Bhavisha Sharma and Siddharth Kothari from the National Academy of Legal Studies and Research, Hyderabad write on the interrelationship between the IBC, SARFAESI and the PMLA.
The legislative intent behind the enactment of the Insolvency and Bankruptcy Code, 2016 was to remove the ambiguity in features of the insolvency resolution process existing in earlier legislations. It also aimed to prevent unnecessary delays in the resolution process and the deterioration of properties that occurred because of the same. However, in the past two decades, many other acts like the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Recovery of Debt due to Banks and Financial Institutions Act, 1993 were also passed to provide creditors with alternative and efficient remedies.
These legislations coupled with the enactment of the Prevention of Money Laundering Act, 2002 create conflicts in prioritisation of claims of different creditors on the assets of an insolvent debtor. Presence of non-obstanteclauses in all these “special” enactments further increases difficulty. The case of Union of India v. Punjab National Bank is one of the cases where these legislations clash and the issue of attachment of property comes into play. This case comment discusses the opaque nature of the phrase “proceeds of crime” contained in the Prevention of Money Laundering Act, 2002 in context of the civil/ criminal nature of different acts. It also considers the question of non-obstante clauses and other prioritisation clauses in the enactments. Further, the authors question the consistency of application of the aforesaid clauses in multiple cases, highlighting the need for the Supreme Court to settle this question with finality, in order to prevent the unnecessary.