New Delhi: The Directorate of Enforcement (ED) has restored 354 seized flats and several commercial units of a bankrupt real estate developer, Udaipur Entertainment World Pvt. Ltd, to the successful acquirer of the company, marking the resolution of legal complexities in the revival of an insolvent company entangled in money laundering investigations.
ED said in a statement on Tuesday that the restitution of properties worth ₹175 crore, which include 17 commercial units, will ultimately benefit the genuine homebuyers who had purchased units in the Royal Rajvilas project in Udaipur.
“The present restitution brings an end to the plight of 213 innocent homebuyers who had been suffering for over 12 years, and it has paved the way for completion of the project and finally handing over the completed units to these homebuyers,” ED stated.
Mint had reported on 16 September that ED has set a new protocol for smooth operation of the Prevention of Money Laundering Act (PMLA) and the Insolvency and Bankruptcy Code (IBC).
Legal resolution
ED implements PMLA and the Foreign Exchange Management Act (Fema). Since PMLA is a criminal law, the investigating agency is empowered to attach assets that are the proceeds of crime and restore them to their rightful owners. However, in the case of bankrupt businesses facing money laundering investigations, ED’s actions add another layer of legal proceedings to the debt resolution proceedings initiated by the company’s creditors under the Insolvency and Bankruptcy Code. IBC proceedings are time-bound, and fewer instances of litigation could aid quicker revival of companies. Therefore, ED’s asset attachments under the PMLA are often contested by other parties. IBC allows a clean slate to an insolvent company under new ownership, subject to certain riders, while prosecution can continue for any violation against the individuals involved.
ED’s timely restitution of properties to the successful bidder of the insolvent business helps in the timely revival of the company.
ED’s statement comes after the Supreme Court, on 10 October, gave its final ruling in the case Udaipur Entertainment World Pvt Ltd. vs Union of India and others. The apex court ruled that the resolution plan for the company may now be implemented in accordance with the law, signalling an amicable settlement.
ED stated that, in view of the Supreme Court’s directions to protect the interests of bona fide homebuyers, it approached the resolution professional and the new management of the company, seeking details of all homebuyers whose claims had been admitted before the NCLT, Mumbai.
After scrutinizing the details of the homebuyers, ED submitted a ‘No Objection’ before the court for restitution of the attached properties for the benefit of bona-fide homebuyers, except 11 flats/units pertaining to eight homebuyers, which were identified to be connected with proceeds of crime.
“Since this instant issue involved a complex question of law involving interplay between IBC, 2016 and PMLA, 2002, which could have prolonged the ongoing litigation before the various forums, ED took proactive approach to arrive at a harmonious solution without compromising the objective of the PMLA, 2002 and interest of the 213 homebuyers who were suffering due to the prolonged litigations,” ED stated.
By adhering to the essence of PMLA, 2002, ED is taking every possible step to ensure that attached properties are restituted to the rightful claimant for the ultimate benefit of the public at large, the statement said.
