Firm Matters

Khaitan & Co successfully represented Nuvoco Vistas Corporation Ltd (“NVCL”) (successful resolution applicant) in securing the discharge of Vadraj Cement Ld (“VCL”) in proceedings under the Prevention of Money Laundering Act, 2002 (“PMLA”) arising from the IL&FS Financial Services Ltd. money laundering matter. 

VCL had been arrayed by the Enforcement Directorate (“ED”) as an Accused, with allegations in relation to proceeds of crime of approximately INR 952 crores. The ED had provisionally attached VCL’s properties in January 2020, and such attachment was confirmed by the Adjudicating Authority under the PMLA in August 2021. 

VCL had undergone Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”), pursuant to which NVCL’s resolution plan (unanimously approved by the Committee of Creditors) was approved by the National Company Law Tribunal, Mumbai on 1 April 2025. On behalf of NVCL, it was argued that Section 32A of the IBC grants statutory immunity to the corporate debtor upon approval of a resolution plan (subject to change in management to persons unconnected with the erstwhile promoters), thereby entitling VCL to discharge. The ED opposed the discharge, including on the basis that such relief would create a precedent for an “amnesty route” and that the PMLA’s non-obstante clause should prevail over the IBC. 

The Court allowed the discharge of the corporate debtor in view of the immunity under Section 32A of the IBC, while clarifying that the erstwhile officers/directors and persons responsible for, or involved in, the conduct/commission of the offence prior to commencement of CIRP would continue to be prosecuted notwithstanding discharge of the corporate debtor. 

Unique feature:

The matter involved the interplay between statutory immunity under Section 32A of the IBC and parallel criminal proceedings under a special legislation (PMLA), including a direct challenge based on competing non-obstante clauses. The order reinforces the “clean slate” principle for bona fide resolution applicants while maintaining accountability of alleged individual wrongdoers associated with the corporate debtor prior to CIRP.