Value Wise Consultancy Private Limited Vs. The Deputy Director Directorate of Enforcement & Ors. - The writing is on the wall for the appellant: whether to attach or not to attach the properties of a corporate debtor is for the Enforcement Directorate to decide, and where there has been any such attachment by the ED, the adjudicatory mechanism created under the PMLA alone will have jurisdiction to deal with any challenge to it.

 NCLAT (2026.06.30) in Value Wise Consultancy Private Limited Vs. The Deputy Director Directorate of Enforcement & Ors. [Company Appeal (AT) (Ins) No. 1226 and 1227 of 2022] held that;

• This in turn leads to a concomitant conclusion that, if the purpose behind Sec.14 is to freeze the existing liability of the corporate debtor as on the date when it is admitted to CIRP as part of the legislative strategy to preserve the status quo for a convenient resolution of insolvency of the CD, then operation of Sec.14 must be limited to those litigations and proceedings, both pending and prospective, either civil or criminal, which hold the likelihood of adding on to the existing debt liability of the corporate debtor and not others.

• Needless to state that those crimes which spring from penal statutes of public law nature, with no prospect of adding to the debt-liability of civil nature of the CD, cannot be allowed to be impacted by the moratorium, even if they affect the net asset of the CD available for CIRP or liquidation.

• Supreme Court in Embassy Property Developments Private Limited Vs State of Karnataka and Others [(2020)13 SCC 308], where it was held that the jurisdiction of the Adjudicating Authority is limited by the extent to which it is required to be exercised for the purposes of working of the IBC and no more. After all, both IBC and the PMLA, are legislations of the Parliament and as shown earlier, they operate in different domains with different objectives to achieve, and do not overlap in their respective operations.

• Indeed, the IBBI has also taken note of the issue on jurisdiction, and hence in paragraph 2 of its Circular No. IBBI/CIRP/87/2025, dated 04th November, 2025, it has advised the resolution professionals that “where the assets of the corporate debtor are attached by the ED under the provisions under PMLA, the Insolvency Professional may file an application before the Special Court under Sections 8(7) or 8(8) of the PMLA for restitution of such assets”. Necessarily, the tribunals constituted under the IBC are not the forums which can entertain any plea against the ED.

• The writing is on the wall for the appellant: whether to attach or not to attach the properties of a corporate debtor is for the Enforcement Directorate to decide, and where there has been any such attachment by the ED, the adjudicatory mechanism created under the PMLA alone will have jurisdiction to deal with any challenge to it.

Blogger’s Comments; All said and done, the principal objectives of attachment & confiscation of tainted property in PMLA is that a person/company is not able to enjoy the proceeds of crime. Under IBC, as soon as the application under section 7, 9 or 10 is accepted, the control of the company is divested from its promoters/directors/existing management & the promoters/directors are prevented from taking back the control of the company (Section 29A & section 32A) either during insolvency proceedings or during liquidation process, thus fulfilling the principal objectives of PMLA.

Rather, attachment of company’s property (particularly liquid assets i.e. bank accounts etc.) under the provisions of PMLA, during insolvency/liquidation proceedings frustrate the principal objectives of the IBC, to put the assets of insolvent companies in the beneficial use of the society. In contrast due  to protracted proceedings in PMLA the value of the assets gets diminished, which ultimately is the loss of the society.

In my view, the IBC may provide for deemed suspension of PMLA attachment orders during the CIRP & Liquidation process, for smooth conduct of CIRP & Liquidation process.

Excerpts of the Order; 

# 1. The present set of twin appeals are preferred by the Liquidator of M/s Siddhi Vinayak Logistics Ltd., challenging the Common Order dated 19.07.2022 passed by the Adjudicating Authority (NCLT, Ahmedabad) dismissing his applications in IA No. 453 of 2019 and IA No. 773 of 2021 in CP (IB) No. 89 of 2017.

# 2. To provide a brief overview of this case, the issue involved in these appeals relates to the authority of the Enforcement Directorate to withdraw the amount from a bank account of the CD which the former had attached earlier prior to the commencement of CIRP of the CD, but transferred it during the subsistence of moratorium. Liquidator contends that this sum must be part of the liquidation asset of the CD, but it was negated by the Adjudicating Authority principally on the ground of perceived lack of jurisdiction in the Adjudicating Authority.

Facts:

# 3. The genesis of the dispute lies in the investigation which the Directorate of Enforcement has commenced pursuant to the FIRs registered againstthe Corporate Debtor, alleging bank-fraud and diversion of loan funds by the Corporate Debtor and its promoters. In furtherance thereof, vide communications dated 24.04.2017 the ED issued a notice under Section 50 of the Prevention of Money Laundering Act (PMLA, for short) to various debtors/customers of the Corporate Debtor and directed them not to transact with or release monies to the Corporate Debtor. In short, this is the setting:

a) On 08.06.2017, ED issued an Order of provisional attachment, attaching movable and immovable assets of the CD and related entities/persons.

b) On 24.10.2017, this provisional order of attachment was confirmed by the Adjudicating Authority constituted under the PMLA in terms of Sec.8(4) of the said Act.

c) In between, i.e., after the provisional order of attachment and the subsequent order of confirmation of the said Order, on 12.09.2017, the CD was drawn into CIRP pursuant to an Order of the Adjudicating Authority under the IBC in CP (IB) No. 89 of 2017. Consequently, moratorium under Sec. 14 of the IBC came into operation. In effect, the second mentioned Order confirming provisional attachment of the CD’s assets was passed during the moratorium.

d) Subsequently, on 12.12.2018, the Appellate Tribunal under the PMLA, set aside the earlier order of attachment. The Enforcement Directorate promptly challenged this before the Bombay High Court and it is pending. It may however, be mentioned that the High Court did not stay the operation of the Order of the Appellate Tribunal under the PMLA.

e) While things stood thus, on 02.08.2018, during the subsistence of the moratorium of the CD, the Enforcement Directorate withdrew a sum of ₹.2,29,10,131.06 from the account of the corporate debtor with M/s ICICI Bank.

f) The CIRP against the CD failed and on 19.11.2018 its liquidation was ordered.

g) When the liquidation process was underway, on 18.06.2019, the Enforcement Directorate issued a fresh order of Provisional Attachment of 6,170 vehicles belonging to the Corporate Debtor. This Order of attachment came to be partially confirmed vide its order dated 03.12.2019, when the Adjudicating Authority under the PMLA approved the attachment of only 1,344 vehicles and not the remaining 4,826 vehicles which were already traced by the

Liquidator and have not been taken possession of.

# 4. The Liquidator would now file two applications under Sec.60(5) of the IBC, the details whereof are:

a) I.A No. 453 of 2019, inter alia, for the withdrawal of the provisional orders of attachment dated 08.06.2017 and 18.06.2019 and for remittance/refund of ₹2.29 crores withdrawn by the ED from the account of the Corporate Debtor.

b) I.A No. 773 of 2021, for quashing and setting aside the communications of the ED, dated 24.04.2017 issued under Sec.50 of the PMLA and consequential directions to the debtors/customers of the Corporate Debtor, including Ashok Leyland Ltd., Haldia Petrochemicals Ltd., Sonalika International Tractors Ltd. and Hindustan Coca Cola Beverage Pvt. Ltd. to release the admitted outstanding dues payable to the Corporate Debtor. The ground on which the liquidator rested his plea is that the actions of ED were in direct violation of the moratorium under Section 14 of the IBC and that they had the effect of frustrating CIRP/liquidation by depriving the Corporate Debtor of its receivables and assets.

# 5. The ED opposed these applications and contended that the proceeding under the PMLA are independent criminal proceedings relating to “proceeds of crime”, that the PMLA is a special statute with overriding effect on the IBC and that the tribunals constituted under the IBC lacked jurisdiction to interfere with the attachment proceedings or actions undertaken under the PMLA. 

# 6. The defence of the ED prevailed with the Adjudicating Authority and accordingly, both applications of the liquidator came to be dismissed vide the common order with a direction to the liquidator to approach the appropriate forum, which is now under challenge.

Arguments

# 7. The learned Counsel for the appellant contended:

a) that the Adjudicating Authority committed a manifest error in declining jurisdiction under Section 60(5) of the IBC, despite the dispute arising directly out of the alleged violation of the moratorium imposed under Section 14 of the Code.

b) that the present proceedings do not require adjudication upon the legality or validity of proceedings under the PMLA but are confined only to the issue whether the Directorate of Enforcement could lawfully withdraw monies from the account of the Corporate Debtor during the subsistence of the moratorium.

c) that once the CIRP commences, all assets and receivables of the Corporate Debtor will be under the statutory protection of Section 14 and consequently no authority could continue coercive action against the assets of the Corporate Debtor. The withdrawal of ₹.2,29,10,131.06 from the bank account of the Corporate Debtor during the currency of the moratorium was ex facie contrary to Section 14(1)(a) of the Code and constituted unlawful depletion of the insolvency estate. The Hon’ble Supreme Court in P. Mohanraj and Sundaresh Bhatt [(2021) SCC 258] has held that while statutory authorities may continue adjudicatory proceedings, coercive recovery or enforcement actions in violation of Sections 14 or 33(5) of the Code are impermissible in law, but the impugned Order however, overlooked both the effect of Sec.14 and also the ratio in Mohanraj case.

d) on facts, the Adjudicating Authority has failed to appreciate that vide its order dated 12.12.2018, the Appellate Tribunal under the PMLA has set aside the earlier Order of attachment made under Sec.8(5) of the said Act. And, the Bombay High Court before which the Enforcement Directorate has challenged the aforesaid order of the appellate authority, has not stayed the operation of the said order either. Therefore, in the absence of any subsisting attachment, the Respondent could not continue to retain the monies withdrawn during the moratorium.

e) that the subsequent coercive actions initiated by the ED were barred on principles analogous to res judicata, since the basis of the proceedings had already been considered by the Appellate Tribunal under the PMLA.

f) so far as that the communications issued under Section 50 of the PMLA had the effect of preventing debtors/customers of the Corporate Debtor from releasing admitted dues payable to the Corporate Debtor and thereby frustrated the CIRP/liquidation process.

g) that despite repeated requests and representations made by the Liquidator, the Respondent failed to withdraw the restraint  communications issued to the debtors/customers of the Corporate Debtor.

h) the conduct of the Respondent defeated the object of the IBC by depriving the Corporate Debtor of its receivables and diminishing the value of the insolvency estate;

i) At any rate, the appellant has not sought adjudication upon attachment proceedings under the PMLA but only enforcement of the statutory consequences flowing from Section 14 of the IBC, which falls within the jurisdiction of the Adjudicating Authority.

# 8. Learned Counsel for the Respondent Contended:

a) that the proceedings initiated by the Directorate of Enforcement arose out of serious allegations of bank fraud, forgery, criminal conspiracy and diversion of loan funds involving an amount exceeding ₹.1600 crores and therefore constituted proceedings relating to “proceeds of crime” under the PMLA. Hence, the Corporate Debtor and its promoters were accused in multiple FIRs registered by the CBI concerning fraudulently availing credit facilities and diversion of fund from multiple banks which justify invoking the PMLA. And, the investigation under the PMLA revealed generation, layering and integration of proceeds of crime through various entities controlled by the promoters of the Corporate Debtor and therefore the attached properties represented tainted assets liable for attachment and confiscation under the PMLA.

b) that the Provisional Attachment Order dated 08.06.2017 was issued prior to commencement of CIRP and was subsequently confirmed by the Adjudicating Authority under the PMLA on 24.10.2017. And, the withdrawal of ₹2,29,10,131.06 on 02.08.2018 was effected pursuant to powers available under the PMLA in respect of attached properties and therefore could not be treated as an unlawful recovery action. 

c) that proceedings under the PMLA are independent criminal proceedings relating to proceeds of crime and operate in a completely distinct field from insolvency proceedings under the IBC.

d) Neither the Adjudicating Authority nor this Appellate Tribunal possesses jurisdiction to interfere with attachment proceedings initiated under the PMLA or with actions taken by authorities constituted thereunder. Section 60(5) of the IBC at no time be interpreted as conferring an all-pervasive jurisdiction upon the NCLT/NCLAT to examine decisions taken by statutory authorities exercised in public law. Reliance was placed on the ratio in Embassy Property Developments Pvt. Ltd. Vs State of Karnatka & Others [2019 SCC OnLine SC 1542], Gujarat Urja Vikas Nigam Limited v. Amit Gupta & Ors., [(2021) 7 SCC 209].

e) Not only the IBC and the tribunals constituted thereunder have different purposes to achieve from that which is intended by IBC, by no stretch of interpretation can the Enforcement Directorate be termed as a creditor within the meaning of Sec.5(20) and (21) of the IBC for the tribunals to invoke its jurisdiction in matters concerning the working of PMLA. At any rate, Section 14 of the IBC has no application to criminal proceedings or penal actions having the character of proceedings concerning proceeds of crime and therefore attachment proceedings under the PMLA remain unaffected by moratorium. Reliance was placed on Embassy Property Developers case, Directorate of Enforcement Delhi V. Axis Bank [2019 SCC Online Delhi 7854], Kiran Shah, R.P. of KSL Industries Vs Enforcement Directorate, Kolkata, [Com. Appeal (AT)(Ins) 817 of 2021].

f) Section 41 of the PMLA expressly bars jurisdiction of civil courts and other authorities in matters falling within the competence of authorities constituted under the PMLA.

Discussion & Decision

# 9. The facts and the arguments being what they are (as stated above), the critical aspect of the controversy relates to the legality of attaching the assets of the corporate debtor by the Enforcement Directorate either during the moratorium clamped under Sec.14 of the Code, or during liquidation process in the context of Sec.33(5) thereof. In short, the dispute is not appellant Vs the Enforcement Directorate, but IBC Vs PMLA, when both the legislations are in action. 

# 10. The facts in controversy give rise to three issues:

• a) Whether the Order of attachment and physical removal of certain assets of the CD by the Enforcement Directorate when the CD was under moratorium is legally sustainable?

• b) whether in view of the appellate authority constituted under the PMLA vacating the Order of attachment whose correctness though being challenged before the High Court, yet inasmuch as the High Court has not stayed the operation of the Order of the appellate authority, is it justifiable for the Enforcement Directorate to continue to retain the amounts of the CD that it has taken possession of?

• c) The last issue is the sustainability of the notice issued by the Enforcement Directorate under Sec.50 of the PMLA to the debtors of the corporate debtor directing them not to make payments to the CD.

# 11. It requires to be reminded with a strong dose of emphasis that the PMLA, 2002, was enacted to fulfill India’s obligations under the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, the Financial Action Task Force (FATF) Recommendations, and the United Nations Convention against Transnational Organized Crime. These international initiatives required the countries to criminalize money laundering, confiscate proceeds of crime, and strengthen international cooperation. The genesis of PMLA is rooted here with an intent to prevent money laundering and to combat organized economic terrorism besides actual terrorist- financing, and to protect the integrity of our financial system. Set in the context, the attachment of proceeds of crime or relatable to it under the PMLA is in aid of its eventual confiscation, which, it may be said, is a legislative structure for tracking and hunting such ill-gotten assets. The intent is evident: there shall be no tolerance, no premium for engaging in the crime which the Parliament is keen to forbid. If this aspect of PMLA is placed alongside an analysis of the objective of the IBC, it is gatherable that notwithstanding the laudability of the objective that provides centrifugality to the functioning of the Code, it still remains only as a statute for resolving the insolvency situation of a debtridden company - just one company. If this is unlayered more, it exposes the reality of a conflict between the interest of few creditors of a company in CIRP versus the national interest. While the former is compromisable, which, at any rate happens through the haircuts imposed during the distribution of the proceeds of a successful CIRP, or liquidation, which every creditor of a CD knows, accepts, and is prepared for, national interest at all times remains uncompromisable.

# 12. This apart, the PMLA in its working neither differentiates nor discriminates the companies that are drawn into a CIRP and those which are considered financially safe by its creditors. It must be emphasised that Parliament did not legislate IBC with an intent to create a holy Ganges out of the IBC to wash the corporate debtor of its sin of criminality under the PMLA, or as a mechanism for legitimizing any ill-gotten wealth of the CD. There is nothing in the code, that enables accommodating the wealth which is sourced by and out of a crime, in the resolution or liquidation process of a corporate debtor. The legislative intent behind the scheme of IBC only aims to deal with the issue of corporate insolvency, either in a CIRP or in

a liquidation process, and to pay off the creditors of the corporate debtor through the sale proceeds of the legitimate assets of the corporate debtor either as a going concern or as liquidated assets, as the case may be, and not out of the ill-gotten wealth of the CD. Otherwise, and as indicated earlier, IBC would unwittingly become a camouflage, a shield, to save the ill-gotten wealth of the corporate debtor and create a classification within the non-discriminatory character of the PMLA. Set on this plane, if the operational space of Sec.14 of the Code during the CIRP, or Sec.33(5) during liquidation, is tested, it becomes evident that these provisions legislatively intended to gyrate around the legitimately acquired assets of the corporate debtor and not with those that fall within the shadow of crime under the PMLA. This in turn leads to a concomitant conclusion that, if the purpose behind Sec.14 is to freeze the existing liability of the corporate debtor as on the date when it is admitted to CIRP as part of the legislative strategy to preserve the status quo for a convenient resolution

of insolvency of the CD, then operation of Sec.14 must be limited to those litigations and proceedings, both pending and prospective, either civil or criminal, which hold the likelihood of adding on to the existing debt liability of the corporate debtor and not others. Needless to state that those crimes which spring from penal statutes of public law nature, with no prospect of adding to the debt-liability of civil nature of the CD, cannot be allowed to be impacted by the moratorium, even if they affect the net asset of the CD available for CIRP or liquidation. See: Deputy Director, Enforcement Directorate Vs Axis Bank [2019 SCC OnLine Delhi 7854], Varrsana Ispat Ltd., through its RP Vs Deputy Director, Directorate of Enforcement [Comp.Appeal (AT) 493 of 2018] confirmed by the Hon’ble Supreme Court in C.A.(s) 5546 of 2019, and relied on by this tribunal in Kiran Shah, R.P. of KSL Industries Vs Enforcement Directorate, Kolkata, [Com. Appeal (AT)(Ins) 817 of 2021] and Ashok Kumar Sarawagi, RP of Kohinoor Steel Private Ltd., Vs Enforcement Directorate & another [Com.Appeal (AT)(Ins) No:411 of 2022].

# 13. The appellant however, placed considerable reliance in the authority of the Hon’ble Supreme Court in P. Mohan Raj & Others Vs Shah Brothers Ispat Pvt. Ltd., [(2021)6 SCC 258], where the Court has held that a proceeding under Sec.138 of the Negotiable Instrument Act would fall within Sec.14 of the Act, but the correctness of the same is now doubted by another bench of the Supreme Court recently in Dineshchand Surana Vs UCO Bank, [(2026) ibclaw.in 402 SC], and the issue has now been referred to a larger bench. 

# 14. It now on the above plane, the controversy on jurisdiction of the tribunals constituted under the IBC to travel into the working of other statutes, more particularly the PMLA, to be tested. This is no more res integra as the issue now stands settled in the celebrated authority of the Supreme Court in Embassy Property Developments Private Limited Vs State of Karnataka and Others [(2020)13 SCC 308], where it was held that the jurisdiction of the Adjudicating Authority is limited by the extent to which it is required to be exercised for the purposes of working of the IBC and no more. After all, both IBC and the PMLA, are legislations of the Parliament and as shown earlier, they operate in different domains with different objectives to achieve, and do not overlap in their respective operations. Indeed, the IBBI has also taken note of the issue on jurisdiction, and hence in paragraph 2 of its Circular No. IBBI/CIRP/87/2025, dated 04th November, 2025, it has advised the resolution professionals that “where the assets of the corporate debtor are attached by the ED under the provisions under PMLA, the Insolvency Professional may file an application before the Special Court under Sections 8(7) or 8(8) of the PMLA for restitution of such assets”. Necessarily, the tribunals constituted under the IBC are not the forums which can entertain any plea against the ED.

# 15. In the course of arguments, Sec.32A(2) of the Code was also referred to, but for the present we do not consider a need to discuss it, since Sec.32(A) operates only where there is a successful insolvency resolution process. 

# 16. The writing is on the wall for the appellant: whether to attach or not to attach the properties of a corporate debtor is for the Enforcement Directorate to decide, and where there has been any such attachment by the ED, the adjudicatory mechanism created under the PMLA alone will have jurisdiction to deal with any challenge to it. This will also include any notice issued under Sec.50 of the PMLA. So far as those assets which have been relieved by the appellate authority under the PMLA goes, even though no order of stay has been passed by the Bombay High Court, the fact remains that the correctness of the Order of the appellate authority is being tested there, which again fall within the framework for working the adjudicatory process under the PMLA, the appellant may have to approach the High Court.

# 17. To conclude, we find no merit in the appeals and dismiss the same as we concur with the conclusion of the Adjudicating Authority. No costs. Pending I.A.s, if any, also stand disposed of.

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Shri Santanu T Ray, RP vs Axis Bank Limited - Moreover, the statutory mandate under Section 25(2)(a) of the Code, coupled with the overriding effect under Section 238, continues to govern the field and obligates the Resolution Professional to take immediate control and custody of the assets of the Corporate Debtor.

 NCLT Kolkata (2026.03.27)  in Shri Santanu T Ray, RP vs Axis Bank Limited [I.A. (IBC) 1521(KB) of 2025 In C.P. (IBC) 254(KB) of 2019] held that;-

• A conjoint reading of the above provisions makes it clear that the Resolution Professional is duty bound to take control and custody of all assets of the Corporate Debtor and the banks are equally obligated to facilitate such control.

• The overriding effect of Section 238 of the Code leaves no manner of doubt that any action taken by any authority, including statutory authorities, which is inconsistent with the provisions of the Code, cannot be sustained.

• In that view of the matter, the procedural requirement as envisaged under the aforesaid Circular cannot be applied retrospectively so as to defeat or delay the relief sought in the present application, particularly when the issue pertains to custody and control of the assets of the Corporate Debtor during subsistence of CIRP.

• Moreover, the statutory mandate under Section 25(2)(a) of the Code, coupled with the overriding effect under Section 238, continues to govern the field and obligates the Resolution Professional to take immediate control and custody of the assets of the Corporate Debtor.

• Accordingly, notwithstanding the said Circular, we are of the considered view that the asset in question, i.e., the term deposit, is liable to be brought under the control and custody of the Resolution Professional for the purposes of CIRP.

Excerpts of the Order;

# 1. I.A. (IBC) 1521(KB) of 2025

1.1 The instant application has been preferred by Mr. Santanu Ray, RP, seeking orders upon Axis Bank to de-attach term deposit of the Corporate Debtor held with them so that the RP could take control and custody of the said deposit as required under Section 25(2)(a) praying for the following reliefs:-

• a. Allow the present application;

• b. The Respondent - Axis Bank Limited, Nagpur branch be directed to de-attach a term deposit held in the name of the Corporate Debtor in account number 911040013677029 having a balance of Rs.26,67,757/- comprising of principal and accrued interest as on 31.12.2023;

• c. The Respondent be directed to handover control and custody of the term deposit to the RP in terms of Section 25(2)(a);

• d. The Respondent be directed to act on the instructions of the Applicant in relation to the term deposit accounts and furnish all information relating to the corporate debtor available with them to the Applicant in terms of Section 17(1)(d);

• e. No encumbrance or 3rd party rights to be created during pendency of this application;

• f. The amount lying in the term deposit not to be appropriated towards dues of any creditor of the corporate debtor during pendency of this application;

• g. Costs;

• h. Ad-interim orders;

• i. Issue such other necessary orders as may be deemed fit in the matter.

2. Background of the Case

2.1 The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Adjudicating Authority vide order dated 13.12.2019 passed in Company Petition (IB) No. 219/IB/2019 under Section 7 of the Insolvency and Bankruptcy Code, 2016. Pursuant thereto, the Applicant herein was appointed as the Interim Resolution Professional (IRP), which appointment was duly communicated on 26.12.2019.

2.2 In compliance with the provisions of the Code, the Applicant made a public announcement in Form-A on 27.12.2019 in widely circulated newspapers, inviting claims from creditors. Upon receipt and verification of claims, the Committee of Creditors (CoC) was constituted and the first CoC meeting was convened on 27.01.2020, wherein the Applicant was confirmed as the Resolution Professional with 100% voting share. The said appointment was taken on record by this Adjudicating Authority vide order dated 06.02.2020.

2.3 During the pendency of the CIRP, the suspended director of the Corporate Debtor preferred an appeal under Section 61 of the Code before the Hon’ble NCLAT challenging the admission order dated 13.12.2019. The Hon’ble NCLAT, vide interim order dated 07.02.2020, inter alia, directed that the CoC shall not approve any resolution plan during pendency of the appeal.

2.4 It is pertinent to note that prior to the said interim order, the CoC had already been constituted by the Applicant in accordance with the CIRP Regulations and a report certifying the same had been filed before this Adjudicating Authority.

2.5 The appeal preferred by the suspended director came to be dismissed by the Hon’ble NCLAT vide order dated 04.10.2021, thereby vacating the interim restrictions. In view of the time lost during pendency of the appeal, the CoC resolved to seek exclusion of the said period, and this Adjudicating Authority vide order dated 16.12.2021 was pleased to allow exclusion of 615 days from the CIRP period.

2.6 Thereafter, efforts were undertaken for revival of the Corporate Debtor by issuance of Form-G inviting Expression of Interest (EOI). However, no EOI was received within the stipulated period. Consequently, in the 7th CoC meeting, the members deliberated upon initiation of liquidation proceedings. The resolution for liquidation was approved with 83.58% voting share.

2.7 In pursuance thereof, the Applicant filed an application seeking initiation of liquidation. However, during the pendency of the said application, the suspended director challenged the NCLAT order before the Hon’ble Supreme Court by way of Civil Appeal No. 1031 of 2022, and the Hon’ble Supreme Court vide order dated 04.03.2022 stayed further proceedings before this Adjudicating Authority.

2.8 The said Civil Appeal came to be finally dismissed by the Hon’ble Supreme Court vide judgment dated 22.10.2024, thereby affirming the CIRP initiation and bringing finality to the proceedings.

2.9 Subsequent thereto, the CoC, being of the view that revival of the Corporate Debtor was still feasible, resolved to withdraw the liquidation application and to undertake fresh steps for resolution. Accordingly, an application was filed seeking withdrawal of liquidation proceedings, exclusion of further period, and extension of CIRP, which was allowed by this Adjudicating Authority vide order dated 27.02.2025.

2.10 Pursuant thereto, fresh Form-G was issued on 24.03.2025 inviting resolution plans. Two prospective resolution applicants submitted their plans within the prescribed timeline. Considering the time required for evaluation and negotiations, further extension of CIRP period was granted by this Adjudicating Authority vide order dated 10.06.2025.

2.11 The CIRP is presently ongoing, and the CoC is in the process of considering the resolution plans, with further time having been sought for completion of the process.

# 3. Fact in a nutshell -:

3.1 While conducting the CIRP and upon scrutiny of the financial records and bank statements of the Corporate Debtor, the Resolution Professional discovered that the Corporate Debtor is maintaining a term deposit bearing account no. 911040013677029 with Axis Bank, Nagpur branch, originally created on 09.03.2011.

3.2 The said term deposit presently holds a sum of Rs.26,67,757/- as on 31.12.2023, inclusive of principal and accrued interest, and constitutes a valuable asset of the Corporate Debtor forming part of the insolvency estate.

3.3 It is the statutory duty of the Resolution Professional under Section 25(2)(a) of the Code to take control and custody of all assets of the Corporate Debtor. Further, under Section 17(1)(d), the financial institutions maintaining accounts of the Corporate Debtor are obligated to act upon the instructions of the Resolution Professional and provide complete access and information in relation to such accounts.

3.4 However, upon inquiry with the Respondent Bank, the Applicant was informed that a lien has been marked on the said term deposit by the Income Tax Department on 27.09.2023 and subsequently by the Enforcement Directorate on 24.10.2024.

3.5 The Applicant submits that the imposition of such lien during the subsistence of CIRP is in clear violation of the moratorium imposed under Section 14 of the Code, which expressly prohibits any action to foreclose, recover or enforce any security interest or to create any encumbrance over the assets of the Corporate Debtor.

3.6 It is further submitted that the Income Tax Department has already filed its claim before the Resolution Professional, which has been duly admitted. Therefore, any attempt to secure its dues by way of lien over the assets of the Corporate Debtor dehors the mechanism provided under the Code is impermissible in law.

3.7 The Applicant has addressed several communications and emails to the Respondent Bank requesting removal of the lien and release of the term deposit in favour of the Resolution Professional. However, no effective steps have been taken by the Respondent to comply with the provisions of the Code.

3.8 The Applicant submits that in view of Section 238 of the Code, the provisions of the Code have overriding effect over all other laws, and therefore, any action by statutory authorities resulting in encumbrance over the assets of the Corporate Debtor during moratorium cannot be sustained. 

3.9 In the aforesaid circumstances, the present application has been preferred seeking necessary directions against the Respondent Bank to remove the lien, hand over control and custody of the term deposit to the Resolution Professional, and ensure that the said asset remains available for resolution of the Corporate Debtor in accordance with the provisions of the Code.

# 4. Analysis and Findings -:

4.1 We have gone through the case file carefully and perused the pleadings of the parties and documents placed on record by the parties and heard the arguments put forth by learned Counsels for the parties; and after hearing the learned counsels for the parties, we shall now proceed to consider the present petition on its merits, specifically within the ambit of points involved in the instant application.

4.2 The present application has been filed by the Resolution Professional seeking directions against the Respondent Bank for removal of lien marked on the term deposit of the Corporate Debtor and for handing over control and custody of said asset to the Resolution Professional.

4.3 It is not in dispute that the Corporate Debtor is undergoing Corporate Insolvency Resolution Process (CIRP) and that moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 is in force. It is also not in dispute that the term deposit in question constitutes an asset of the Corporate Debtor. 

4.4 The short question which arises for consideration is whether the lien created by the Income Tax Department and Enforcement Directorate during the subsistence of CIRP can be sustained in view of the statutory moratorium.

4.5 Before proceeding further, it is apposite to refer to Section 25(2)(a) of the Insolvency and Bankruptcy Code, 2016, which reads as under:

• “25.Duties of resolution professional.— 

• ….

• (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:— 

• (a) take immediate custody and control of all the assets of the corporate debtor including the business records of the corporate debtor;”

4.6 Section 17(1)(d) of the Insolvency and Bankruptcy Code, 2016, which reads as under:

• “17. Management of affairs of corporate debtor by interim resolution professional. –

• (1) From the date of appointment of the interim resolution professional, -

• …. 

• (d) the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional.”

4.7 Further, Section 17(1)(d) mandates that financial institutions shall act on the instructions of the Resolution Professional in relation to the accounts of the Corporate Debtor and furnish all necessary information.

4.8 A conjoint reading of the above provisions makes it clear that the Resolution Professional is duty bound to take control and custody of all assets of the Corporate Debtor and the banks are equally obligated to facilitate such control.

4.9 In the present case, the lien on the term deposit has been created by statutory authorities during the CIRP period. Such an act directly falls foul of the moratorium imposed under Section 14 of the Code.

4.10 The Hon’ble Supreme Court in Pr. Commissioner of Income Tax v. Monnet Ispat and Energy Ltd [(2018) ibclaw.in 30 SC]

• “Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-Tax Act. We may also refer in this Connection to (2000) 5 SCC 694 and its progeny, making it clear that income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons. We are of the view that the High Court of Delhi, is, therefore, correct in law.”

4.11 The Hon’ble NCLAT in Directorate of Enforcement v. Manoj Kumar Agarwal [(2021) ibclaw.in 182 NCLAT] has categorically held as follows-:

• “41. Alternatively, even if for any reason it was to be held that Section 14 of IBC would not help, it appears to us that Section 238 of IBC would still apply. Although it is argued that PMLA is a special statute and has an overriding effect still Section 238 of IBC is also a special statute and which is subsequent statute. IBC has specific object, which is to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of value of assets of such persons and to promote entrepreneurship, availability of credit and balance the interest of all stakeholders including alteration in the order of priority of payment of Government dues.

• Section 238 of IBC reads as under:

• “238. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

• If this Section is perused, the provisions of this Code would have effect notwithstanding anything inconsistent therewith contained “in any other law” for the time being in force. Section 238 of IBC does not give overriding effect merely to Section 14. The other provisions also are material, and will have effect if there is anything inconsistent therewith contained in any other law for the time being in force. Thus if the Authorities under PMLA on the basis of the attachment or seizure done or possession taken under the said Act resist handing over the properties of the Corporate Debtor to the IRP/RP/Liquidator the consequence of which will be hindrance for them to keep the Corporate Debtor a going concern till resolution takes place or liquidation proceedings are completed, the obstructions will have to be removed.”

4.12 In the present case, the Income Tax Department has already filed its claim before the Resolution Professional and the same has been admitted. Therefore, any attempt to secure its dues by creating lien over the assets of the Corporate Debtor dehors the IBC framework is not permissible.

4.13 The overriding effect of Section 238 of the Code leaves no manner of doubt that any action taken by any authority, including statutory authorities, which is inconsistent with the provisions of the Code, cannot be sustained.

4.14 The Respondent Bank, being a financial institution, is statutorily obligated under Section 17(1)(d) to act on the instructions of the Resolution Professional. Failure to remove the lien and handover custody of the asset is in violation of the provisions of the Code.

4.15 At this juncture, we also take note of the Circular No.IBBI/CIRP/87/2025 dated 04.11.2025 issued by the Insolvency and Bankruptcy Board of India (IBBI), wherein it has been advised that in cases where assets of the Corporate Debtor are attached by the Enforcement Directorate under the provisions of the Prevention of Money Laundering Act, 2002, the Insolvency Professional may approach the Special Court under Section 8(7) or 8(8) of the PMLA for restitution of such assets.

4.16 The said Circular further provides for furnishing of an undertaking by the Insolvency Professional before the Special Court to facilitate restitution of such attached assets.

4.17 While we are mindful of the aforesaid Circular and the procedure contemplated therein, it is pertinent to note that the present Interlocutory Application was registered on 24.09.2025 and was reserved for orders on 03.11.2025, i.e., prior to the issuance of the said Circular dated 04.11.2025.

4.18 In that view of the matter, the procedural requirement as envisaged under the aforesaid Circular cannot be applied retrospectively so as to defeat or delay the relief sought in the present application, particularly when the issue pertains to custody and control of the assets of the Corporate Debtor during subsistence of CIRP.

4.19 Moreover, the statutory mandate under Section 25(2)(a) of the Code, coupled with the overriding effect under Section 238, continues to govern the field and obligates the Resolution Professional to take immediate control and custody of the assets of the Corporate Debtor.

4.20 Accordingly, notwithstanding the said Circular, we are of the considered view that the asset in question, i.e., the term deposit, is liable to be brought under the control and custody of the Resolution Professional for the purposes of CIRP.

4.21 In view of the foregoing discussion and in light of the judicial pronouncements referred hereinabove, the present application is allowed.

4.22 Accordingly, the following directions are issued:

• i. The Respondent, Axis Bank Limited, Nagpur Branch, is hereby directed to remove/de-attach the lien marked on the term deposit bearing account no. 911040013677029 held in the name of the Corporate Debtor;

• ii. The Respondent shall handover control and custody of the said term deposit, having a balance of Rs.26,67,757/- (as on 31.12.2023), to the Resolution Professional forthwith in terms of Section 25(2)(a) of the Insolvency and Bankruptcy Code, 2016;

• iii. The Respondent shall act strictly in accordance with the instructions of the Resolution Professional and furnish all requisite information relating to the account in compliance with Section 17(1)(d) of the Code;

• iv. It is directed that no encumbrance or third-party rights shall be created over the said term deposit during the subsistence of CIRP;

• v. The amount lying in the term deposit shall not be appropriated towards dues of any creditor and shall form part of the assets of the Corporate Debtor;

• vi. The above directions shall be complied with within a period of two weeks from the date of receipt of this order.

4.23 The instant I.A. (IBC) 1521(KB) of 2025 is allowed in terms of the above.

4.24 I.A. (IBC) 1521(KB) of 2025 in C.P. (IB) 254(KB) of 2019 is disposed off accordingly.

4.25 The Registry is directed to send copies of the Order forthwith to all the parties and their representative for information and for taking necessary steps.

4.26 Certified copies of this order, if applied for with the Registry of this Adjudicating Authority, be supplied to the parties upon compliance with all requisite formalities.

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