Insolvent firms may get back assets seized by ED

Move expected to help resolve IBC-PMLA conflict

- MANU KAUSHIK

THE INSOLVENCY AND Bankruptcy Board of India (IBBI)and the Enforcement Directorate (ED) have mutually devised a mechanism, allowing insolvency professionals (IPs) to bring assets of corporate debtors attached bythe ED back into the resolution pool.

Such restitution of theassets is expected to give a fillip to the resolution process by reducing the chances of the prosecution process against errant promoters for their past wrong deeds undermining the value of the assets being salvaged.

Aconflict between the Insolvency Bankruptcy Code, 2016 (IBC), and the Prevention of Money Laundering Act, 2002, which most ED actions are based on, have engaged the courts for the last many years. This is despite the IBC containing Section 32 (A),introducedin December 2019, that reinforced immunity to the corporate debtor and its assets from prosecution under otherlaws.PMLA, like IBC, has an overriding nature, which made the issue more intractable.

In a new circular, the IBBI said that in cases where assets of the corporate debtor are attached by the ED under the PMLA, the IPs can file an application before a special court under Sections 8(7) or 8(8) ofthe PMLA for restitution of the attached assets.

Further, to facilitate the speedy disposal of such applications by the special courts, the IBBI, in consultation with the ED, has formulated a standard undertaking to be furnished by the IPs along with the application forrestitution.