Context:
The Insolvency and Bankruptcy Board of India (IBBI) issued a circular on 4 November 2025 allowing insolvency professionals to file applications for the restoration of assets attached by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA). The move aims to maximize recovery for creditors, reduce friction between PMLA and Insolvency and Bankruptcy Code (IBC) provisions, and support the resolution of stressed companies.
Key Highlights:
- Purpose:
- Attachment of assets by ED often discourages investors and hampers corporate rescue efforts.
- The circular addresses conflicts between:
- PMLA: Allows ED to attach assets linked to proceeds of crime.
- IBC: Protects assets of a bankrupt firm during resolution or transfer to a new owner.
- Procedure for Restitution:
- Insolvency professionals can file applications under Sections 8(7) or 8(8) of PMLA before special courts.
- Courts may direct the government to restore confiscated assets to the corporate debtor.
- A standard undertaking format has been prepared jointly by IBBI and ED.
- Conditions for Restituted Assets:
- Assets cannot be sold or transferred to promoters, related parties, or anyone involved in the offence.
- Assets cannot benefit individuals under ED investigation.
- Insolvency professionals must submit quarterly status reports and cooperate with ED investigations.
