₹5,600-cr NSEL case: PMLA Court refuses to release ED-attached assets for insolvency process

Special Judge Nitin V Jiwane on Tuesday rejected a plea by resolution professional K Sivalingam, who had sought restitution of the properties so they could be used in the company’s insolvency resolution process

MUMBAI: An insolvency process cannot be used to free properties attached by the Enforcement Directorate (ED) under the money-laundering law, a special PMLA court has ruled while refusing to release properties of NCS Sugars Ltd that were attached in connection with the alleged ₹5,600-crore National Spot Exchange Ltd (NSEL) fraud case.

₹5,600-cr NSEL case: PMLA Court refuses to release ED-attached assets for insolvency process

Special Judge Nitin V Jiwane on Tuesday rejected a plea by resolution professional K Sivalingam, who had sought restitution of the properties so they could be used in the company’s insolvency resolution process. Sivalingam told the court that two resolution plans were being considered and that the attached properties were important for NCS Sugars’ revival.

The court said, however, that assets attached as alleged proceeds of crime could not be released merely because the company was undergoing insolvency proceedings. It observed that “IBC proceedings cannot be used to defeat attachment under PMLA,” citing earlier rulings including those of the Supreme Court and Delhi High Court.

The case dates back to the 2013 NSEL crisis, when the exchange failed to meet settlement obligations and several trading members defaulted. NCS Sugars was among the companies declared a defaulter, with dues of ₹58.85 crore at the time.

According to the ED’s investigation, NCS Sugars participated in NSEL’s paired contracts without having the corresponding physical stock. It allegedly issued stock offer letters and sale invoices despite not possessing the commodities and received funds through the NSEL settlement system.

The court order records that NCS Sugars received ₹188.06 crore from NSEL and paid back ₹133.15 crore. After subsequent repayments, ₹47.30 crore remained outstanding and was identified by the ED as proceeds of crime.

The ED provisionally attached NCS Sugars’ immovable properties in July 2018. The attachment was later confirmed by the PMLA Adjudicating Authority and remains in force.

The court clarified that whether the properties ultimately constitute proceeds of crime would be decided at the conclusion of the trial.