AI Structured Summary
Not yet generated for this judgment
Judgment
ORDER
PER: MANNI SANKARIAH SHANMUGA SUNDARAM, MEMBER (JUDICIAL)
The present Application has been filed by the Applicant, Directorate of Enforcement, through its Deputy Director under the provisions of Section 60(5) of Insolvency and Bankruptcy Code, 2016 (“Code”), seeking the following reliefs:
1.To pass appropriate orders/directions under section 60(5) of IBC 2016, to stay the Corporate Insolvency Resolution Process (CIRP) initiated against Alchemist Limited
2.To recall order dated 28.01.2022 constituting the Committee of Creditors
3.To recall of order dated 10.02.2022 of appointing Shri Gaurav Misra as the Resolution Professional.
4.To pass any other order as this Hon'ble Tribunal may deem fit and proper.
2. SUBMISSIONS OF THE APPLICANT/DIRECTORATE OF ENFORCEMENT:
The Applicant/ED submitted that it is investigating two cases against the Alchemist Group under the provisions of Prevention of Money Laundering Act, 2002 (PMLA) vide ECIR/09/DLZO-1/2018 dated 11.07.2018 and ECIR/DLZO/05/2016 dated 28.09.2016 which was recorded on the basis of FIRs registered by the Kolkata Police and UP Police. Kolkata Police registered the FIRs under sections 406, 409, 420 r/w 120B of IPC against various persons of the Alchemist group including Kanwar Deep Singh, Chairman Emeritus of Alchemist Group wherein it was alleged that the accused persons entered into criminal conspiracy to induce the complainants/ victims/investors to invest into various lucrative schemes but after maturity of the schemes, they did not return the amount and thereby committed cheating. Offences under section 420 r/w 120B of IPC are scheduled offences under the PMLA, 2002.
The FIR registered by the UP Police i.e., PS Kotwali, Kanpur Nagar Case Crime No. 234/2019 under section 420 & 406 have since been taken over by the CBI, ACB, Lucknow. CBI has thus registered FIR No. RC0062021S0006 dated 09.04.2021 against accused persons of the Alchemist group including Kanwar Deep Singh, Ex-MP, Rajya Sabha. Section 420 of IPC is a scheduled offence under the PMLA, 2002.
It was further submitted that ECIR/DLZO/05/2016 was recorded by the applicant ED on the basis of Prosecution Complaint filed by SEBI against Alchemist Infra Realty Ltd for collection/mobilization of more than Rs. 1916 crores from the public under the Collective Investment Scheme (CIS) without even getting registered with SEBI. The said complaint was filed by SEBI under sections 12 & 24 of the SEBI Act. Section 24 of the SEBI Act is a scheduled offence under the PMLA, 2002.
The investigation in ECIR/09/DLZO-1/2018 revealed that Alchemist Holdings Limited and M/s Alchemist Township India Ltd had collected more than Rs. 1840 crores from the general public spread across various states of India. The said funds were mobilized by Alchemist Holdings Ltd and Alchemist Township India Ltd on the pretext of offering high returns and in the garb of giving plots/villas/flats to the investors/victims, however, neither plots/villas/flats/high returns were provided nor the money was refunded to the investors/victims/public. The funds were diverted/siphoned to other group companies of Alchemist Group like M/s Technology Parks Ltd and M/s Alchemist Ltd on the pretext of providing Inter-Corporate Loans.
An amount of Rs. 1314.89 crores & Rs. 11.68 crores were given as Inter Corporate Loans to M/s Technology Parks Ltd and M/s Alchemist Ltd respectively by Alchemist Holdings Ltd and Alchemist Township India Ltd.
The Applicant ED has filed a Prosecution Complaint dated 02.03.2021 in ECIR/09/DLZO-1/2018 against 08 entities/persons viz. (i) Alchemist Township India Limited (ii) Alchemist Holdings Limited (iii) Technology Parks Limited (iv) Alchemist Limited (v) Alchemist Realty Limited (vi) KDS Corporation Pvt Ltd (vii) Kanwar Deep Singh (viii) Bikram Bhattacharya before the Hon'ble Special Court (PMLA) Rouse Avenue Court, New Delhi.
A Provisional Attachment Order (PAO) dated 24.03.2021 for properties valued at Rs. 181.51 crores (approx.) has also been issued in ECIR/09/DLZO-1/2018. An Original Complaint (OC) No. 1450/2021 dated 19.04.2021 was also filed before the Ld. Adjudicating Authority under PMLA, New Delhi as per the provisions of section 5 (5) of PMLA, 2002. The same is pending confirmation before the Ld. Adjudicating Authority in view of the Hon'ble Delhi High Court order dated 13.09.2021 in W.P. (C) 9798/2021 & CM APPL. 30233/2021 in the matter of 'Kanwar Deep Singh Vs. Union of India & Ors'. The Hon'ble High Court had directed the Adjudicating Authority to suitably adjourn the matter to date after the next date of hearing.
The applicant issued 2nd PAO dated 28.01.2023 in ECIR/09/DLZO-1/2018 attaching properties amounting to Rs. 12.64 crores (approx.). Original Complaint (OC) No. 1905/2023 dated 24.02.2023 was filed before the Ld. Adjudicating Authority under PMLA and the same has been confirmed vide order dated 21.07.2023 by the Ld. Adjudicating Authority.
The Applicant issued 3rd PAO dated 09.03.2024 in ECIR/09/DLZO-1/2018 attaching properties amounting to Rs. 10.29 crores (approx.). Original Complaint (OC) No. 2234/2024 dated 05.04.2024 was filed before the Ld. Adjudicating Authority under PMLA and the same is pending confirmation before the Ld. Adjudicating Authority in view of the Hon'ble High Court of Punjab & Haryana order dated 15.07.2024 in CWP 13294/2024 in the matter of M/s Alchemist Airways Pvt Ltd Vs. Union of India & Ors'.
The Applicant issued 4th PAO dated 28.03.2024 in ECIR/09/DLZO-1/2018 attaching properties amounting to Rs. 29.45 crores (approx.). Original Complaint (OC) No. 2293/2024 dated 25.04.2024 was filed before the Ld. Adjudicating Authority under PMLA and the same is partially confirmed.
The applicant issued 5th PAO dated 10.08.2024 in ECIR/09/DLZO-1/2018 attaching properties amounting to Rs. 4.50 crores (approx.). Original Complaint (OC) No. 2412/2024 dated 06.09.2024 was filed before the Ld. Adjudicating Authority under PMLA and the same has been confirmed vide order dated 17.01.2025 by the Ld. Adjudicating Authority.
It was submitted that the Applicant/ ED has also attached properties valued at Rs. 239.29 crores (approx.) belonging to the Alchemist group in ECIR/DLZO/05/2016 vide PAO dated 24.01.2019. No Original Complaint (OC) in the said PAO dated 24.01.2019 has been filed by the applicant before the Ld. Adjudicating Authority under PMLA in view of the order dated 13.02.2019 of the Hon'ble High Court of Delhi in LPA 104/2019 in the matter of M/s Alchemist Infra Realty Ltd & Anr Vs. Directorate of Enforcement & Ors. The Hon'ble Delhi High Court vide the said order had stayed further proceedings under the PMLA. The Hon'ble High Court also directed that the Petitioner (Alchemist Infra Realty Ltd) shall not alienate the property in any manner during the pendency of the appeal.
It was further submitted that the investigation conducted by the Applicant/ED revealed that proceeds of crime amounting to Rs. 1314.89 crores diverted to M/s Technology Parks Ltd in the guise of Inter-Corporate Loan by Alchemist Township India Ltd was further siphoned of/ diverted by M/s Technology Parks Ltd to Alchemist Realty Ltd (Rs. 97 crores), M/s Alchemist Limited (Rs. 685 crores), M/s KDS Corporation Ltd (Rs. 138 crores) and M/s Alchemist Infra Realty Ltd (Rs. 328 crores).
Thus, it is clear that proceeds of crime amounting to Rs. 1314.89 crores first travelled from Alchemist Township India Ltd to M/s Technology Parks Ltd and thereafter an amount of Rs. 685 crores out of the Rs. 1314.89 crores was siphoned to Alchemist Ltd by M/s Technology Parks Ltd. It was submitted that Alchemist Ltd which is in receipt of proceeds of crime of Rs. 685 crores is the Corporate debtor in the instant matter before this Tribunal and Technology Parks Ltd which siphoned the said proceeds of crime is the biggest Financial Creditor with 97% voting rights in the matter.
Therefore, M/s Technology Parks Ltd and M/s Alchemist Limited have directly indulged and is actually involved in the process and activity of possession, use and layering of the proceeds of crime and committed the offence of money laundering as per Section 3 of PMLA, 2002 punishable under section 4 of PMLA, 2002.
The Applicant/ ED has attached properties to the tune of Rs. 477.68 crores (approx.) in its investigation conducted under PMLA in ECIR/09/DLZO-1/2018 & ECIR/DLZO/05/2016. It was submitted that these attached properties are proceeds of crime and this Tribunal does not have the jurisdiction to entertain any application which may lead to frustration of the attached properties.
During the course of further investigation by the Applicant/ED against the Alchemist Group in ECIR/09/DLZO-1/2018, it was revealed that an application has been filed under section 9 of Insolvency and Bankruptcy Code, 2016 before this Tribunal with a prayer to initiate the Corporate Insolvency Resolution Process (CIRP) against Alchemist Limited by M/s Sai Tech Medicare Pvt Ltd. It has been stated that M/s Sai Tech Medicare Pvt Ltd deals in the business of medicines and M/s Alchemist limited has been a customer of M/s Sai Tech Medicare Pvt Ltd.
It is further revealed that a Committee of Creditors (CoC) has been appointed in the instant matter which comprises of: M/s Alchemist Township India Limited (voting share 1.74%), M/s Technology Parks Limited (voting share 97%), M/s Alchemist Realty Limited (voting share 0.61%), Punjab National Bank (voting share 0.11%) and Bank of India (voting share 0.54%). However, it is pertinent to mention that this Tribunal vide order dated 09.09.2022 in IA/4176/ND/2022 in the instant matter has directed the proceedings to be not proceeded till the next date of hearing. The said order dated 09.09.2022 is continuing till date.
The Applicant conducted searches in the instant matter on 22.12.2023 at different premises u/s 17 of PMLA, 2002. During the search, it came to knowledge of the applicant that an application under section 9 of IBC has been filed before this NCLT, New Delhi, by the operational creditor M/s Sai Tech Medicare Pvt Ltd, against M/s Alchemist Limited. It was also gathered that Shri Gaurav Misra had been appointed as the Resolution Professional (RP) in the instant matter.
During investigation, statement of Mr. Gaurav Misra was recorded under section 50 of PMLA, 2002. Mr. Gaurav Misra stated that he has been appointed as the Resolution Professional by Hon'ble NCLT in the aforesaid matter on the recommendation of Committee of Creditors (CoC). The CoC in the matter include the companies of Alchemist group itself with an overwhelming majority of voting rights. The CoC, therefore, recommended Mr. Gaurav Misra, an ex-employee of Alchemist Group so that he can give undue favours to Alchemist Limited (Corporate Debtor). Further, it is pertinent to mention that out of the claims which have been approved by NCLT, majority of claims will be settled against the group companies of Alchemist Group only. Mr. Gaurav Mishra also disclosed during his statement under section 50 of PMLA, 2002 that he never disclosed the fact of being an employee of Alchemist group in the past. He stated that the NCLT never inquired the same from him.
Mr. Gaurav Misra, RP informed about the details of Creditors in the present matter which are mentioned below: M/s Sai Tech Medicare Private Limited Vs M/s Alchemist Limited:
Financial Creditors with claims amounting to Rs. 919.47 Crores (approx.)
Operational Creditors amounting to Rs. 16,69,53,789. Some of the Major operational creditors are:-
Other Creditors (other than Workmen and Employees) amounting to Rs. 3,69,60,724.
It was submitted that the accused companies which are a part of the Alchemist Group themselves have the maximum voting rights in the Committee of Creditors viz. Accused company M/s Technology Parks Limited (voting share 97%), Accused company M/s Alchemist Realty Limited (voting share 0.61%), Accused company M/s Alchemist Township India Limited (voting share 1.74%).
The Alchemist group has thus devised a sinister plan to get back its properties (which were acquired by way of fraud and cheating by it) through these the accused companies i.e., M/s Technology Parks Limited, M/s Alchemist Realty Limited and M/s Alchemist Township India Limited which also happen to be a part and parcel of Alchemist group. These entities have assisted the mobilizing companies in the process and activities of money laundering and are now before this Tribunal to stake their claim from their own group companies by filing claims.
In the matter of M/s Sai Tech Medicare Private Limited versus M/s Alchemist Limited (IA 5779/2022), this e NCLT vide orders dated 29.05.2023 and 12.10.2023 directed counsel for Resolution Professional to make ED a necessary party. However, Gaurav Misra, RP for corporate debtor has deliberately made delays in making ED a necessary party for the benefit of Corporate Debtor (Alchemist Ltd), the same is evident from the Order dated 12.10.2023.
Further, Mr. Gaurav Misra, RP in the instant matter also disclosed in his statement under section 50 of PMLA, 2002 that the amendment to the memo of parties was filed by him (in compliance of NCLT order dated 29.05.2023 and 12.10.2023) on 18.11.2023. However, the amended memo of parties for making ED a necessary party was never served to the applicant ED on the right address instead was sent to ED on an old office address of the Applicant i.e., MTNL Building, Jawahar Lal Nehru Marg, New Delhi-110002. The Applicant ED's office was shifted way back in January 2022 from the said address to its new address on Dr. APJ Abdul Kalam Road, New Delhi. Therefore, it is apparent that delay in filing the amended memo of parties for making ED a party was deliberate ploy by the RP to keep the ED in dark about the proceedings going on before this Tribunal.
It was further submitted that Alchemist Limited has been arrayed as an accused in Prosecution Complaint dated 02.03.2021 filed by the applicant ED before Hon'ble Special Court. It has received direct proceeds of crime from Alchemist group companies including M/s Technology Parks Ltd.
Therefore, from the above facts it can be concluded that Alchemist Group under a well-hatched conspiracy adopted the route of insolvency resolution through its group companies against its own companies and got its ex-employee appointed as RP to receive the funds (proceeds of crime) through legal channel in their companies by misleading this Hon'ble Tribunal. They are misusing the insolvency resolution process to siphon off funds and to evade criminal liability under PMLA, 2002.
xxviii. The Applicant submitted that the Alchemist Group is misusing the IBC process to obtain immunity under Section 32A, thereby frustrating PMLA proceedings. Further, the RP qualifies as a “related party”/“connected person” under Sections 5(24) and 29A of IBC, rendering him ineligible to act in this matter. The participation of related parties with criminal allegations as dominant CoC members violates the principles of fairness and independence in CIRP. Reliance has been placed on the decisions of the Hon’ble Delhi High Court in Deputy Director, Directorate of Enforcement Delhi v. Axis Bank & Ors. 2019 SCC OnLine Del 7854 and Hon’ble NCLT in Shakti Bhog Snacks Ltd. in IA-3695-2023 in IB-1713-2019.
It was also submitted that Section 32A of the IBC does not extinguish the offence. It only discharges the liability of the corporate debtor which has been taken over by a new promoter/entity, thereby acknowledging the clean slate theory. Section 32A explicitly permits prosecution of the erstwhile promoters of the Corporate Debtor and therefore there is sufficient legislative guidance that the offence committed cannot go unpunished. The obligation of the new entity which has stepped in to the shoes of the Corporate Debtor, is also contemplated under law, wherein they are not only obligated to cooperate, but also provide assistance to the investigating authority, notwithstanding the immunity granted to them. Reliance has been placed on Manish Kumar Union of India, (2021)5 SCC 1, Anil Kohli v. Directorate of Enforcement, Company Appeal (AT) (Insolvency) No. 389 of 2018.
It is a settled law that the Hon’ble NCLT and NCLAT have no jurisdiction to deal with the properties that have been attached under the provisions of the Prevention of Money Laundering Act, 2002. Reliance has been placed on Kiran Shah vs Enforcement Directorate[Company Appeal (AT) (Insolvency) No. 817/2021, Ashok Kumar Sarawagi v. Enforcement of Directorate &Anr., Comp. App.(AT)(Ins.) No. 411 of 2022, Rajiv Chakraborty Resolution Professional of EIEL vs. Directorate of Enforcement, 2022 SCC OnLine Del 3703, Embassy Property Developments Pvt. Ltd. vs. State of Karnataka & Ors. 2019 SCC OnLine SC 1542, Shailendra Singh vs. Directorate of Enforcement [IA 4698/2023, dated11.02.2025 Ingram Micro India Pvt. Ltd. v. Dr. Jain Video on Wheels Ltd. (Order dated 02.09.2025) in C.P. (IB) No. 843 (ND) of 2018I.A. No. 4373 of 2021 & I.A. No. 5680 of 2023, and Deputy Director, Directorate of Enforcement Delhi v. Axis Bank & Ors. 2019 SCC OnLine Del 7854.
The effect of Section 14 of the Code does not take away from the powers of the ED to attach proceeds of crime in possession of the Corporate Debtor under PMLA. Reliance has been placed on Varrsana Ispat Ltd vs. The Deputy Director, Directorate of Enforcement Company Appeal (AT) (Insolvency) No. 493 of 2018, Rajiv Chakraborty, Resolution Professionalof EIEL v. Directorate of Enforcement [2022/DHC/004739], Deputy Director, Directorate of Enforcement v. Axis Bank [2019 SCC OnLine Del7854].
It was further submitted that the ED intervened promptly upon learning of the CIRP developments, and the risk posed to the prosecution due to related-party control of the CoC. The RP’s delay in impleading ED despite NCLT directions (orders dated29.05.2023 and 12.10.2023) shows mala fides, not ED’s conduct. The Service of documents to ED’s old address despite knowledge of the office shift in January 2022 further shows deliberate obstruction.
xxxiii. It is further submitted that there is no legal bar on PMLA proceedings and CIRP running in parallel, as both statutes operate in distinct fields. However, where the outcome of CIRP particularly through a resolution plan steered by related-party CoC members who are themselves accused would undermine ongoing PMLA prosecution or frustrate recovery of proceeds of crime, the mandate of Section 71 PMLA and the judicial dicta in Shakti Bhog Snacks Ltd. (supra), Rajiv Chakraborty (supra), and Axis Bank (supra) make it clear that the PMLA has overriding effect. The corporate insolvency framework cannot be used to nullify or dilute criminal liability under the PMLA, and NCLT is duty-bound to ensure that its orders do not render the statutory process under the PMLA nugatory.
The ED further submitted that from the analysis of records, including data obtained from the Registrar of Companies (RoC) and bank statements, it has been established that M/s Alchemist Township India Limited collected approximately Rs. 1,403 crore during the period from FY 2013-14 to FY 2017-18 from gullible investors through false promises of allotment of plots, flats, villas and returns on investments. Instead of using the said funds for the intended purposes, M/s Alchemist Township India Limited diverted the same to its group companies in the form of Inter-Corporate Deposits (ICDs). The balance sheet of M/s Alchemist Township India Limited for the financial year 2017-18 reflects outstanding ICDs of Rs. 1,314.89 crore to M/s Technology Parks Limited and Rs. 11.68 crore to M/s Alchemist Limited, aggregating to Rs. 1.326.57 croгe.
The Directorate of Enforcement, having identified these tainted funds, has attached equivalent value of assets in the hands of M/s Alchemist Limited under Provisional Attachment Order (PAO) No. 02/2021 and PAO No. 06/2024. The attached properties include land and building at F-5, Rajiv Gandhi IT Park, Chandigarh; land situated at Village Dappar, Tehsil Derabassi, Punjab; land at Village Chanalon, Tehsil Kharar, District Ropar, Punjab; and other immovable properties located in Katni, Madhya Pradesh and Sirmaur, Himachal Pradesh aggregating to a value exceeding Rs. 160 crore. The said attachments have been confirmed by the Adjudicating Authority under Section 8(3) of the PMLA and form part of the prosecution complaint filed beforethespecial court PMLA.
It was submitted that the funds forming the basis of the CoC claims, particularly those of M/s Alchemist Township India Limited and M/s Technology Parks Limited, are themselves proceeds of crime arising out of the fraudulent mobilization of public funds. Permitting these related entities to participate in the CIRP or to benefit under any resolution plan would effectively amount to legitimizing the proceeds of crime and defeating the very object of the PMLA. The legislative intent behind the PMLA is to deprive offenders of the benefits derived from criminal activity and to prevent the reintegration of tainted money into the financial system. In the present case, the proceeds of crime collected from investors by M/s Alchemist Township India Limited have been systematically layered through M/s Technology Parks Limited and ultimately integrated into the accounts of M/s Alchemist Limited, which is now under CIRP. Accordingly, it was submitted that the properties attached under PAO Nos. 02/2021 and 06/2024, having been confirmed under Section 8(3) of the PMLA, are liable to be confiscated to the Central Government under Section 8(5) of the Act. The proceeds realized from such confiscation may be utilized for restitution to the defrauded investors in terms of Section 8(8) of the PMLA. Since the attached assets represent the direct or equivalent value of funds fraudulently collected from investors and laundered through the aforesaid group entities, their confiscation and restitution would serve the ends of justice and uphold the twin objectives of the PMLA and the IBC.
xxxvii. The Hon'ble Supreme Court, in National Spot Exchange Ltd. v. Union of India (2025 INSC 694), underscored that the paramount objective in such economic offences is the restitution of investors' monies and prioritized investor restitution over competing statutory claims.
3. SUBMISSIONS OF THE RESPONDENT/ RESOLUTION PROFESSIONAL:
The Resolution Professional submitted that it is a matter of record and evidently demonstrated by the documents produced by the Applicant itself that the RP is in no manner related to or having any connection with accused persons or the alleged crime. It is pertinent to mention herein neither the prosecution complaint nor the FIR or ECIR has named the RP which makes it crystal clear that the RP is not an accused person.
It was submitted that the Applicant is only an investigation agency and not a judicial authority hence it is irrelevant for this Tribunal to consider the allegations of such agency while deciding the issue of CIRP under the Code. The provisions under PMLA provides trail for the accused by a Special Court which is the sole authority to decide upon the proceeds of crime. Without any finding and order of the Special Court on money laundering any document produced by the Applicant is not only premature but also contrary to the principles of natural justice.
It was also submitted that the RP has been appointed by the CoC and this Tribunal has confirmed the same through Order dated 10.02.2022. The RP has already disclosed his employment with the CD before the Insolvency and Bankruptcy Board of India (IBBI). Hence, complete disclosure by the RP as regards his employment with the CD as Manager – Compliance in the year 2009-2011 was done.
The RP satisfies the conditions specified in the Regulation 3 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) for acting as the RP, hence the allegations made by the Applicant are baseless and shall be outrightly rejected. The fact that the RP was an employee of the CD almost 13 years back bears no disqualification upon the R-1 being appointed as the RP of the CD. Further, the allegations made by the Applicant in this regard are not of relevance at all, as these submissions were merely of prejudicial nature and no specific relief as regards the same has been sought.
The objects and reasons for the enactment of IBC and PMLA are distinct as both operate in different field of law which has been specifically held by Hon'ble Delhi High Court in Deputy Director Directorate of Enforcement Delhi vs Axis Bank (2019) 259 DLT 500. The foundation of IBC is to reorganise, restructure and resolution of the Corporate Debtor in time bound manner whereas PMLA focus on securing the integrity of the financial system and dismantling the web of money laundering. There is no embargo upon the continuity of the parallel proceeding under PMLA and IBC as both statues are independent and have different legislative objectives.
The Applicant had not considered the special status as both seek to subserve independent and separate legislative objectives. Therefore, the instant Application preferred by the Applicant is a malevolent attempt seeking intervention in the ongoing CIRP of the Corporate Debtor which is not permissible under law.
This Tribunal is the creation of the statue and their jurisdiction is conferred by the Code and is limited to that extend only. Reliance is placed on Hon'ble Supreme Court judgement ES Krishnamurthy & Ors, Vs Bharath Hi Tech Builders Private Limited (2022) 3 SCC wherein the scope of jurisdiction vested upon the Tribunals have been categorically defined and it clearly bars any interference or embargo by any independent proceedings. Similarly, in Kiran Shah vs Enforcement Directorate Kolkata 2022 SCC Online NCLAT 2 answered the question that this Tribunal is not empowered to deal with the matters of PMLA. Thus, in light of the same the present application is not maintainable and is liable to be set aside.
Section 238 of the Code deals with overriding effect over other law when anything is inconsistent in any law for time being in force. The Applicant in guise of the same in the present application is seeking stay of the CIRP which is unwarranted and invalid with the current position of law.
The Applicant had filed this false and frivolous Application raising allegations which are baseless and claiming the reconstitution of the CoC on the basis of the outdated documents obtained from the third party websites with no authentic or verified information.
The CD is a listed company and each and every updated information of the CD is available on the website of the Ministry of Corporate Affairs and other government websites. However, the Applicant had filed the instant application with sole intention to harass the RP and to derail the instant CIRP based on outdated and false documents just to take wrongful gain.
Section 5(24) of the IBC defines the term 'related party", which is an exhaustive definition captures all kinds of interrelationships between a financial creditor and a CD, to enable an interim resolution professional/resolution professional to access whether a party filing a claim as a 'financial creditor' is to be classified as a 'related party and thus deprived of its right of participation, representation and voting in the CoC in terms of Section 21(2) of the IBC
As held by the Hon'ble Supreme Court in Phoenix ARC Private Limited Vs. Spade Financial Services Limited & Ors. (2021) 3 SCC 475; Para 70, 75, 81, 82, 88, 90, 98, 99, 100, 101, 103 & 104, although the related party definitions are prescribed in the Companies Act, 2013 and also by Securities Exchange Board of India, the definition provided in the IBC is complete and exhaustive therefore while conducting the related party check, the RP is bound to limit to Section 5(24) of the IBC. Further, the Hon'ble Supreme Court has held that in order to ascertain if a person is a related party of the CD, the relationship under Section 5(24) of the IBC is to be seen "in praesenti".
It was submitted that ATIL., TPL and ARL. do not fall under the scope of Section 5(24) of the IBC. It is further stated that the allegations made by the Applicant is baseless as the bare perusal of the records of the CD and the information of the R-2 to R-4 available in the public domain did not indicate that ATIL, TPL and ARL are related parties of the CD. It is submitted that the Applicant has failed to provide any documents/ information that could adduce the ATIL, TPL and ARL come within the ambit of Section 5(24).
All the above persons as alleged by the Applicant to have relation with the CD or the ATIL, TPL and ARI do not fall within the meaning of Section 5(24) of the IBC. Further, Mr. Bikram Bhattacharya tendered his resignation on 11.06.2020 from the CD, which information is readily available on the website of the Ministry of Corporate Affairs ("MCA") The date of uploading of the DIR-11 Form is immaterial as the same is a mere non-compliance of the timelines as prescribed.
In view of the above, ATIL, TPL and ARL are not classified as "related parties" to the CD in the instant CIRP and arriving at this opinion, the RP has relied on the exhaustive definition provided under Section 5(24) of the Code and the interpretation afforded to the same by the Hon'ble Supreme Court in Phoenix ARC (supra). It is reiterated that the Applicant has filed the instant Application merely to derail the CIRP of the CD. It is further submitted that the Applicant had failed to explain the under what provision of Section 5(24) of the IBC do ATIL, TPL and ARL fall, so that the same can be classified as "related parties", and instead placed reliance on outdated documents from third party websites and filed the false and frivolous Application.
It is alleged by the Applicant that the address of the CD, ATIL, TPL and ARL are common. It is stated that merely having office at same place does not amount to related party and the same does not align with the Section 5(24) of the Code and the RP while verifying the same has to look whether the parties are related or not within the exhaustive definition given in Code. It is submitted that address which is mentioned is a commercial building were several companies are situated in the same building with this analogy of the Applicant all the companies in the said commercial building are related parties.
The members of the CoC of the CD are also co-accused in the alleged complaint of the Applicant and the same does not bar for any disqualification under Section 5(24) of the Code. Besides, the allegation made herein regarding related party is not covered under Section 5(24) of the Code and is liable to be dismissed with heavy cost and the Applicant be punished for stalling the CIRP for more than 3 years.
4. ANALYSIS AND FINDINGS:
We have heard the submissions of both the parties and have perused the record.
The present Application has been filed by the Directorate of Enforcement (“ED”) under Section 60(5) of the Code, seeking inter stay of the CIRP initiated against the Corporate Debtor herein Alchemist Limited, recall of the constitution of the Committee of Creditors (“CoC”) and recall of the order appointing the Resolution Professional (“RP”).
The Applicant has submitted that it is investigating multiple cases against the Alchemist Group under the provisions of the PMLA arising out of scheduled offences registered by the Kolkata Police, UP Police, CBI and SEBI, involving large-scale cheating, criminal conspiracy and illegal mobilization of public funds. It has been contended that entities of the Alchemist Group collected thousands of crores from the general public under fraudulent investment schemes and Collective Investment Schemes, and that substantial portions of such funds amounting to over Rs. 1,300 crores were diverted and layered through group companies, including Technology Parks Limited and ultimately siphoned into the Corporate Debtor, Alchemist Limited, in the guise of inter-corporate loans.
The Applicant has detailed the issuance of multiple Provisional Attachment Orders under the PMLA attaching properties many of which have already been confirmed by the Adjudicating Authority under the PMLA, and form part of pending prosecution complaints before the Special Court.
It is the Applicant’s case that the CIRP against Alchemist Limited was initiated through a Section 9 application and is being controlled by a CoC dominated by group companies of the Alchemist Group itself, M/s Technology Parks Limited (voting share 97%), Accused company M/s Alchemist Realty Limited (voting share 0.61%), Accused company M/s Alchemist Township India Limited (voting share 1.74%), despite being a recipient and conduit of proceeds of crime. It is alleged that the CoC is thus entirely compromised and lacks independence. The Applicant has further alleged that the RP was an ex-employee of the Alchemist Group, that this material fact was not disclosed before this Tribunal at the time of appointment, and that the RP acted in a manner intended to keep the ED out of the proceedings despite express directions of this Adjudicating Authority to implead the ED.
According to the Applicant, the CIRP has been deliberately used as a device to legitimize proceeds of crime, regain control over attached assets, and ultimately obtain immunity under Section 32A of the Code, thereby frustrating ongoing criminal prosecution and confiscation proceedings under the PMLA.
The Resolution Professional, on the other hand has contended that he is not named as an accused in any FIR, ECIR or prosecution complaint, and that mere past employment with the Corporate Debtor more than a decade ago does not render him ineligible under the Code or CIRP Regulations. It has been submitted that all disclosures regarding his past employment were duly made before the Insolvency and Bankruptcy Board of India, and that his appointment was confirmed by this Adjudicating Authority after due consideration.
The RP has further contended that the ED is only an investigating agency and not a judicial authority, and that until a finding of guilt is recorded by the Special Court under the PMLA, allegations of money laundering cannot be relied upon to interfere with CIRP. It has been argued that the IBC and the PMLA operate in distinct fields, that parallel proceedings are permissible, and that Section 238 of the Code gives overriding effect to the IBC in case of inconsistency. According to the RP, this Adjudicating Authority lacks jurisdiction to examine attachment of properties under the PMLA or to stay CIRP on the basis of allegations arising therefrom. The RP has also denied that the financial creditors forming part of the CoC are “related parties” within the meaning of Section 5(24) of the Code, contending that the definition is exhaustive and must be applied strictly in praesenti. It has been submitted that the Application is mala fide and has been filed only to derail the CIRP which has already been stalled for a considerable period.
Though the Application has been styled under Section 60(5) of the Code, the pleadings, material placed on record and the nature of allegations squarely raise issues touching upon fraudulent initiation and malicious conduct of CIRP, warranting examination under Section 65 of the Code.
At the outset, it is necessary to underscore that the Insolvency and Bankruptcy Code, 2016 is a beneficial economic legislation intended to ensure timely resolution of genuine insolvency in a transparent, creditor-driven and non-adversarial manner. The Code was never envisaged as a mechanism to sanitize tainted transactions, legitimize proceeds of crime, or provide a protective umbrella against penal consequences arising under other statutes.
Section 65 of the Code embodies a clear legislative mandate that the insolvency resolution process shall not be invoked fraudulently or with malicious intent, or for any purpose other than resolution of insolvency. The provision is preventive as well as curative in nature, empowering the Adjudicating Authority to interdict abuse of process at any stage. The language of Section 65 does not restrict its invocation only upon a formal application. Where facts placed on record, pleadings, or surrounding circumstances prima facie disclose collusion, fraud or mala fide intent, the Adjudicating Authority is fully empowered to take suo motu cognizance.
It is also pertinent to mention that a plea under Section 65 is not confined to any particular stage of the proceedings and can be examined at any time, including after admission of the petition, if material surfaces indicating that the process was invoked for purposes other than genuine insolvency resolution. The Adjudicating Authority is duty bound to ensure that the Code is not used as a device to defeat legitimate claims or to perpetrate fraud upon stakeholders, and therefore, an allegation under Section 65 can always be entertained, scrutinised, and adjudicated whenever credible grounds are brought to the notice of the Bench.
In the present case, the CIRP against the Corporate Debtor has been initiated through a Section 9 application, but the subsequent conduct of the process reveals that the control of the CIRP vests almost entirely with group entities of the Corporate Debtor itself. The Committee of Creditors is overwhelmingly dominated by M/s Technology Parks Limited, holding approximately 97% voting share, along with other Alchemist Group entities. These very entities are alleged recipients, conduits, or beneficiaries of proceeds of crime arising out of large-scale cheating and fraudulent mobilization of public funds, and are facing prosecution and attachment proceedings under the PMLA.
A CoC so constituted, where related and interested entities accused of criminal misconduct exercise near-total control, fundamentally erodes the independence, commercial wisdom, and fairness that underpin the CIRP mechanism. The Code presupposes a CoC acting at arm’s length from the Corporate Debtor, not a self-controlled loop where the alleged wrongdoers sit in judgment over their own claims.
The Applicant has placed extensive material showing that funds collected from the public by Alchemist Group entities were layered through inter-corporate transactions and ultimately routed into the Corporate Debtor. Substantial assets corresponding to these funds have already been attached under the PMLA, with 2 attachment orders having attained confirmation under Section 8(3) of the Act.
The concern raised is not merely academic. If the CIRP were permitted to culminate in a resolution plan driven by the same group entities, it would result in:
legitimization of claims arising out of tainted transactions, reintegration of proceeds of crime into the financial system, dilution or frustration of attachment and confiscation proceedings, and potential invocation of Section 32A immunity in a manner never contemplated by the legislature.
The insolvency process cannot be allowed to be converted into a laundering mechanism cloaked in statutory legitimacy.
There is no quarrel with the settled proposition that the IBC and the PMLA operate in distinct fields and may, in appropriate cases, proceed in parallel. However, the doctrine of parallel operation cannot be stretched to permit abuse of one statute to defeat the object of another.
While NCLT does not adjudicate upon criminal liability or attachment under the PMLA, it must also ensure that its orders do not render PMLA proceedings nugatory. The moratorium under Section 14 and the overriding effect under Section 238 of the Code do not grant a license to launder proceeds of crime or to reclaim attached assets through insolvency proceedings.
In the present case, the material suggests that the CIRP itself has been initiated and steered in a manner that directly undermines ongoing PMLA proceedings. Such a situation obligates this Tribunal to step in to prevent abuse of its process.
While the RP is not an accused in the criminal proceedings, the allegations regarding his past association with the Alchemist Group, the overwhelming control of the CoC by accused group entities, and the delays in impleading the ED despite express directions of this Adjudicating Authority, cumulatively raise serious concerns regarding the perception of independence and fairness of the resolution process.
Considering the totality of circumstances, the nature of allegations, confirmed attachments under PMLA, domination of the CoC by accused group entities, prima facie layering of funds, and the risk of misuse of insolvency immunity, this Adjudicating Authority is satisfied that the CIRP has not been initiated or conducted for the genuine purpose of insolvency resolution.
Permitting the CIRP to continue would not only prejudice statutory proceedings under the PMLA but would also undermine the integrity of the insolvency regime itself. This Tribunal cannot be a silent spectator to such abuse.
Accordingly, this Tribunal holds that this is a fit and appropriate case to invoke the powers under Section 65 of the Code suo motu, and to recall the CIRP initiated against the Corporate Debtor, as the process stands vitiated by fraud, collusion and malicious intent.
Having regard to the principles of Section 65, this Adjudicating Authority orders as follows:
a. In view of the reasons mentioned above, the IA 1997/2024 stands allowed in the following terms.
b. Having regard to the facts and circumstances of the case, we are constrained to recall and set aside the admission order dated 30.11.2021 secured by the Operational Creditor, Sai Tech Medicare Private Limited in IB-275(ND)/2020 in relation to the Corporate Debtor in exercise of powers conferred under Rule 11 of the NCLT Rules, 2016 to meet the ends of justice.
c. In view thereof, the order of admission dated 30.11.2021 and the CIRP initiated thereof in relation to the Corporate Debtor, Alchemist Limited is cancelled and terminated. The moratorium as declared under Section 14 of IBC, 2016 also stands withdrawn. The appointment of the Resolution Professional and all the actions taken by the Resolution Professional consequent to his appointment are brought to nullity. The Resolution Professional is directed to hand over the management of the affairs of the Corporate Debtor to the Ex-management/suspended board of Directors of the Corporate Debtor.
d. The Operational Creditor Sai Tech Medicare Private Limited is hereby directed to pay all CIRP costs, fees, and expenses of Resolution Professional within a week, and Resolution Professional is directed to file a memo of compliance in this regard to this Adjudicating Authority within a week from such payment.
e. The Legislature has incorporated Section 65 of the Code, enabling the Adjudicating Authority to impose a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees on any person who initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be. We are of the view that the application under Section 9 is a gross abuse of the process of law. We, therefore, impose a penalty of Rs. 5,00,000/- (Rupees Five Lakh Only) to be deposited by the Operational Creditor, Sai Tech Medicare Private Limited to the Insolvency and Bankruptcy Board of India (IBBI) within ten days from the date of passing of this order. Failing this, the amount shall be realized through the due process of law. The Operational Creditor is directed to file a memo of compliance in this regard to this Adjudicating Authority within a week of the payment.
f. The Registry is directed to send a copy of this order to the Insolvency and Bankruptcy Board of India (IBBI) for their record.
g. The Registry is further directed to send a copy of this order to the Regional Director, Northern Region, Ministry of Corporate Affairs and Registrar of Companies of NCT of Delhi and Haryana, Ministry of Corporate Affairs for necessary action as these authorities may contemplate and deem fit and necessary.