NCLT says it can't direct ED to de-freeze bank account

The National Company Law Tribunal (NCLT) recently ruled that it did not have the jurisdiction to direct the Enforcement Directorate (ED) to de-freeze an account that was frozen on the directions of authorities under the Prevention of Money Laundering Act (PMLA). .A coram of Judicial Member Bachu Venkat Balaram Das and Technical Member Atul Chaturvedi said, "In light of the settled legal position and the provisions of the Code read with the Prevention of Money Laundering Act, 2002 (PMLA), we are of the considered view that this Adjudicating Authority does not have the power to issue directions to the ED to defreeze the account of the Corporate Debtor when the account was frozen as per the directions of the Adjudicating Authority under PMLA.”.Foxdom Technologies, formerly known as Fenexa Technology, is under investigation for its alleged involvement in a money laundering case linked to a first information report (FIR) registered by the Cyber Crime Police Station, Dehradun in September 2021. The ED froze the company’s bank account during a search conducted in July 2023, as part of its probe into suspected money laundering activities.After the company was admitted to the corporate insolvency resolution Process (CIRP), the resolution professional (RP) contended that the freeze was obstructing the CIRP, as the account was being used to pay for resolution process costs. Despite repeated requests to ICICI Bank and the ED, the account remained frozen, prompting the RP to approach the NCLT for relief. The RP argued that the NCLT had the authority to direct the ED to de-freeze the account under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), 2016..The NCLT emphasised that the PMLA and IBC serve distinct purposes—the former focuses on preventing money laundering and recovering proceeds of crime, while the latter aims at resolving corporate insolvency. It said,“The Prevention of Money Laundering Act, 2002, primarily focuses on preventing money laundering and recovering proceeds of crime, whereas the Insolvency and Bankruptcy Code, 2016, is aimed at the resolution of Corporate Debtor. Accordingly, this Adjudicating Authority, deriving its jurisdiction from the provisions of the Code, lacks the authority to adjudicate upon an order issued by the Adjudicating Authority under PMLA or to direct the Enforcement Directorate to release the attachment.”.Thus, the Tribunal ruled that it lacked jurisdiction to direct the ED to de-freeze the account, as the freezing was done under the PMLA by the competent authority. It advised the RP to seek remedies under the PMLA before the appropriate forum..The company was represented by Advocate Vishnu Shankar.The RP was represented by Advocates Gautam Singhal and Rajat Chaudhary ED was represented by Advocates Zoheb Hossain, Vivek Gurnani, Kartik Sabharwal and Adhiraj Singh..[Read Judgment]