JUNE 09,2020

By Dr M S Krishna Kumar, Advocate

1.1 THE Novel Corona Virus (COVID-19) outbreak across the globe has brought immense loss of lives and standstill to normal life of billions across countries. Due to the COVID- 19 pandemic during March 2020 the Government of India first brought in a one- day dawn to dusk lockdown on 22 nd March 2020. The lockdown was immediately followed up by nationwide lockdown from 24th March 2010 for 21 days allowing only essential services to function, and the lockdown continued in stages. On 24th March 2020 the Finance Minister informed that immediate steps are taken in providing relief measures in statutory, regulatory and compliance issues across sectors.

2.1 Subsequently Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 was published in the Gazette of India on 31.03.2020, relaxing various limitation(s) prescribed under direct tax, indirect tax, GST, Customs, and Prohibition of Benami Property Transactions Act, 1988.

2.2 In the meantime the Hon'ble Supreme Court taking suo moto cognizance of the difficulties faced across the country due to lock down, social distancing, movement of general public, in Suo Motu Writ Petition Civil No. 3 of 2020 in RE: Cognizance for Extension of Limitation passed the following interim order dated 23.03.2020

"To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.

We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities."

2.3 In the meantime a new provision was inserted in the IBBI (Liquidation Process) Regulation excluding the period of lockdown. Rule 47A reads as "47A. Subject to the provisions of the Code, the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of computation of the time-line for any task that could not be completed due to such lockdown, in relation to any liquidation process." The newly inserted regulation was to operate from 17th April 2020. Further Sec.4 of the Insolvency & Bankruptcy Code, 2016 (IBC 2016) was amended incorporating certain welfare measures. The threshold limit of invoking insolvency proceedings has been enhanced from Rs.1,00,000/- to Rs.1,00,00,000/- (one crore). The amendment took effect from 24th March 2020. Simultaneously Regulation 40C of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation 2016 proposed to exclude lockdown period from the time limit prescribed in the IBC and the said provision was notified on 29th March 2020. Consequently, for computation of 330 days prescribed in the IBC, the lockdown period shall stand excluded.

4.1 The Taxation & Other Laws (Relaxation of certain provisions) Ordinance 2020 (Taxation Ordinance 2020) was published in Gazette on 31.3.2020. As per Sec. 3(1) of the Ordinance the time limit specified in, or prescribed, or notified under the "specified Act" falls during the period from 20th March 2020 to 29th June 2020 (or such other day after 29th June 2020 as notified by Central Govt.) the time limit for completion or compliance of action, shall, notwithstanding anything contained in the specified Act, stand extended to the 30th day of June 2020 or such day after the 30th day of June 2020 as may be notified. In terms of Sec. 2(1) of the Ordinance specified Act means the following (a) Wealth Tax Act, 1957 (b) Income Tax Act, 1961 (c) Prohibition of Benami Property Transactions Act, 1988 (PBPT 1988) (d) Chapter VII of FA, 2004 (e) Chapter VII of FA, 2013 (f) The Black Money (Undisclosed Foreign Income & Assets) Act, 2015 (g) the Direct Tax Vivad se Vishwas Act, 2020. Simultaneously, amendments were proposed vide Chapter III to Chapter VII for various direct, indirect tax, customs, GST laws as mentioned therein.

4.2 In addition to the Taxation Ordinance, 2020, very recently another Ordinance titled The Insolvency and Bankruptcy Code (Amendment) Ordinance 2020 was notified on 5th June 2020. One of the main objects as could be seen from the Ordinance is that it is considered expedient to suspend Sec.7, Sec.9 and Sec.10 of the IBC, 2016 to prevent corporate persons which are experiencing distress on account of unprecedented situation, being pushed into insolvency proceedings under the IBC for some time. The above provisions of IBC provide financial creditors, operations creditors and corporate debtor to move insolvency proceedings. By this Ordinance, fresh insolvency proceedings for a period of six months (which may be extended up to one year) to protect companies which are struggling to come back to normalcy and were affected very badly due to COVID 19 pandemic.

5.1 In the meantime a batch of Petitions were moved before the Hon'ble Supreme Court for directions qua (i) arbitration proceedings under Sec. 29 A of the Arbitration and Conciliation Act, 1996 (ii) proceedings under Sec.138 of Negotiable Instruments Act, 1881. (NI Act 1881). The Hon'ble Supreme Court in its order dated 06.05.2020 (in RE: COGNIZANCE FOR EXTENSION OF LIMITATION - Suo Motu Writ (Civil) 3/2020) following the earlier order dated 23.03.2020 in Suo Motu Writ Petition (Civil ) No. 3/2020, ordered that all periods of limitation prescribed under Arbitration and Conciliation Act, 1996 and under Sec. 138 of Negotiable Instrument Act, 1881 (NI Act 1881) shall be extended with effect from 15.3.2020 till further orders passed in the current petitions. It was further clarified that if the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises, shall be extended for a period of 15 days after lifting the lockdown.

5.2 It is pertinent to mention that the Apex Court while delivering the first interim order on 23.03.2020 has clearly mentioned that the orders are passed in terms of Art 142 of the Constitution of India read with Art. 141 and hence is binding on all courts, tribunals and authorities. In the first interim order dated 23.03.2020 the Apex Court extended period of limitation in all proceedings irrespective of limitation prescribed under general law or special law, whether condonable or not shall stand extended w.e.f 15th March 2020 until further orders. Now the question arises whether the limitation prescribed under all enactments which are in force in India stands extended by virtue of the order dated 25.03.2020. If such a scenario is visualized there is no necessity for batch of Petitions seeking extension of time under Arbitration & Conciliation Act, 1996 and NI Act 1881 to be listed and heard and orders dated 06.05.2020 specifically extending time limit for two the two Statutes passed as above. Further after issue of Taxation & Other laws Ordinance 2020 dated 31st March 2020 was subsequently followed up with another IBC Ordinance 2020 dated 5th June 2020.

6. Prevention of Money Laundering Act, 2002 (PMLA, 2002)

6.1 The Prevention of Money Laundering Act, 2002 which came in to force on 1 st July 2005 contains (a) civil proceedings for attachment of properties ("proceeds of crime" derived/obtained out of alleged scheduled offence) which are involved in money laundering - civil proceedings under the Act, and (b) prosecution and punishment of offence of money laundering by the Special Court appointed under the Act. The empowered authorities are bound follow the limitation prescribed under the Act in the following circumstances

- As per Sec. 5(3) of the Act, the Provisional Attachment Order (PAO) passed by an officer not below the rank of Deputy Director, Enforcement Directorate (passed under Sec.5(1) )shall cease to have effect after the expiry of 180 days

- In terms of Sec. 5(5) after issue of PAO the concerned authority has to file a Complaint before the Adjudicating Authority, PMLA, New Delhi within 30 days.

- As per Sec. 8(1) on receipt of PAO+ Complaint the Adjudicating Authority, PMLA, New Delhi (who normally functions from New Delhi) has to issue a notice seeking response from the defendants giving them at least 30 days time to respond. The notice under Sec.8(1) is being served on the Defendants situated across various places in India (depending on the jurisdiction of the Authority who issued PAO & the address of Defendants) through the Enforcement Directorate, with copy of PAO, Complaint & Relied Upon Documents, which are voluminous in nature.

- In terms of Sec. 8(2) the Adjudicating Authority shall after hearing parties concerned and upon perusing the documents, replies filed shall either confirm the attachment or lift the same. Such exercise has to be completed before the expiry of 180 days from the date of issue of PAO or else in terms of Sec. 5 (3) the PAO ceases to have effect, and if so the attached properties stands released forthwith.

- Similarly the authority who seizes, freezes records/property during search shall in terms of Sec.17 and Sec.18 of the Act, file within 30 days of search/seizure an application for retention of records/properties seized/frozen again with the Adjudicating Authority, PMLA New Delhi, and similar orders passed for retention after hearing parties concerned.

6.2 Therefore, in the absence of separate extension of limitation as provided to IBC, 2016 and Taxation and other Laws, the seizure, attachment, freezing orders become invalid after expiry of time, frustrating the object of the special enactment like PMLA. The instances as mentioned above are covered under Sec.5, Sec. 8, Sec. 17, Sec.18 etc.

7. Fugitive Economic Offenders Act, 2018 (FEOA 2018)

7.1 Sec.5(1) of the FEOA 2018, like PMLA 2002, also provides for attachment of any property (mentioned in application under Sec.4 with the permission of Special Court in such manner as may be prescribed. In terms of Sec. 5(3) of the Act, such provisional attachment shall continue for a period of 180 days from date of attachment or such other period as may be extended by Special Court before expiry of such period. In terms of Proviso to Sec. 5(2) the authority who provisionally attaches the property shall within 30 days file an application before the Special Court.

8. Foreign Exchange Management Act, 1999 (FEMA 1999)

8.1 In terms of Sec.37A(1) of Foreign Exchange Management Act, 1999 (FEMA 99) the authorized officer has reason to believe that foreign exchange/security or any immovable property situated outside India in contravention of Sec. 4 of the Act, seize value equivalent situated in India, of such foreign exchange/security, immovable property. In terms of Sec. 37A(2), such seizure order shall be placed before the Competent Authority within 30 days of date of such seizure, for confirmation of the same. In terms of Sec. 37A(3) the Competent Authority shall dispose of the Petition (filed by the authority effecting Seizure) within 180 days of seizure.

9.1 The time limit prescribed under FEMA 1999, PMLA 2002 and FEOA 2018 is not condonable in the absence of provisions under the respective enactments, except for computation of the period of limitation under PMLA and FEMA the period of stay granted by Court shall be excluded for computation of the time limit. In other words, statute does not provide for extension of the time limit, and further PMLA 2002 and FEOA 2018 have overriding provisions.

9.2 News reports in print/electronic media point out attachment orders issued in the past months against persons under PMLA especially after February 2020. Difficulties may, therefore, arise for the authorities as well as the persons concerned against whom attachment proceedings have been initiated under PMLA as defending the same within the time frame is not possible due to the nationwide lockdown from March 2020. Filing of Petitions, Applications by the Directorate of Enforcement before the Adjudicating Authority, PMLA at New Delhi and service of them to the Defendants pose practical difficulties in current scenario. Further, appearance of both sides before the Adjudicating Authority at New Delhi for a hearing is also not easy due to restricted intra-state and inter-state movement.

10. Conclusion

10. As the three statutes mentioned above are not part of the Ordinances issued in the COVID-19 situation, it is not clear, in the absence of specific Ordinance, whether the limitation under the said statutes stands covered/extended by the interim order dated 23.03.2020 of the Hon'ble Apex Court, more so when separate interim orders are subsequently passed for Arbitration Act and IBC. In order to clear the doubts of all concerned it would be a relief if the Government brings Ordinance or takes appropriate steps to cover the limitation prescribed under the three enactments above.

[The views expressed are strictly personal.]