IBBI Empowers Insolvency Professionals to Reclaim ED-Attached Assets, Aiming to Maximize Recovery in Insolvency Cases
IBBI Empowers Insolvency Professionals to Reclaim ED-Attached Assets, Aiming to Maximize Recovery in Insolvency Cases
Introduction
The Insolvency and Bankruptcy Board of India (IBBI) has issued a circular on November 4, 2025, guiding insolvency professionals on the restitution of assets attached by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA). The Board noted that assets of entities undergoing insolvency resolution are often under ED attachment, which affects value realization during Corporate Insolvency Resolution Process (CIRP) or liquidation. The circular aims to streamline the process for restitution of such assets, thereby enhancing the value of the corporate debtor’s estate.
Factual background
In several insolvency cases, assets of corporate debtors have been attached by the ED due to alleged money laundering activities by former management or related parties. Such attachments often lead to conflicts between the PMLA authorities and the insolvency framework under the Insolvency and Bankruptcy Code, 2016 (IBC). The IBBI, taking note of this recurring issue and in consultation with the ED, has introduced a structured mechanism to assist insolvency professionals in reclaiming attached assets for the benefit of creditors.
Procedural background
The circular, addressed to all registered insolvency professionals, advises them to file applications before the designated Special Courts under Sections 8(7) or 8(8) of the PMLA for restitution of attached assets. To ensure uniformity and expedite the disposal of such applications, IBBI has also introduced a standard form of undertaking to accompany every restitution application. The undertaking ensures responsible handling of restituted assets and compliance with statutory safeguards.
Issues
1. How should insolvency professionals seek restitution of assets attached by the ED under the PMLA during insolvency proceedings?
2. What safeguards and obligations apply to insolvency professionals handling restituted assets?
Contentions of the Parties
The circular directs insolvency professionals to provide an undertaking that restituted assets will not be sold, transferred, or otherwise used for the benefit of persons ineligible under the IBC or those accused in ongoing ED investigations. Insolvency professionals must also file quarterly reports to the Special Court detailing the utilization, monetization, and distribution of restituted assets.
Further, they must disclose details of all ED-attached properties in the information memorandum or auction notices and keep such disclosures updated as new information becomes available. The IBBI emphasizes the need for full cooperation with the ED by sharing information on preferential, undervalued, fraudulent, or extortionate transactions, details of the Committee of Creditors, and information about successful resolution applicants.
Reasoning and analysis
The circular underscores the IBBI’s intent to harmonize the interplay between the IBC and PMLA frameworks. By encouraging insolvency professionals to actively pursue restitution through the Special Courts, the Board seeks to ensure that attached assets are reintegrated into the insolvency estate for equitable distribution among creditors. The inclusion of a standard undertaking and reporting obligations strengthens transparency, accountability, and regulatory oversight. Moreover, cooperation with the ED ensures that the insolvency process does not inadvertently benefit wrongdoers while protecting the value of legitimate creditor claims.
Implications
This circular is a significant step toward resolving the long-standing friction between the IBC and PMLA. It offers clarity to insolvency professionals, enabling them to pursue restitution without conflicting with anti-money laundering objectives. The framework promotes coordination between insolvency and enforcement authorities, enhances value realization for creditors, and reinforces the integrity of the insolvency process.
