their provisions have effect notwithstanding any contrary provision contained in any other law, the first question to be answered is whether there is in fact an element of irreconcilability and incompatibility in the functioning of the two statutes which cannot be harmonized. The issue of the incompatibility in the operation of two laws should not be resolved on a mere perceived or facial level, but on a more thorough and careful examination of the operation of the competing provisions and of the subject sought to be regulated.
The IBC can rightly be described as an economic measure marking a significant departure from how debt has been treated for centuries by the laws in force in the country. The IBC is first seen as framework legislation dealing with various aspects aimed at the rapid resolution of insolvency. He also inaugurated a regime where the old management which previously continued to retain the reins of the indebted entity as it sank deeper and deeper into debt, now became liable to be dismantled and the debtor company support by a professional who would take over. the management and administration of the debtor pending resolution of his insolvency. The third important objective of the IBC was to maximize value with the assumption and disposal of the debtor’s assets by adopting fair and transparent means within strict and regulated deadlines.
The Single Chamber of Judge Yashwant Varma ruled that the liquidator was legally authorized to continue the liquidation process in accordance with the provisions of the IBC. The defendant hereby refrains from taking any other action, coercive or otherwise, against the liquidation mass of the debtor company or the corpus assembled by the liquidator in terms of the sale of the liquidation assets as approved by the authority. adjudicator under the IBC. The Court grants the applicant the freedom to ask the Adjudication Authority to release the sums currently held in receivership in accordance with the provisional order issued in the context of these proceedings. Any request that may be made in this regard by the liquidator will be decided by the adjudicating authority taking into account the conclusions recorded above.
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