Attached before the plan was approved, freed after: Delhi HC orders ED to return Rs 3.01 crore
In a judgment by Justice Navin Chawla, a Division Bench set aside the PMLA Appellate Tribunal and held that once an unconnected bidder takes over a company under an approved resolution plan, Section 32A of the IBC ends a PMLA attachment made earlier, as the Directorate of Enforcement had argued it survives.
The Directorate of Enforcement attached a property in Uttar Pradesh on 25 August 2021. Thirty-five days later, the NCLT approved a plan that handed the company to a new owner. On 6 November 2026 the Delhi High Court held that the attachment could not outlive the plan, and ordered the Directorate to return a Rs 3.01 crore fixed deposit.
The question was whether an attachment made under the Prevention of Money Laundering Act, 2002 before a resolution plan is approved falls away once the plan is approved under the Insolvency and Bankruptcy Code, 2016. The PMLA Appellate Tribunal had said no. The High Court said yes.
Justice Navin Chawla wrote the judgment for a Bench that also included Justice Arun Bhardwaj. The Bench allowed the appeal of Dash Exports Private Limited and made no order on costs.
Attached while the NCLT order was pending
The NCLT admitted Dash Exports to corporate insolvency resolution on 26 February 2020. Asteroid Shelter Homes Private Limited put in a resolution plan. The committee of creditors approved it on 27 November 2020 with 99.22 per cent of the votes.
Asteroid then applied to the NCLT under Section 31 of the Code for approval. The Tribunal reserved its order on 26 March 2021. Before it could be pronounced, the Directorate of Enforcement issued Provisional Attachment Order No. 05/2021 on 25 August 2021 against the property at 228-P, Village Habibpur, in Gautam Buddh Nagar.
The NCLT approved the plan on 29 September 2021. It recorded that Asteroid had met Section 30(2) of the Code and was not disqualified under Section 29A. On 26 May 2022 the PMLA Adjudicating Authority confirmed the attachment in Original Complaint No. 1526/2021.
Rs 3.01 crore deposit to break deadlock
Dash Exports and Asteroid went to the High Court in W.P.(C) 10771/2022. On 13 April 2023 a Bench recorded that no one had appealed the plan’s approval and that Asteroid had stepped into the company’s management. The petitioners had deposited Rs 28 crore, which was distributed among the creditors.
The difficulty was that State Bank of India still held the title deeds of the land. The attachment had come after the insolvency process began. The Bank said it learnt of the order only on 14 October 2021, and the 2023 Bench said it ought to have told Asteroid then.
With the Directorate agreeing, the 2023 order allowed a way out. Asteroid would deposit Rs 3.01 crore, the value the Directorate had put on the property, as a fixed deposit in the Directorate’s favour, on auto-renewal. The title deeds would then be released.
The company was given four weeks to challenge the attachment before the Appellate Tribunal, with a promise that limitation would not be held against it. The 2023 Bench recorded that it had not decided the legal issues.
The Tribunal: attachment came first, so it stays
Dash Exports appealed to the Appellate Tribunal under Section 26 of the PMLA as FPA-PMLA-5922/DLI/2023. Its case was that once the plan was approved, Section 32A(2) of the Code freed the property from the attachment. Asteroid, it said, was not a promoter, not in the management, not a related party and not accused of abetment or conspiracy.
The Tribunal dismissed the appeal on 12 August 2025. It reasoned that Section 32A takes effect only if several conditions are met, one being that the attachment is made after the plan is approved. An attachment made before approval, it held, is untouched.
The Tribunal added that the attachment would continue unless the Special Court found that the new owner had not abetted or conspired in the offence and that the company stood discharged. Dash Exports then filed this appeal under Section 42 of the PMLA, and the Bench reserved judgment on 13 October 2026.
What each side told the Bench
Mr Sanjay Jain, Senior Advocate, appeared for Dash Exports. He relied on the Supreme Court’s decision in Manish Kumar v. Union of India, the Bombay High Court’s decision in Shiv Charan and a Supreme Court order of 16 July 2026 in the appeals from that decision.
His case was that once a plan is approved, and the new controller meets Section 29A and is not accused of abetting the offence, action against the company’s property for earlier offences abates. The Directorate, he said, had never alleged that Asteroid was related to the old management or had any role in the offence.
He added that Asteroid had paid Rs 28 crore under the plan. State Bank of India, the lead creditor holding the title deeds, had issued a no-dues confirmation for the property to Asteroid.
Mr Rajat Nair appeared for the Directorate. His main point was that Section 32A protects only against attachments made after approval of a plan, and does not wipe out a lawful attachment retrospectively.
He argued that the PMLA and the Code work in different fields. Property attached as proceeds of crime, he said, cannot be treated like an unencumbered asset of a company in insolvency.
He also said the power to attach under the PMLA does not fall within Section 14(1)(a) of the Code, and that the NCLT, a creature of statute, cannot review government action in public law. Section 32A, he added, is triggered only on approval of a plan or a liquidation sale to an unconnected buyer.
The Directorate cited Axis Bank, Varrsana Ispat, P. Mohanraj, S. Rajendran and Embassy Property Developments. It also cited Manish Kumar, Rajiv Chakraborty and Nitin Jain, which are the rulings the Bench went on to rely on.
What Section 32A of the Code provides
The court set out the section in full. Under Section 32A(1), a company’s liability for an offence committed before insolvency began ceases from the date the plan is approved. That holds if the plan changes management or control to someone who was not a promoter or related party.
The new controller must also not be a person whom the investigating authority has reason to believe abetted the offence, and about whom it has filed a report or complaint.
Section 32A(2) says no action shall be taken against the company’s property for such an offence where the property is covered by an approved plan with the same kind of change in control. An Explanation says that action includes attachment, seizure, retention and confiscation.
The protection does not reach individuals. The second proviso to Section 32A(1) keeps officers in default and others involved in the offence liable to prosecution. The Explanation also leaves action open against the property of anyone other than the company or a buyer who meets the section’s requirements.
Section 32A(3) requires the company and others to keep cooperating with any authority investigating the earlier offence, despite the immunity.
The issue as the Bench framed it
The Bench put the question to itself in these words:
“the issue to be determined by this Court is of the effect of the approval of the resolution plan under Section 31 of the IBC on the provisional attachment order passed against the property of a corporate debtor before the approval of such resolution plan.” (para 26)
It answered by reading Section 32A with the Supreme Court’s ruling on its validity, and it began with that ruling.
Manish Kumar and the clean slate
The Bench reproduced a long passage from Manish Kumar, in which the Supreme Court dealt with a challenge to Section 32A by allottees and creditors. The section was inserted by an amendment effective from 28 December 2019. The challengers said it shielded assets acquired from the proceeds of crime and violated Articles 14, 19, 21 and 300A.
The Supreme Court found no case for striking the section down. It said the provision was carefully thought out, that wrongdoers were not allowed to get away because they remained liable, and that ending the company’s criminal liability was important for a new management to make a clean break.
The Supreme Court also listed the conditions for the immunity. There must be an approved plan and a change in control. The new management must not be a disguised avatar of the old one or a related party, and must not be the subject of material showing abetment or conspiracy.
The Bench said it quoted the ruling at length because it authoritatively decides the question in the appellant’s favour (para 28). Its reading was that where the person taking control meets the conditions of Section 32A, that person must get the company’s property on a clean slate.
Two Delhi rulings read it the same way
The Bench next turned to its own court’s earlier decisions. In Nitin Jain v. Enforcement Directorate, the High Court had said that Section 32A assures a resolution applicant that it takes over on a fresh slate, and extends the same assurance to the company’s property once a plan is approved or liquidation assets are sold.
It also quoted Rajiv Chakraborty, Resolution Professional of EIEL v. Directorate of Enforcement. That ruling treated Section 32A as the pivot that decides how far the Code overrides the PMLA, because it was the later enactment and the last expression of legislative intent.
On the Directorate’s argument about Section 14(1)(a), the passage in Rajiv Chakraborty held that the power to attach under the PMLA does not fall within that provision. Through Section 32A, it said, the legislature had fixed the point after which PMLA powers cannot be used, and once that point is reached no PMLA action can breach it.
The Bombay High Court and an open question
The Bench also drew support from Shiv Charan, in which the Bombay High Court upheld NCLT orders that released properties the Directorate had attached, once a qualifying plan was approved. That court held that the NCLT acted within its jurisdiction in applying Section 32A, and that the attachment had to end from the date of approval.
The Bombay court also said quasi-judicial authorities, including the PMLA Adjudicating Authority, must take judicial notice of a plan that qualifies under Section 32A and release their attachment on their own.
Its reasoning on the nature of attachment was that an attachment under Section 5 of the PMLA is a step in aid of confiscation under Section 8(5), which can follow only a conviction. If Section 32A bars prosecution of the company, no conviction can follow, and the attachment cannot continue in a vacuum.
The Bench noted that the Supreme Court, in the Directorate’s appeals against Shiv Charan, left the legal question open because the parties there settled. It said it arrived at its view on an independent reading of Section 32A together with Manish Kumar.
Why the timing argument failed
The Bench called the Directorate’s distinction between attachments made before and after approval an artificial one. It found no support for it in the plain words of Section 32A or in Manish Kumar.
The trigger, it said, is the approval of the plan. Once the plan is approved and control passes to a third party meeting the section’s conditions, that party must get the property “free from all encumbrances, including the attachment order under the PMLA” (para 33).
To hold otherwise, the Bench added, would defeat the object for which Section 32A was introduced. Its summary of the holding was that once a plan is approved, an attachment under Section 5 “can no longer subsist against the property of the corporate debtor” if the person taking control meets the Section 32A conditions (para 36).
The Bench said this does not set the Code against the PMLA and does not work retroactively to cancel the earlier attachment order. It applies from approval onwards, to release the property (para 37).
The Special Court finding the Tribunal wanted
The Bench then applied the test to the facts. The Directorate did not say the property fell outside the plan, that control had not changed, or that Asteroid was a promoter, a related party or a suspected abettor.
The Tribunal had held that relief must wait for a finding from the Special Court that the new owner was clear of the exceptions. The Bench said that was wrong. The Special Court would need to make such a finding only if the Directorate said Asteroid fell within an exception, and it had not.
Without any such case, the Bench said, the Special Court is not to give a finding in a vacuum. It added that it had to presume the Directorate accepted that Asteroid satisfied all the conditions of Section 32A.
The only plea the Directorate took was the timing point, which the Bench had already rejected. With no other defence raised, it held, the Tribunal erred in dismissing the appeal.
Order
The High Court set aside the Appellate Tribunal’s order of 12 August 2025 in Appeal No. 5922/DLI/2023. It held that, with approval of the resolution plan, the Provisional Attachment Order no longer subsists against Dash Exports, because there is no allegation that Asteroid fails the conditions of Section 32A(2).
The Bench directed the Directorate to release the Rs 3.01 crore fixed deposit, which Asteroid had made on behalf of Dash Exports under the 2023 order, to the appellant within two weeks of the judgment. The appeal was allowed on those terms, with no order as to costs.