IBBI Moves to Reclaim Assets Under PMLA for Insolvent Corporates

The Insolvency Bankruptcy Board of India (IBBI) has taken a decisive step to facilitate the recovery of assets for corporate debtors facing insolvency. It has instructed insolvency professionals to file applications with special courts under the Prevention of Money Laundering Act (PMLA) to reclaim assets attached by the Enforcement Directorate (ED).

The strategy aims to boost the value of the corporate debtor, potentially leading to higher recoveries under the Insolvency and Bankruptcy Code (IBC). According to a circular from the IBBI, insolvency professionals should seek restitution of assets through applications under sections 8 (7) or 8 (8) of the PMLA, depending on the trial status and proof of good faith by claimants.

In ensuring efficient resolution, the IBBI has collaborated with the ED to create a standardized undertaking for insolvency professionals. This undertaking ensures that restituted assets do not aid PMLA offenders and mandates regular reporting to the special court on asset usage, guaranteeing transparency and compliance throughout the insolvency process.