Section 32A of IBC protects properties covered under a resolution plan from prior offences, allowing the new management to commence without liability.

ORDER :

G.R. SWAMINATHAN, J.

1. Milan Textile Enterprises Private Limited purchased the petition- mentioned property vide sale deed dated 26.08.2004 (Document No. 2378/2004) registered on the file of Sub Registrar, Thallakulam. The Deputy Commissioner of Income Tax (Benami Prohibition), Chennai formed the opinion that this property is being held benami by the petitioner herein. Hence, provisional attachment order under Section 24(3) of theProhibition of Benami Property Transactions Act, 1988 (hereinafter referred to as “the Act”) was issued on 01.11.2019 restraining the petitioner from transferring or charging the said property. Vide order dated 28.01.2020, it was directed that the attachment would continue until further order was passed by the adjudicating authority. These two orders are assailed in this writ petition.

2.City Union Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 on 18.03.2021 to initiate corporate insolvency resolution process against the petitioner - company. The application was admitted on 21.03.2022 and CIRP was ordered to be initiated. Moratorium envisaged under Section 14(1) of IBC also came into force. An Insolvency Resolution Professional was also appointed to take over the management. On 05.01.2024, the resolution plan was submitted by the Resolution Professional and the same was also duly approved by NCLT. As a result, the successful Resolution Applicant replaced the erstwhile management.

3.In the meanwhile, on 23.09.2021, the adjudicating authority under the Prohibition of Benami Property Transactions Act, 1988 confirmed the attachment. Questioning the same, the erstwhile management had filed an appeal before the Appellate Tribunal. The appeal is still pending. Since the new management had taken over the petitioner - company, they also moved an application before the Appellate Tribunal for release of the petition-mentioned property. That application was dismissed on the ground that grant of interim relief would amount to granting final relief. It is in this background, the present challenge has been mounted.

4.The prime contention advanced by the learned Senior Counsel for the petitioner is that when once the insolvency resolution plan had been approved by the NCLT and a new management has taken over, no action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the CIRP, where such property is covered under the Resolution Plan which results in the change in control of the corporate debtor. In other words, the new management should be allowed to commence its journey with a clean slate. Reliance was placed on Sections 32A and 238 of IBC, 2016. He drew my attention to the decisions rendered in Manish Kumar v. UOI (2021) 5 SCC 1, Mudapallur Varieth Gangadharan, RP of Padmaadevi Sugards Ltd v. Dy.Commissioner of IT (Benami Prohibition) (MA/05/2020 by NCLT, Chennai dated 25.04.2022,Shiv Charan v. Adjudicating Authority (2024:BHC-OS:3371-DB) and Committee of Creditors v. Directorate of Enforcement (SLP (C) No.29327-29328 of 2019).

5.Per contra, the learned Senior Standing Counsel for the Initiating Officer for Income Tax Department relying on Sections 54, 57 and 67 of the Benami Act submitted that there is no merit in the contention advanced by the learned Senior Counsel for the petitioner. She would add that when an appeal is pending before the Tribunal, the petitioner cannot be allowed to mount a parallel challenge to the attachment proceedings. According to her, Section 32A