Bombay HC Orders Release Of MPID-Attached Property After Approval Of Steel Company's Resolution Plan

The Bombay High Court has held that there could be no impediment to releasing a property attached under the Maharashtra Protection of Interest of Depositors (MPID) Act after the corporate debtor's resolution plan was approved.

The court held that the company was entitled to proceed on a "clean slate" under the Insolvency and Bankruptcy Code (IBC).

A Division Bench of Justices Manish Pitale and Shreeram V. Shirsat quashed a March 19, 2016 MPID attachment insofar as it related to a property owned by Abhirama Steels Ltd. The Bench also directed the return of a Rs.74.24 lakh bank guarantee furnished by successful resolution applicant Dwarka Iron Industries Pvt Ltd.

Holding that the corporate debtor satisfied all the requirements of Section 32A of the IBC, the Bench observed:

“The corporate debtor upon approval of the resolution plan satisfies all the requirements of Section 32A of the IBC and there can be no dispute about the same. Therefore, the logical consequence thereof must follow and there ought to be no impediment in releasing the subject property from attachment, so that the corporate debtor proceeds on a clean slate, in line with the objects and reasons of enactment of the IBC."

The case concerned a property owned by Abhirama Steels Ltd. The property was attached under the MPID Act in connection with a 2013 Economic Offences Wing case against Birla Power Solutions Ltd.

The company was not named as an accused when the FIR was registered in December 2013. It was also not named as an accused in the subsequent charge-sheet.

Corporate insolvency resolution proceedings against Abhirama Steels commenced in November 2021. The National Company Law Tribunal (NCLT), Hyderabad, approved Dwarka Iron Industries' resolution plan on September 17, 2024.

The State contended that the property had vested in the Competent Authority upon issuance of the attachment notification. It therefore argued that the property could not form part of the resolution plan.

The High Court rejected the contention. It held that vesting under the MPID Act remained incomplete unless the designated court passed an order making the attachment absolute.

The High Court observed that the designated court had not passed any order under Section 7 of the MPID Act making the attachment absolute. It therefore rejected the State's argument that the property was unavailable to the corporate debtor when the resolution plan was approved.

The State also argued that the NCLT's September 17, 2024 order excluded the property from the resolution plan. According to the State, the NCLT had required the successful resolution applicant to approach the competent authority under the MPID Act for lifting the attachment.

Rejecting the contention, the Bench observed:

“We also do not find much substance in the contention raised on behalf of the respondents that, in view of paragraph 8(g) of the order dated 17.09.2024 passed by the NCLT, approving the resolution plan, the subject property could not be said to be part of the resolution plan. A proper reading of the said order, including paragraph 8 thereof, shows that the NCLT thought it fit to call upon the successful resolution applicant to approach the competent authority i.e. the designated Court under the MPID Act for lifting of the attachment.”

The High Court further held that the effect of Section 32A of the IBC raised a pure question of law. It held that the petitioner could seek relief directly in writ proceedings despite the liberty granted by the NCLT to approach the MPID authority.

On the maintainability of the writ petition, the bench observed,

“Since the effect of Section 32A of the IBC, on a bare reading of the said provision and the position of law being elaborately clarified by the Supreme Court, is essentially a pure question of law, we find that the petitioner is clearly entitled to press for relief in this writ petition itself. Merely because the NCLT in the said order dated 17.09.2024 reserved liberty for the successful resolution applicant to approach the competent authority under the MPID Act for lifting of attachment, would not adversely affect the power of this Court under writ jurisdiction to entertain the present writ petition.”

The High Court also recorded the State's admission that Abhirama Steels was not an accused in the criminal proceedings that led to the attachment notification.

Holding that the corporate debtor satisfied the requirements of Section 32A of the IBC, the High Court allowed the writ petition. It quashed the attachment insofar as it related to the subject property and directed the return of the bank guarantee.