PMLA Tribunal Sets Aside ₹315 Cr ED Attachment Against Viceroy Hotels, Applies Section 32A IBC Immunity

The Appellate Tribunal under the Prevention of Money Laundering Act (PMLA) on 23 April allowed an appeal filed by Viceroy Hotels Ltd., setting aside the Enforcement Directorate's attachment of assets worth over Rs. 315 crore in connection with alleged diversion of bank loan funds by Best & Crompton Engineering Projects Ltd.

A Bench comprising Members Balesh Kumar and Rajesh Malhotra held that once a resolution plan is approved under Section 32A of the Insolvency and Bankruptcy Code (IBC), such action cannot continue against the corporate debtor or its assets. It observed:

“It is also to be noted that the attempt made by MHPL to claim the status of the financial creditor has also been rejected in the Judgment dated 24.11.2023 passed by the NCLAT in Company Appeal (AT) (CH) (INS.) No. 225/2023 in the matter of Mahal Hotel Pvt. Ltd. vs. Dr. Govindarajula Venkata Narasimha Rao.”

The case stemmed from CBI allegations concerning Best & Crompton Engineering Projects Ltd. (BCEPL), which was accused of causing losses of Rs. 364 crore to a consortium of banks in 2017. The Enforcement Directorate alleged that BCEPL routed proceeds of crime through subsidiaries.

Viceroy Hotels Ltd. (VHL) had entered into a Business Transfer Agreement in 2011 with Mahal Hotels Pvt. Ltd. (MHPL), an entity linked to BCEPL, for the sale of a Chennai hotel and its business for Rs. 480 crore. Although the transaction was later terminated, MHPL had already paid about Rs. 124.52 crore, which was treated as an advance refundable to MHPL. The ED alleged that these funds formed part of proceeds of crime and provisionally attached VHL's assets worth over Rs. 315 crore in 2019, including the Hyderabad Marriott property and a vehicle.

Meanwhile, Viceroy Hotels underwent Corporate Insolvency Resolution Proceedings in 2018. The National Company Law Tribunal (NCLT) approved a resolution plan submitted by Anirudh Agro Farms Ltd. in 2023, which was subsequently implemented. Anirudh Agro Farms Ltd. took over the company and discharged payments to lenders in terms of the plan.

Viceroy Hotels contended before the Tribunal that Section 32A of the IBC applied once the resolution plan was approved and management changed. It argued that the new management was neither a promoter nor a related party to the alleged offenders, and therefore the statutory immunity applied to the corporate debtor and its assets. It also submitted that the ED's case could not survive after MHPL's claim to financial creditor status was rejected by the NCLT and NCLAT.

The Enforcement Directorate opposed the appeal, arguing that PMLA attachment operates independently of insolvency proceedings and is intended to prevent dealing with proceeds of crime, including by a resolution applicant. It maintained that the moratorium under Section 14 of the IBC does not restrict its powers under the PMLA.

The Tribunal examined Section 32A of the IBC in light of the Supreme Court's ruling in Manish Kumar v. Union of India (2021), which upheld the provision and clarified that immunity attaches to the corporate debtor and its assets upon approval of a resolution plan, subject to statutory conditions.

In this context, the Bench rejected the ED's stand, holding that the statutory protection under Section 32A squarely applied after approval and implementation of the resolution plan. It concluded that the foundation of the ED's attachment could not be sustained.

Accordingly, the Tribunal allowed Viceroy Hotels' appeal and set aside both the Adjudicating Authority's order and the provisional attachment order dated 26 March 2019.

For the Appellant: Mr. R. V. Yogesh, Advocate

For the Respondent (ED): Mr. Aditya Singla, Advocate