Appellate authority upholds IBC over PMLA

In a ruling upholding the prevalence of the Insolvency and Bankruptcy Code (IBC) over the Prevention of Money Laundering Act (PMLA), the appellate authority of the PMLA has released some properties, belonging to PMT Machines, a subsidiary of debtladen Sterling Biotech, attached by the Enforcement Directorate (ED).

The Resolution Professional (RP) of PMT Machines had approached the appellate authority with a plea that the properties were incorrectly attached by the ED as they had been acquired before the “alleged commission of offences and charges were created prior to the date of alleged offences”.

The appellate authority for PMLA, in its judgment, said since the properties attached by ED have no relation to the alleged crime committed by Nitin Sandesara, Chetan Sandesara, and Deepti Sandesara, the same must be released to the RP to ensure quick insolvency resolution for PMT Machines.

Holding that the recovery proceeding initiated by banks is

“valid and legal recovery ” and that it could not “blocked for years without valid reasons”, a single-judge Bench of PMLA appellate authority chairperson, Justice Manmohan Singh, said that ED is not precluded to attach other private properties and all other assets of the alleged accused.

The ruling, however, the appellate authority clarified, will “have no bearing in any proceedings initiated against the alleged accused including extradition proceedings pending or proposed to be initiated in any part of the world”.

“The judgment paves the way to achieve the desired objective of Insolvency process. On account of attachment of assets by the ED, CIRP can’t achieve its objective of maximisation of value of stressed assets,” the counsel for RP, Rajendra Beniwal, founding partner at Karma Law Associates said.

The attachment of the properties by ED, the RP had said in his plea, was delaying the Corporate Insolvency Resolution Process (CIRP) of PMT Machines. The company has been admitted for insolvency resolution by the Mumbai bench of the National Company Law Tribunal (NCLT) in 2018.

Though the ED had in its submissions, before the PMLA appellate tribunal, said that the banks were victim of the alleged fraud perpetuated by the Sandesaras, and were entitled to recover the amount, they should approach the special court set up for the same.

PMT Machines, the Sterling group company, had in 2011-1 2 defaulted on its debt-repayments, following which t he consortium of banks, led by UCO Bank, initiated recovery proceedings in 2013 before t he Debt Recovery Tribunal (DRT).

The Resolution Professional of Sterling Biotech’s subsidiary, PMT Machines, had approached the appellate authority with a plea that the properties were incorrectly attached by the ED