WHETHER SECTION 32A OF IBC IS A BOON OR CURSE?
Channel: R V Seckar
Date: 2020-07-24

WHETHER SECTION 32A OF IBC IS A BOON OR CURSE?

WHETHER SECTION 32A OF IBC IS A BOON OR CURSE?
 HOW SECTION 32A OF IBC CODE OFFERS 
IMMUNE FROM ATTACHMENT BY THE 
ENFORCEMENT DIRECTORATE TO THE 
ASSETS OF CORPORATE DEBTOR

WHETHER SECTION 32A OF IBC IS A BOON OR CURSE?
Section 32A of IBC code which was inserted through IBC Amendment Act 2020  seeks to provide immunity to a corporate debtor and its assets from any prosecution, action, attachment, seizure, retention or confiscation upon approval of a resolution plan if the resolution plan results in the change in the management or control of the corporate debtor.
The Section 32A appears to have been introduced as a result of the litigation and ambiguity surrounding JSW Steel Limited’s resolution plan for Bhushan Power & Steel Limited.
In the aforesaid corporate insolvency resolution process, JSW Steel’s resolution plan was approved by the Adjudicating Authority with certain modifications on September 5, 2019. Shortly thereafter, on October 10, 2019, the Enforcement Directorate attached certain assets of Bhushan Power under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA).
JSW VS ENFORCEMENT DIRECTORATE
The attachment by the Enforcement Directorate was challenged by JSW Steel before the National Company Law Appellate Tribunal (NCLAT).
Whilst JSW Steel’s Appeal was pending adjudication, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 was promulgated. As a result, the NCLAT took into account the Ordinance and the proposed Section 32A therein and inter alia called upon the Enforcement Directorate to clarify as to whether or not JSW Steel’s Resolution Plan would be covered under Section 32A. 
In response, the Enforcement Directorate took a stand that the newly introduced Section 32A would not apply to JSW Steel’s resolution plan for various reasons including its assertion that JSW Steel is a related party to Bhushan Power. 
APPEAL TO SUPREME COURT AGAINST NCLAT’S ORDER 
Consequently, the Enforcement Directorate took a stand that the benefit of Section 32A (2) would not be available to Bhushan Power’s properties attached by the Enforcement Directorate under the PMLA.
Rejecting the Enforcement Directorate’s arguments, the NCLAT held that the Enforcement Directorate’s attachment was illegal and without jurisdiction. Relying on Section 32A, the NCLAT further held that Bhushan Power’s assets are immune from attachment by the Enforcement Directorate. 

Whilst parting, the NCLAT clarified that its decision will not come in the Enforcement Directorate’s way to proceed with investigation or to take any action in accordance with law against Bhushan Power’s erstwhile promoters and officers.
NCLAT’s aforesaid order is currently challenged before the Supreme Court of India and is sub-judice (Civil Appeals) 
Anil Goel vs. Dy Director, Enforcement Directorate, New Delhi
Introduction of Section 32A of IBC is quite a dominant and overriding amendment to IBC read with its Section 238 having the ability to cease any/all prosecution, attachment and/or seizure against the corporate debtor under any law for the time being in force

Section 32A is a sweeping amendment in every sense. Not only does it override the PMLA as in the JSW Steel case, but in a given case; has the ability to cease any prosecution, action, attachment, seizure, retention or confiscation against a corporate debtor and its property/assets under any law for the time being in force. Section 32A being a non-obstante provision itself, read with Section 238 of the Code, is arguably the Code’s most powerful and overriding amendment till date.
Hon'ble NCLT, Kolkata Bench, in the case of Anil Goel vs. Dy Director, Enforcement Directorate, New Delhi in the case of Varrsana Ispat Limited whereby the Liquidator is permitted to sell the assets which are attached by Enforcement Directorate under Prevention of Money Laundering Act. 
Anil Goel vs. Dy Director, Enforcement Directorate, New Delhi

The Corporate Debtor is a steel plant and is being run as a going concern doing a turnover of about 900 Crores p.a.
Now we would be selling the Corporate Debtor as a going concern and then will apply to NCLT under newly inserted section 32A of IBC for de-attachment and protection of the buyer. This is  said to be the first order of its kind in the Country after the promulgation of section 32A in IBC

whether a legislation with primarily civil and commercial consequences, can, in such manner, override any and all other legislations governing their respective individual fields. Pertinently, the NCLAT, has, in Shah Bros. Ispat (P) Ltd.[3] held that criminal proceedings such as proceedings
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