HC strikes down ED’s attachment of V Hotel at Juhu Beach

The Bombay high court recently struck down the attachment by the Enforcement Directorate (ED) of several properties of V Hotels (formerly Tulip Hospitality Services), including its hotel at Juhu Beach and 11 residential flats in three buildings located in Malad West and JVPD Scheme

MUMBAI: The Bombay high court recently struck down the attachment by the Enforcement Directorate (ED) of several properties of V Hotels (formerly Tulip Hospitality Services), including its hotel at Juhu Beach and 11 residential flats in three buildings located in Malad West and JVPD Scheme.

HC strikes down ED’s attachment of V Hotel at Juhu Beach

A division bench of justice BP Colabawalla and justice Somasekhar Sundaresan struck down the attachment, confirmed by the PMLA, adjudicating authority primarily because V Hotels has undergone successful Corporate Insolvency Resolution Process (CIRP) under provisions of the Insolvency and Bankruptcy Code (IBC), 2016 (IBC), and Macrotech Developers Ltd has taken over the company.

“Once a resolution plan is approved under Section 31 (of the IBC) and a change in control and management is effective under the resolution plan, the property of the corporate debtor would also get immunity from further prosecution of proceedings,” said the bench.

The bench said this is made explicitly clear by the explanation appended to Section 32A (2). “Once this is the case, we find that the Enforcement Directorate’s attachment, either provisionally or otherwise, cannot continue even for a day longer after the approval of the resolution plan which meets the parameters of section 32A,” the bench added.

V Hotels had approached the high court after the ED had in April this year provisionally attached their hotel at Juhu Beach, and five flats in Sunder Jamnotri building in Malad West and three flats each in Abhanga Samata building in Malad West and Goa Bhavan in JVPD Scheme. During pendency of the petition, in October this year, the adjudicating authority, under the Prevention of Money Laundering Act, had confirmed the attachment.

The court accepted the arguments advanced on behalf of the company that once a resolution plan has been approved by the National Company Law Tribunal under Section 31 of the IBC, the corporate debtor (V Hotels) cannot be prosecuted for any offence and no action can be taken against its property in relation to the offence committed prior to the commencement of the CIRP, where such property is covered under the approved resolution plan that results in a change in control of the corporate debtor to a third party.

The court also struck down the Enforcement Case Information Report (ECIR) registered by the ED against V Hotels in view of the successful CIRP.