“The liquidator is permitted to sell the assets of the corporate debtor…which were attached by the Enforcement Directorate, subject to the right of the buyer to apply for detachment,” the Kolkata bench of the National Company Law Tribunal said in an order pronounced on July 22.
“It appears to us that the attachment and confiscation of properties of a CD (corporate debtor) undergoing CIRP (corporate insolvency resolution process) or liquidation become void under Section 32-A of the Code (Insolvency and Bankruptcy Code),” the court said in its order in the case of Varrsana Ispat, a firm promoted by REI Agro managing director Sandip Jhunjhunwala.
The ruling is expected to help speed up the insolvency process in similar cases where investigative agencies have attached assets of a corporate debtor.
“This order will unlock a lot of value in various assets owned by companies which are attached by any investigating agencies,” said Anil Goel who is the liquidator for Varrsana Ispat. “This order will become a landmark in the history of jurisprudence of insolvency law in India.”
Varrsana Ispat had come under the insolvency process in November 2017, and NCLT ordered winding up of the company on August 6 last year.
Goel was appointed as the liquidator to spearhead the winding up process. He later submitted to the court that liquidating the company as a ‘going concern’ had been hampered due to attachment of its properties by various agencies.
No one is willing to bid for the company in spite of several interested parties had approached him, Goel said.
Many agencies, including ED, Central Bureau of Investigation (CBI), Economic Offences Wing (EOW), Serious Fraud Investigation Office (SFIO), Central Economic Intelligence Bureau (CEIB), Central Bureau of Narcotics (CBN), and market regulator Sebi, had initiated criminal proceedings against the company or its promoters or associate concerns under various criminal offences. Most of it were in connection with an alleged bank fraud pegged at Rs 3,871.71 crore committed by REI Agro and its directors Sandip and Sanjay Jhunjhunwala and others.
After promulgation of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, Section 32A has been inserted to the code by giving much clarity in regards the assets under attachment.
“A liquidator can proceed with the sale of the assets even if it is under attachment by the respondent, to continue the time-bound process of liquidation under the provisions of the Code,” NCLT Kolkata said.