Dash Exports Private Limited Vs Directorate of Enforcement (Delhi High Court)
Prior PMLA Attachment Cannot Survive Qualifying IBC Resolution Plan: Delhi HC
The Delhi High Court has held that a property attachment under the Prevention of Money Laundering Act, 2002 (PMLA) cannot continue after approval of a resolution plan where the conditions of Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC) are satisfied.
Allowing Dash Exports Private Limited’s appeal, the Court rejected the distinction between attachments imposed before and after plan approval. It directed release of a Rs. 3.01 crore fixed deposit furnished as equivalent security for the attached property
Background of the Dispute
The Corporate Insolvency Resolution Process (CIRP) against Dash Exports commenced on February 26, 2020.
Asteroid Shelter Homes Private Limited submitted a resolution plan, which the Committee of Creditors approved with 99.22% voting support on November 27, 2020. An application seeking approval was subsequently placed before the NCLT.
While approval remained pending, ED provisionally attached the company’s property in Gautam Buddh Nagar, Uttar Pradesh, on August 25, 2021.
The NCLT approved the resolution plan on September 29, 2021, recording compliance with Section 30(2) and the resolution applicant’s eligibility under Section 29A. The PMLA Adjudicating Authority nevertheless confirmed the attachment on May 26, 2022.
Earlier Proceedings and Tribunal’s Decision
In earlier writ proceedings, the High Court permitted the attachment dispute to be pursued before the PMLA Appellate Tribunal.
Under that arrangement, Asteroid deposited Rs. 3.01 crore through an FDR in ED’s favour, enabling release of the property’s title deeds by the bank. The legal questions concerning attachment remained undecided.
The Tribunal subsequently dismissed the appeal. It held that Section 32A did not affect an attachment imposed before approval of the resolution plan.
It also considered a finding from the Special Court necessary regarding satisfaction of the statutory exceptions. Dash Exports challenged that decision under Section 42 of PMLA.
Appellant’s Arguments
Dash Exports submitted that the approved plan transferred control to Asteroid, an unrelated resolution applicant, satisfying Section 32A’s requirements.
ED had not alleged that Asteroid belonged to the former management, was a related party, or had abetted or conspired in the offence.
The appellant argued that continued attachment would defeat the statutory protection afforded to qualifying acquisitions through insolvency resolution. Asteroid had paid Rs. 28 crore towards the approved plan.
ED’s Arguments
ED maintained that Section 32A protected against attachments imposed after plan approval, but did not retrospectively nullify an earlier lawful attachment.
It also emphasised the distinct purposes of PMLA and IBC, arguing that property attached as proceeds of crime could not be treated like an ordinary unencumbered insolvency asset.
According to ED, the statutory immunity was conditional and could arise only upon satisfaction of the prescribed requirements.
Section 32A Covers Existing Attachments
The High Court relied principally on Manish Kumar v. Union of India, which upheld Section 32A and explained its safeguards.
It held that the distinction advanced by ED found no support in the provision’s language or the Supreme Court’s reasoning.
The trigger is approval of a qualifying resolution plan, accompanied by the required change in control. Once those conditions are fulfilled, an earlier PMLA attachment cannot continue against property covered by the plan.
The Court clarified that this interpretation does not retrospectively invalidate the attachment. Instead, Section 32A operates prospectively to release the property from continued attachment after the statutory trigger.
No Academic Special Court Finding Required
ED did not dispute that the property was covered by the approved plan or that control had passed to Asteroid. Nor did it allege circumstances bringing Asteroid within Section 32A’s disqualifying categories.
The Court therefore rejected the Tribunal’s insistence on a separate Special Court finding. Such adjudication would arise if ED actually asserted that an exception applied.
Without that dispute, requiring a finding would amount to seeking an academic determination in a factual vacuum.
The Court also drew support from Shiv Charan, while expressly noting that the Supreme Court had left the legal question open when the appeal in that matter ended through settlement.
Final Decision and Significance
The High Court set aside the Tribunal’s order and held that the provisional attachment could no longer subsist against the appellant in view of Section 32A(2).
It directed release of the Rs. 3.01 crore FDR within two weeks, allowed the appeal and made no order as to costs.
The ruling reinforces statutory protection for qualifying insolvency resolutions while preserving its limits. Responsible individuals remain liable, and the corporate debtor’s obligation to assist investigations continues despite the immunity granted to it and its covered property.
Cases Discussed
- Manish Kumar Vs Union of India & Anr. (Supreme Court), (2021) 5 SCC 1 — Relied upon for the conditions and effect of Section 32A immunity.
- Shiv Charan & Ors. Vs Adjudicating Authority under PMLA (Bombay High Court), 2024 SCC OnLine Bom 701 — Considered regarding attachment of property after insolvency resolution.
- Deputy Director, Directorate of Enforcement Vs Axis Bank & Ors. (Delhi High Court), 2019 SCC OnLine Del 7854 — Cited by ED on the distinct operation of PMLA.
- Varrsana Ispat Ltd. Vs Deputy Director, Directorate of Enforcement (NCLAT), 2019 SCC OnLine NCLAT 236 — Cited by ED concerning PMLA attachments.
- P. Mohanraj & Ors. Vs Shah Brothers Ispat (P) Ltd. (Supreme Court), (2021) 6 SCC 258 — Cited by ED on the relationship between IBC and other proceedings.
- S. Rajendran & Ors. Vs Deputy Commissioner of Income Tax (Benami Prohibition) (Supreme Court), (2026) 5 SCC 563 — Cited by ED regarding statutory protections.
- Rajiv Chakraborty, RP of EIEL Vs Directorate of Enforcement (Delhi High Court), 2022 SCC OnLine Del 3703 — Cited by ED concerning PMLA and IBC.
- Embassy Property Developments (P) Ltd. Vs State of Karnataka (Supreme Court), (2020) 13 SCC 308 — Cited by ED concerning NCLT jurisdiction.
- Nitin Jain, Liquidator of PSL Limited Vs Enforcement Directorate (Delhi High Court), 2021 SCC OnLine Del 5281 — Cited by ED on the conditions of Section 32A.
