Source: National Company Law Tribunal (NCLT) Delhi Bench 

Why in News? 

The National Company Law Tribunal (NCLT) Delhi Bench delivered a significant judgment in the case of M/s Goyal Tea Agencies Private Limited v. M/s Shakti Bhog Snacks Limited., establishing that the Insolvency and Bankruptcy Code, 2016(IBC) cannot be used to frustrate proceedings under the Prevention of Money Laundering Act, 2002 (PMLA).  

• The ruling, delivered by a coram of Bachu Venkat Balaram Das (Member Judicial) and Dr. Sanjeev Ranjan (Member Technical) emphasized the primacy of PMLA over IBC in matters involving money laundering allegations. 

What was the Background of M/s Goyal Tea Agencies Private Limited v. M/s Shakti Bhog Snacks Limited (2025) Case? 

Background and Initiation: 

• Initial Application: M/s Goyal Tea Agencies Private Limited filed an application under Section 9 of the IBC against M/s Shakti Bhog Snacks Limited (Corporate Debtor). 
• Corporate Insolvency Resolution Process (CIRP) Commencement: The application was admitted on 3rd January 2023, with a moratorium declared under Section 14 of the IBC. 
• Appointment of Resolution Professional (RP): Mr. Umesh Gupta was appointed as Interim Resolution Professional, later confirmed as Resolution Professional by the Committee of Creditors on 2nd February 2023. 

Claims and Committee Formation: 

• Public Announcement: Published in Hindi edition of Jansatta and English edition of Financial Express on 6th January 2023. 
• Claims Received: Only one claim received from State Bank of India (Financial Creditor) for ₹14,62,18,009.83 with 100% voting share. 
• Committee of Creditors: Constituted on 25th January 2023, with SBI as the sole member. 
• No Other Claims: No claims received from operational creditors, employees, or workmen. 

Challenges in Asset Recovery: 

• Director Non-Cooperation: Suspended directors, including Mr. Naresh Chander Varshney, refused to provide documents or information. 
• Section 19(2) Application: Filed due to lack of cooperation from suspended directors. 
• Physical Verification: RP visited registered office at Pearls Business Park, Pitampura, New Delhi. 
• Office Status: Found office sealed by Enforcement Directorate with no operations or available records. 

Asset Position and Meetings: 

• No Physical Assets: No physical assets available for the Corporate Debtor. 
• Property Sale: Land and building at B-87, Sector-64, Noida sold by SBI under SARFAESI Act in December 2019. 
• Financial Records: Last available financial statements from FY 2015-16. 
• CoC Meetings: Three meetings held (2nd February 2023; 28th February 2023; 19th June 2023). 
• CoC Decision: Unanimously recommended dissolution under Section 54 instead of liquidation due to absence of assets. 

Section 54 Application: 

• Filing: Resolution Professional filed application under Section 54 of IBC seeking dissolution. 
• Grounds: No assets to liquidate, no prospects of revival, economically impractical to continue CIRP. 
• Precedents Cited: Multiple coordinate bench decisions supporting dissolution in similar circumstances. 

ED's Opposition and PMLA Proceedings: 

• ED Entry: Enforcement Directorate filed reply opposing dissolution. 
• Money Laundering Investigation: ECIR/DLZO-I/12/2021 dated 31st January 2021 against Shakti Bhog Foods Limited and group entities. 
• Group Company Status: Shakti Bhog Snacks Limited identified as group company of Shakti Bhog Foods Limited. 
• Criminal Allegations: Company accused of routing loan funds through bogus invoices and money laundering activities. 
• Financial Involvement: Acquired and possessed proceeds of crime worth ₹97.87 crores, transferred ₹127.81 crores to group entities (FY 2007-08 to 2014-15). 

Prosecution and Attachment: 

• Criminal Prosecution: Corporate Debtor arraigned as accused in 5th Supplementary Prosecution Complaint dated 20th September 2024. 
• Court Cognizance: Special Court, PMLA took cognizance and issued summons, 
• Asset Attachment: ICICI Bank account (A/c No. 042305000350) with balance of ₹3,701.81 attached under PMLA. 
• Attachment Confirmation: Confirmed by Adjudicating Authority, PMLA vide order dated 26th May, 2022. 

RP's Counter-Arguments:  

• Timing: Corporate Debtor implicated only on 20th September 2024, after 19 months of CIRP commencement. 
• Limited Involvement: Reference to Corporate Debtor confined to pages 20-21 of prosecution complaint. 
• Minimal Assets: Only ₹3,701.81 in bank account under attachment. 
• Parent Company Orders: ED stated no objection to release of parent company properties; Trial Court allowed restoration of attached properties to RP/Liquidator of Shakti Bhog Foods Limited.

What were the Court’s Observations? 

Jurisdictional Principles: 

• PMLA Primacy: The PMLA is a special and self-contained legislation designed to prevent, detect, and punish acts of money laundering. It provides for its own adjudicatory framework and overrides any inconsistent provisions of other laws by virtue of Section 71 of the PMLA. 
• NCLT Limitations: The tribunal emphasized that NCLT and NCLAT do not have jurisdiction to interfere with proceedings or orders passed under the PMLA, including attachment orders or criminal prosecution 

Key Judicial Pronouncements: 

• Character Over Quantum: It is not the quantum but the character of the proceedings that is determinative. The IBC cannot be used as a mechanism to frustrate or sidestep the legitimate process of law under the PMLA. 
• Judicial Overreach Prevention: Permitting dissolution despite the pendency of the Special Court's cognizance over the Corporate Debtor would amount to judicial overreach and would impair the ED's ability to complete its investigation, pursue trial, and recover proceeds of crime. 
• Corporate Availability for Criminal Liability: This Adjudicating Authority cannot assume jurisdiction in a manner that would render the Corporate Debtor unavailable for criminal liability, particularly when it stands named as an accused, and assets, however meagre, are under attachment. 

Legal Reasoning: 

• Consequences of Dissolution: Court noted that dissolution under Section 54 results in the corporate debtor ceasing to exist as a legal entity, which would frustrate ongoing criminal prosecution. 
• Statutory Hierarchy: Recognized that PMLA, being a special legislation, holds primacy over IBC in proceedings relating to money laundering.

Final Disposition: 

• Application Dismissed: In light of the above facts and circumstances, the prayer(s) sought in the present Application cannot be allowed and hence, IA-3695-2023 In IB-1713-2019, hereby stands dismissed. 
• No Costs: Court ordered no costs, indicating the application was not frivolous but legally unsustainable. 
• Certified Copy: Provision made for issuance of certified copy upon compliance with formalities’ 

Judicial Impact: 

• This judgment establishes important precedent regarding the intersection of insolvency law and anti-money laundering enforcement, clarifying that: 
  • IBC proceedings cannot shield entities from PMLA enforcement. 
  • Special legislation (PMLA) takes precedence over general commercial law (IBC). 
  • Criminal liability considerations override commercial convenience in dissolution matters. 
  • Minimal asset value does not diminish the importance of criminal proceedings.

What is the Insolvency and Bankruptcy Code (IBC), 2016?

About: 

• The IBC, 2016 is the bankruptcy law of India that consolidates and amends the existing laws relating to insolvency and bankruptcy of corporate persons, partnership firms, and individuals. 
  • Insolvency is a state where the liabilities of an individual or an organization exceed its assets and that entity is unable to raise enough cash to meet its obligations or debts as they become due for payment. 
  • Bankruptcy is when a person or company is legally declared incapable of paying their due and payable bills. 
• The IBC aims to provide a time-bound and creditor-driven process for insolvency resolution and to improve the credit culture and business environment in the country. 
• IBC resolves claims involving insolvent companies. This was intended to tackle the bad loan problems that were affecting the banking system.

Regulating Authority: 

• The Insolvency and Bankruptcy Board of India (IBBI) was established under the Insolvency and Bankruptcy Code, 2016. 
• It is a statutory body, responsible for making and implementing rules and regulations for insolvency and bankruptcy resolution of corporate persons, partnership firms, and individuals in India. 
• The IBBI has 10 members, representing the Ministry of Finance, the Ministry of Corporate Affairs, and the Reserve Bank of India.

Salient Features:  

• Covers all individuals, companies, Limited Liability Partnerships (LLPs) and partnership firms. 
• Adjudicating authority: 
  • National Company Law Tribunal (NCLT) for companies and LLPs. 
  • Debt Recovery Tribunal (DRT) for individuals and partnership firms.

What is the Prevention of Money Laundering Act, 2002 (PMLA)? 

About: 

• The Prevention of Money Laundering Act, 2002 (PMLA) is an Act of the Parliament of India enacted to prevent money laundering and provide for the confiscation of property derived from money laundering. 
• It aims to combat money laundering related to illegal activities such as drug trafficking, smuggling, and terrorism financing.

Objectives of PMLA: 

• Prevention: To prevent money laundering by implementing stringent measures and monitoring financial transactions. 
• Detection: To detect and investigate instances of money laundering through proper enforcement and regulatory mechanisms. 
• Confiscation: To confiscate properties derived from money laundering activities to deter offenders and disrupt illicit financial flows. 
• International Cooperation: To facilitate international cooperation in combating money laundering and terrorist financing activities.

Key Provisions: 

• Offences and Penalties: PMLA defines money laundering offences and imposes penalties for such activities. It includes rigorous imprisonment and fines for offenders. 
• Attachment and Confiscation of Property: The Act allows for the attachment and confiscation of property involved in money laundering. It provides for the establishment of an Adjudicating Authority to oversee these proceedings. 
• Reporting Requirements: PMLA mandates certain entities, such as banks and financial institutions, to maintain records of transactions and report suspicious transactions to the Financial Intelligence Unit (FIU). 
• Designated Authority and Appellate Tribunal: The Act establishes a Designated Authority to assist in the investigation and prosecution of money laundering offences. It also provides for the establishment of an Appellate Tribunal to hear appeals against orders of the Adjudicating Authority.

Recent Amendments to PMLA, 2002: 

• Clarification about the Position of Proceeds of Crime: Proceeds of the Crime not only includes the property derived from scheduled offence but would also include any other property derived or obtained indulging into any criminal activity relate-able or similar to the scheduled offence. 
• Money Laundering Redefined: Money Laundering was not an independent crime rather depended on another crime, known as the predicate offence or scheduled offence. The amendment seeks to treat money laundering as a stand-alone crime.

Comparative Analysis: IBC vs. PMLA 

Nature and Purpose: 

Procedural Framework: 

Asset Treatment: