In a landmark judgement, the Mumbai bench of National Company Law Tribunal (NCLT) has nullified the attachment notice served by the Enforcement Directorate on Baroda-based Sterling Biotech Ltd (SBL), saying that the NCLT gives speedier justice and that a new legislation Insolvency and Bankruptcy Code 2016 precedes over the existing legislation.
Enforcement Directorate had attached 31 acres of land owned by Sterling Biotech after banks declared the Rs 8,100 crore loans extended to the promoters as fraud. Subsequently, the promoters left the country under suspicious circumstances. NCLT has ordered the release of this land from the ED to the resolution professional to be resolved under the IBC 2016.
“All the properties which were attached were in the name of the company and they should be available for legitimate distribution to various creditors for settlement, resolution or recovery of their claims,” said Vishal Ghisulal Jain, resolution professional.
The court was hearing a dispute between Srei Infrastructure Finance Ltd and Sterling SEZ and Infrastructure Ltd. It has also overruled any prosecution under the Prevention of Money Laundering Act (PMLA). SBL, a subsidiary of Sterling SEZ and Infrastructure, was engaged in the manufacturing of gelatin and listed on BSE, but now is suspended from trading. The group obtained loans of Rs 8,100 crore from banks and financial institutions, which have turned non-performing assets. A forensic audit conducted by State Bank of India revealed that the funds were diverted.
The court added that Section 63 of the IBC provides that no civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter over which NCLT or NCLAT (National Company Law Appellate Tribunal) has jurisdiction under this code.
The court in an order dated February 12, 2019, said, “The object of the IBC is to expedite the insolvency process and to secure maximisation of the value of assets of the corporate debtor so that it can be distributed to all the stakeholders.”
The court added that if the PMLA and the enforcement directorate route is followed, it may take considerable time and the assets would be locked up in proceedings. Considering the economic actors associated with the case, the objective of both the legislations, it is advisable to take a route where assets can be utilised in a speedy manner rather than waiting and losing the value of the assets over a period of time.
The court said that “Since attachment order passed by the PMLA court is hit by the provisions of the Section 14 of the IBC code and considering the overriding effect of IBC under the Section 238 of the code, this tribunal is of the considered view that the attachment order under PMLA Act is a nullity and hence will not have any binding force,” the order said.
MAKING IT CLEAR
- The court said Sec 63 of IBC provides that no civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter over which NCLT or NCLAT has jurisdiction under this code
- It added that if PMLA and ED route is followed, it may take considerable time and the assets would be locked up in proceedings
Source: DNA, February 15, 2019