In a significant ruling, the Calcutta High Court has held that once a liquidation order is passed under the Insolvency and Bankruptcy Code, 2016 (IBC), no proceedings under the Foreign Exchange Management Act, 1999 (FEMA) can be continued or initiated against the corporate debtor. The court emphasized the overriding effect of the IBC, reinforced by its non-obstante clause under Section 238.
The bench of Justice Jay Sengupta delivered this judgment while hearing a writ petition filed by Anup Kumar Singh, who was appointed as the liquidator of Shree Ganesh Jewellery House (I) Pvt. Ltd. The petition challenged notices dated November 30, 2022, and January 31, 2023, issued under FEMA, along with a provisional seizure order and its confirmation dated May 23, 2023.
"Once a liquidation order is passed, Section 33(5) of the IBC clearly bars the initiation or continuation of any legal proceedings against the corporate debtor," the Court stated.
Shree Ganesh Jewellery had entered the Corporate Insolvency Resolution Process (CIRP) on February 12, 2018, pursuant to an NCLT order. On September 14, 2018, the NCLT directed liquidation, and Singh was appointed as the liquidator. The Court pointed out that Section 14 of the IBC already prohibits any proceedings against a corporate debtor after the commencement of CIRP, and Section 33(5) extends that protection into liquidation.
The Enforcement Directorate had issued a Provisional Seizure Order under Section 37A of FEMA in November 2022, claiming violations including failure to realize export proceeds worth over ₹7,220 crore. Subsequently, the liquidator received a notice for personal appearance, seeking confirmation of the seizure. Despite the pendency of the writ petition, the FEMA authorities confirmed the seizure on May 23, 2023.
Justice Sengupta noted that the initiation of FEMA proceedings in 2016—before CIRP began—is irrelevant because Section 14 of the IBC restricts both initiation and continuation of such actions once insolvency proceedings are underway.
The Court emphasized that under Section 32A(2) of the IBC, no action can be taken against the corporate debtor’s assets for any offence committed prior to CIRP. This includes seizure, attachment, or confiscation under any law, unless the asset sale is to a connected party or someone involved in the alleged offence.
"The IBC, being a later legislation, includes a strong non-obstante clause under Section 238, which prevails over any conflicting provisions in other laws, including FEMA," the Court added.
Referring to multiple Supreme Court judgments, including Paschimanchal Viduyt Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. and Sundaresh Bhatt v. Central Board of Indirect Taxes and Customs, the High Court reaffirmed that the IBC’s provisions take precedence over other statutes.
In response to the Enforcement Directorate's arguments that the petitioner suppressed material facts and that FEMA proceedings predate the liquidation order, the Court clarified that the FEMA notices and orders were issued during the moratorium. Therefore, they could not legally stand.
The Court further stated:
"In view of the proceedings pending under the Code and the orders passed therein, the impugned provisional seizure order and the impugned notices could not have been issued."
The Court, however, clarified that while proceedings against the corporate debtor are barred, individual liability of directors or officers for actions before CIRP commencement can still be pursued separately.
Case Title: Anup Kumar Singh Vs Union of India & Others
Case Number: WPA 4585 of 2023
Judgment Date: April 16, 2025
For Petitioner: Mr. Jishnu Chowdhury, Mr. Saptarshi Mondal
For Respondents: Mr. Arijit Chakraborti, Mr. Deepak Sharma, Ms. Swati Singh
