NCLAT: Insolvency law can't override PMLA, ED asset attachment is valid

The National Company Law Appellate Tribunal (NCLAT) has ruled that the Insolvency and Bankruptcy Code (IBC) does not supersede the Prevention of Money Laundering Act (PMLA), stating that assets attached by the Enforcement Directorate (ED) and confirmed by the competent authority cannot be released for the purpose of insolvency resolution.

- MPOST BUREAU

The three-member bench clarified that if a property is considered to be proceeds of crime and the attachment is validated by the adjudicating authority under the PMLA, such assets are outside the purview of the resolution estate, even if insolvency proceedings are ongoing.

"Where attachment is made by the ED and confirmed, the same cannot be undone under the IBC," the tribunal observed in a 36-page order. It noted that Section 14 of the IBC, which imposes a moratorium on legal actions against the corporate debtor, does not extend to assets that are under investigation or adjudication as proceeds of crime under the PMLA.