IBBI and Enforcement Directorate Reach Solution for Insolvency Law and PMLA Interface Issues

The Insolvency and Bankruptcy Board of India (IBBI) and the Enforcement Directorate (ED) have collaborated to tackle issues arising from the intersection of insolvency law and the Prevention of Money Laundering Act (PMLA). IBBI Chairperson Ravi Mital expressed optimism about issuing a circular within a month or two to address these challenges effectively.

There have been complications in resolving certain cases under the Insolvency and Bankruptcy Code (IBC) due to suspected assets linked to black money. The PMLA allows the ED to attach such assets, while the IBC imposes a moratorium on assets undergoing insolvency resolution. This has created conflicts between the two laws, leading to a pending case in the Supreme Court.

Resolution Efforts for Insolvency Law

Mital stated that discussions with the ED have led to a solution that respects both the IBC and PMLA. This approach aims to preserve the integrity of both laws while resolving existing issues. He shared these insights during the ninth annual day celebration of the IBBI, an essential institution under the IBC framework.

The IBC, established in 2016, aims for a market-driven and timely resolution of stressed assets. Mital also mentioned that the IBBI is working on implementing Supreme Court directions from two recent judgements concerning the real estate sector. He anticipates these implementations will be completed within two to three months.

Amendments and Legislative Developments

In August, a bill proposing amendments to the IBC was introduced in Lok Sabha and referred to a select committee. These amendments were formulated after extensive consultations with stakeholders. In January 2023, a discussion paper was issued by the government to gather further stakeholder feedback on enhancing the Code.

The IBBI is currently preparing draft regulations for these proposed amendments. Mital emphasised that this proactive approach aims to minimise delays once Parliament approves the changes. Since its enactment, the Code has seen six legislative interventions, with amendments occurring in 2017, 2018, 2019 (twice), 2020, and most recently in 2021.

Mital concluded by highlighting ongoing efforts to streamline processes under the IBC. The collaboration between IBBI and ED is expected to resolve conflicts between insolvency law and money laundering regulations, ensuring smoother asset resolution procedures in future cases.

With inputs from PTI