NCLT/NCLAT Cannot Review Actions Taken By ED Under PMLA : Supreme Court

In the Bhushan Steel insolvency case, the Supreme Court disapproved of the National Company Law Appellate Tribunal staying with the provisional attachment order passed against the assets of Bhushan Steel and Power Ltd under the Prevention of Money Laundering Act (PMLA).

The Court emphatically stated that the National Company Law Tribunal (NCLT) or the National Company Law Appellate Tribunal (NCLAT) cannot review the actions taken by statutory authorities under other laws.

The NCLAT held that at in view of Section 32A(1)(2), the Directorate of Enforcement/Investigating Agencies did not have the powers to attach assets of Corporate Debtor, once the Resolution Plan had stood approved, and that the criminal investigations against the Corporate Debtor also would stand abated. The NCLAT also declared that the attachment of assets of Corporate Debtor by the ED was illegal or without jurisdiction.

Criticising the interference made by the NCLAT with the ED's investigation, the bench comprising Justice Bela M Trivedi and Justice Satish Chandra Sharma observed :

"In this regard, it is pertinent to note that the NCLT and NCLAT are constituted under Section 408 and 410 of the Companies Act, 2013 and not under the IBC. The jurisdiction and powers of the NCLT and NCLAT are well circumscribed under Section 31 and Section 60 so far as NCLT is concerned, and under Section 61 of IBC so far as the NCLAT is concerned. Neither the NCLT nor the NCLAT is vested with the powers of judicial review over the decision taken by the Government or Statutory Authority in relation to a matter which is in the realm of Public Law."

Reference was made to the judgment in Embassy Property Developments Private Limited vs. State of Karnataka & Ors which held that a decision taken by the Government or a statutory authority in relation to a matter which is in the realm of Public Law, cannot be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution” appearing in Section 60(5)(C) IBC.

When the NCLT could not exercise the powers of judicial review falling outside the purview of the IBC, or falling within the purview of public law, the NCLAT also, being an Appellate Authority under Section 61 over the orders passed by the NCLT, could not exercise any power or jurisdiction beyond Section 61 of IBC, the Court stated.

"The PMLA being a Public Law, the NCLAT did not have any power or jurisdiction to review the decision of the Statutory Authority under the PMLA," the Court stated.

The Court held that the observations made and the findings recorded by the NCLAT with regard to the provisional attachment order passed by the ED as "coram non judice", as being made without any authority of law and without jurisdiction. 

Also from the judgment- Supreme Court Rejects JSW's Resolution Plan For Bhushan Steel As Illegal, Orders Liquidation; Says CoC Acted Without Commercial Wisdom