Judgment Summaries (NCLT) – In the matter of Sterling SEZ

  December 22, 2021

In the matter of Sterling SEZ & Infrastructure Ltd. (Mumbai Bench (12.02.2019))

 

Facts

The Enforcement Directorate (ED) had initiated proceedings against the Sterling SEZ Infrastructure Ltd. (CD), and had attached certain properties of the CD pursuant to Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 (PMLA) through its order and corrigendum dated 29.05.2018 and 14.06.2018, respectively. The Tribunal then admitted an application under Section 7 of the Code against the CD, on 16.07.2018. The RP approached the ED, requesting it to withdraw the attachment on the properties since they had to be taken in charge and custody as per the provisions of the Code. The RP filed this application under Section 60(5) of the Code, with the prayer to direct the ED to release attachments on all assets and properties of the CD, and hand them over to the RP. The issue before the Tribunal was to decide whether provisions of the Code would override the provisions of the PMLA?

Order

The Tribunal noted that proceedings under the PMLA take a longer time, as compared to the resolution process under the Code. It observed that the resolution process under the Code will thus be much favourable to both the CD and the creditors, and would provide a solution at the earliest. As a result, Section 238 of the Code would override Section 71 of the PMLA. The Tribunal then noted that Section 14 of the Code bars any legal proceedings during the moratorium period and since Section 238 gives the Code an overriding effect over the PMLA, ED’s attachment order will be null and void. Referring to Section 63 of the Code, the Tribunal clarified that the Adjudicating Authority under PMLA does not have the jurisdiction to attach the properties of a CD undergoing CIRP. The Tribunal accordingly allowed this application and handed over the possession of the concerned properties to the RP.

 

Full text of the order accessible here.

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