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The Enforcement Directorate (ED) and the Insolvency and Bankruptcy Board of India (IBBI) have introduced a standard operating procedure to restore assets, previously attached under the Prevention of Money Laundering Act (PMLA), to banks and home-buyers affected by insolvency cases. A circular issued by the IBBI on 4 November follows coordination between the two bodies. Under the new mechanism, insolvency professionals will submit a 'standard undertaking' before special PMLA courts to enable release of attached assets for creditor benefit. The move aims to reduce delays and ensure that wrongdoers do not benefit from the process.
Assets of corporate debtors and promoters that were attached by the Enforcement Directorate under the PMLA will now be made available for use by banks, home-buyers and other creditors, following the establishment of a new standard procedure. The IBBI issued a circular on 4 November after several rounds of coordination with the ED. Advertisement
Under this mechanism, insolvency professionals (IPs) will present a 'standard undertaking' before special PMLA courts, requesting release of assets under Sections 8(7) and 8(8) of the PMLA. Previously, many resolution processes under the Insolvency and Bankruptcy Code (IBC) were delayed because assets remained under attachment and could not be deployed to enhance realisations for creditors.
The ED has indicated that this coordinated move shows enforcement under the PMLA and value-maximisation under the IBC are not conflicting goals. Instead, when aligned, they support the prosecution of economic offenders while protecting the interests of the public and creditors. The mechanism includes safeguards: restituted assets must be used solely for the benefit of creditors, no advantage must flow back to the accused or promoters, and full reporting and compliance obligations remain until the resolution process concludes.
This move addresses a long-standing bottleneck: in several prominent cases (for example in distressed real-estate or construction companies) assets attached under PMLA remained outside the asset pool in IBC processes, thereby reducing recovery value for banks and home-buyers. The new standard aims to bridge that gap by offering a clear pathway for release of such assets for real-estate and corporate insolvency resolutions.
Legal practitioners have welcomed the change. They note that by enabling attached assets to be used in resolution while ensuring no benefit goes back to wrongdoers, the process should cut down litigation delays and accelerate creditor recoveries. For home-buyers especially, the mechanism promises more clarity and faster outcomes in cases where developers face insolvency and also enforcement action.
Source PTI
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