Though the recent NCLAT order staying the Enforcement Directorate attachment of Bhushan Power and Steel asset would provide some comfort for winning bidders of other stressed companies, much would depend on the amendment to the Insolvency and Bankruptcy Code ring-fencing the assets under insolvency from other investigating agencies. The outcome of this case may also have an impact on the insolvency process of Jet Airways.
Naresh Goyal, the former chairman of the now grounded Jet Airways, is being investigated by the ED for diverting a Rs. 9,000-crore loan availed of by the Indian company to its foreign subsidiaries, thus causing a huge loss to the exchequer. However, the ED has not yet attached any asset of Jet Airways.
Advocate Zoheb Hossain, appearing on behalf of the ED, had said that in the Bhushan Power and Steel case, the proceeds of crime involved property that have been attached by the Deputy Director of the Directorate of Enforcement. He has sought time till October 17 to file the reply-affidavit.
Reply affidavit
The CBI will also file its reply affidavit by October 17. Both investigating agencies can also file a rejoinder before the next hearing in the case on October 23. In its response, the Ministry of Corporate Affairs said that before approving the resolution plan, the NCLT hears all the objections raised. Once approved, the resolution plan is binding on all stakeholders, including government agencies. The provision of the Insolvency and Bankruptcy Code (Amendment) Act, 2019 by which Section 31(1) was amended, makes it amply clear that a resolution plan is binding on Central Government and all statutory authorities.
It is further submitted that the new management taking over the company after the IBC process cannot be held responsible for the acts of the previous management. In other words, no criminal liability can be fixed on the successful resolution applicant or its officials. After completion of insolvency process under the IBC, there cannot be any attachment or confiscation of the assets of the corporate debtor by any enforcement. However, the government has to clarify its stand with proper amendment to the law. Ring-fencing a stressed asset involving crime proceeds would dilute the effectiveness of the Prevention of Money Laundering Act as the ill-gotten wealth is always ploughed back into the business to smoke-screen its traceability.
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