IBC Clean Slate Overrides MPID Attachment

The Bombay High Court considered whether a property attached under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 could continue to remain under attachment after approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016.

The petitioner, Dwarka Iron Industries Pvt. Ltd., was the successful resolution applicant for the corporate debtor, M/s. Abhirama Steels Limited. The subject property had been purchased by the corporate debtor in 2008, much before the alleged offence that led to the MPID proceedings. The corporate debtor was not named as an accused in the FIR registered in 2013, and even in the charge-sheet filed in 2014 it was not arraigned as an accused. Despite that, the State issued a notification on 19 March 2016 attaching several properties, including the subject property.

The corporate debtor objected to the attachment. Meanwhile, its loan account was classified as an NPA, the secured creditor initiated SARFAESI measures, and later CIRP was commenced under the IBC. The NCLT approved the resolution plan on 17 September 2024. The successful resolution applicant paid Rs. 14.50 crores to Indian Bank, which issued a no objection certificate and released its charge over the property.

The core issue before the Court was whether Section 32A of the IBC would protect the property from continued attachment under the MPID Act. The State argued that the object of the MPID Act, namely protection of investors, should prevail. The Court did not accept that submission on the facts before it.

The Bench of Justice Manish Pitale and Justice Shreeram Vinayak Shirsat held that Section 32A applied in full force. The Court noted that the corporate debtor was not even an accused in the criminal proceedings and that the resolution plan had already been approved. In that situation, the corporate debtor was entitled to proceed on a clean slate, consistent with the scheme of the IBC and the law laid down by the Supreme Court.

The Court therefore quashed the impugned notification dated 19 March 2016 to the extent it applied to the subject property. The interim protection earlier granted was made absolute, and the bank guarantee furnished by the petitioner was directed to be returned.

Practical takeaway: once a resolution plan is approved, Section 32A can defeat continued attachment of a corporate debtor’s property, even under the MPID Act, where the debtor is not an accused.