PMLA VS IBC

(PMLA/IBC)The crux of Various Judgments:

• “PMLA deals in the matter of “money laundering and proceeds of crime”, it means any asset or property which is obtained by proceeds of crime are attachable by the ED under the provisions of PMLA. Here it is confirmed by various judgments that Provisional Order of Attachment of Property is deemed civil proceeding and shall be within the coverage of section 14 of IBC (Moratorium)" 
• "IRP /RP is vested with the management of Corporate Debtor under section 17 and section 18 and 25 of the code express duties on IRP/RP to take control and custody of assets of the CD, and appear/present/defend with the third party on behalf of CD for the beneficial interest of the CD."
•  "Section 32-A protects (i) resolution applicant (under CIRP), Corporate Debtor, Assets of Corporate Debtor and (ii) Buyer/Bidder of assets (under liquidation) from the action/prosecution /penal action/fines/ attachment of properties, Liabilities for a criminal offense and penalties etc for any conduct /act /offense committed by Corporate Debtor & Its Management ‘prior to commencement of Insolvency resolution’, subject to the condition that the resolution applicant should not be a related party (as per section 5(24) of IBC) of CD and resolution applicant should satisfy the eligibility requirement under section 29-A and section 25 (2)(h). And resolution must cause the change in management and control of the corporate debtor."
•  “Proceeding under IBC and PMLA (being a criminal proceeding) both are separate proceedings and can run simultaneously and ED may attach (under section 5 of PMLA- Provisional Attachment) the property or the asset of promoters or management responsible for such offense. The provisions of the PMLA also empowered the competent officer of the ED to assess the proceed of crime, the assets of CD which are obtained by way of such offense and value the same for attachment. However, the officer may also be empowered to attach the personal assets or properties of the promoters having a value equivalent to proceeds of crime assessed above. Hence the previous management shall be liable for prosecution and attachment of their personal properties instead of providing immunity to Corporate Debtor and Its properties under IBC (sec-32-A).
•  As far as the concern about overriding effect and inconsistent, PMLA contains a section 71 starting with the non-obstante clause as the same clause appearing under section 238 of IBC. So as per the rule of repugnancy, the later enactment will prevail over the earlier. Hence the provisions of IBC having an overriding effect over the PMLA.
•  It is to be understood that, the proper officer of the ED and RP of CD is required to follow the proceedings as laid down in a manner as provided under the PMLA and IBC along with powers and duties are given under the statute. So when the Provisional Attachment becomes final the proceeding became criminal proceedings, but it will run separately, and assets and properties of the corporate debtor will have possession of RP.
•  Section 31 provides that the approved resolution plan is binding on all stakeholders including state/central govt. and other government authorities. Hence the ED can not attach or prosecute Corporate Debtor or resolution applicant or attach assets of the corporate debtor under section 32-A. However, one case may be there when ED already attached any property of a corporate debtor prior to the insolvency commencement date, in such situation proceeding under PMLA, shall operate independent from the IBC –CIRP, but shall de-attach the property and handover the possession to Resolution professional as per section 18,20 and 28 of the IBC.
• But when the provisional attachment order after the due investigation became final the attachment order, in such case accused management (Directors) liable for punishment and corporate debtor liable for monetary fines which are recoverable by ED in the manner of schedule-2 of Income Tax Act. In this scenario, ED should make claim before IRP/RP and de-attach the property of the corporate debtor. In the same manner, if the corporate debtor is under liquidation phase, then the liquidator may sell the asset of the company, or sell the corporate debtor as going concern to buyer/bidder and such bidder/buyer may apply to ED for de-attachment of such assets under section 32-A of IBC.
• Regards