High Court held that in cases where insolvency proceedings precede an attachment by the Enforcement Directorate, the liquidation process under the NCLT takes precedence.
The Kerala High Court Bench of Justice T.R. Ravi was hearing a petition and observed that in cases where insolvency proceedings precede an attachment by the Enforcement Directorate, the liquidation process under the NCLT takes precedence, allowing the sale of assets to proceed, provided the sale proceeds remain subject to the Enforcement Directorate's attachment order.
The petitioner, serving as the Liquidator for M/s. Atlas Gold Township (India) Private Limited, approached the High Court amidst ongoing liquidation proceedings initiated by the National Company Law Tribunal (NCLT). The property in question had been attached by the Enforcement Directorate, leading to a standstill in the liquidation process. The Liquidator requested an interim order to permit the sale of the property as part of the liquidation process by lifting the attachment order issued by the Enforcement Directorate.
The petitioner referenced judgments from the High Court of New Delhi in Rajiv Chakraborty Resolution Professional of EIEL v. Directorate of Enforcement [2022 SCC OnLIne Del. 3703] and the High Court of Gujarat in AM Mining India Private Limited v. Union of India (Special Civil Application No. 808 of 2023). These cases highlighted that when insolvency proceedings commence before an attachment order by the Enforcement Directorate, the proceedings before the NCLT should take precedence. Although the court did not delve into the merits of this contention, it recognized the need to safeguard the interests of all parties involved by permitting the sale to proceed.
Consequently, the High Court issued an interim direction to lift the attachment placed by the Enforcement Directorate on the properties involved in the liquidation. This order allows the Liquidator to sell the properties, with the stipulation that the proceeds from the sale remain in an account subject to the Enforcement Directorate's attachment order. Additionally, the Liquidator must keep the Enforcement Directorate informed of the sale details. This decision aligns with the interim order issued by the Hon’ble Supreme Court in Ashok Kumar Sarawagi v. Enforcement Directorate and Another, REEDLAW 2023 SC 08594 [SLP(C) No. 30092/2022].
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