Delhi High Court Quashes PMLA Proceedings Against Bhushan Power & Steel Limited
- ByAdmin --
- 07 Feb 2025 --
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In a significant legal development, the Delhi High Court has quashed proceedings under the Prevention of Money Laundering Act (PMLA) against Bhushan Power & Steel Limited (BPSL) in connection with a ₹47,000 crore bank fraud case. The court’s decision was influenced by the successful completion of BPSL’s Corporate Insolvency Resolution Process (CIRP), marking a notable intersection between insolvency proceedings and criminal investigations in India’s legal landscape.
The Core Issue
The case centers on allegations that BPSL was involved in a massive bank fraud, leading to significant financial losses for several banks. Following these allegations, the Enforcement Directorate (ED) initiated proceedings under the PMLA, aiming to attach assets and prosecute individuals associated with the company. However, during this period, BPSL underwent the CIRP under the Insolvency and Bankruptcy Code (IBC), resulting in its acquisition by JSW Steel Limited. The primary legal question was whether PMLA proceedings could continue against a company that had successfully undergone insolvency resolution and changed ownership.
Judicial Observations
The Delhi High Court observed that the objective of the IBC is to ensure the revival and continuation of the corporate debtor by protecting it from its past liabilities. The court noted that once a resolution plan is approved, the new management should not be burdened with past criminal liabilities, as this would defeat the purpose of insolvency resolution. The judgment emphasized that allowing PMLA proceedings to continue post-resolution would discourage potential investors from participating in the insolvency process, thereby undermining the IBC’s objectives.
Implications
This ruling has several significant implications:
1. Insolvency Proceedings vs. Criminal Liability: The judgment clarifies that upon the successful completion of the CIRP and approval of a resolution plan, the corporate debtor is shielded from past criminal proceedings, including those under the PMLA.
2. Investor Confidence: By protecting the new management from historical liabilities, the ruling is likely to boost investor confidence, encouraging more entities to participate in the insolvency resolution process.
3. Enforcement Directorate’s Approach: The decision may prompt the ED to reassess its strategy in initiating PMLA proceedings against companies undergoing insolvency, ensuring that actions align with the broader objectives of the IBC.
Conclusion
The Delhi High Court’s decision to quash PMLA proceedings against BPSL underscores the judiciary’s role in harmonizing insolvency and criminal laws in India. By prioritizing the revival of distressed companies and protecting new management from past liabilities, the ruling reinforces the IBC’s intent to facilitate effective resolution and maintain economic stability. This judgment is poised to serve as a precedent in future cases where insolvency proceedings intersect with criminal investigations.
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