Supreme Court Issues Notice On Plea Against NCLAT Ruling Allowing ED Action During IBC Moratorium

Today, the Supreme Court issued notice on a plea by Value Wise Consultancy Private Limited, the liquidator of Siddhi Vinayak Logistics Ltd, challenging a National Company Law Appellate Tribunal (NCLAT), Delhi judgment which held that the Insolvency and Bankruptcy Code (IBC) moratorium does not stop the Enforcement Directorate (ED) from taking action under the Prevention of Money Laundering Act (PMLA).

A Division Bench of Justices K.V. Viswanathan and Arun Palli issued notice, returnable on 16 October, after hearing Senior Counsel Vipul Jain, appearing for the liquidator. The judges observed:

“If the issue is pertaining to the legality and validity of attachment, it will go before the PMLA appellate forum.”

Jain submitted that the validity of the attachment could be challenged before the appropriate PMLA forum. However, the separate question was whether the ED could take away the company's assets during the IBC moratorium and affect the insolvency process.

The Court noted that the issue before it was not the validity of the attachment, but whether the ED could take action during the moratorium that affected the company's assets and the insolvency process.

Jain clarified that the liquidator's immediate grievance was about Rs. 2.29 crore withdrawn from the company's bank account. “My only claim was regarding the refund of the amount, which they have taken, ₹2.29 crore. I was not asking anything else,” he said.

The Court then issued notice and agreed to hear the matter on merits.

Background

The ED had attached assets of Siddhi Vinayak Logistics Ltd over allegations of bank fraud and diversion of Rs. 1,600 crore, even though the company was under the IBC moratorium. During the moratorium, the ED also withdrew about Rs. 2.29 crore from the company's bank account. It later attached 6,170 vehicles, of which 1,344 attachments were confirmed.

The liquidator challenged the ED's actions, arguing that they violated the IBC moratorium. The ED argued that PMLA proceedings are separate from insolvency proceedings and relate to proceeds of crime.

The NCLAT Delhi rejected the challenge, holding that the IBC moratorium does not prevent the ED from acting under the PMLA. It also held that insolvency tribunals cannot interfere with PMLA proceedings.

Further, it had said the liquidator must pursue its remedies under the PMLA, including before the Bombay High Court, where the ED's challenge to an earlier PMLA order was pending.