IBBI and ED Announce Mechanism to Release ED-Attached Assets for Insolvency Resolution

### New Mechanism to Release ED-Attached Assets for Insolvency Resolution

The Insolvency and Bankruptcy Board of India (IBBI) and the Enforcement Directorate (ED) have jointly devised a crucial mechanism to enable insolvency professionals (IPs) to bring assets of corporate debtors, previously attached by the ED under the Prevention of Money Laundering Act (PMLA), back into the resolution pool. This initiative addresses a long-standing conflict between the PMLA and the Insolvency and Bankruptcy Code (IBC), which often stalled resolution processes and diminished asset values.

Under this new arrangement, IPs can now file applications with a special court, as stipulated by the PMLA, to seek the restitution of attached assets. To ensure transparency and smooth functioning, IBBI and ED have collaborated to create a standard undertaking that IPs must furnish. This undertaking assures that the restituted assets will not benefit any accused individuals and mandates regular quarterly reporting on their status to the special court. Furthermore, IPs are required to fully cooperate with the ED during investigations and disclose details about preferential, undervalued, fraudulent, or extortionate (PUFE) transactions.

**Impact** This development is expected to significantly boost the value of corporate debtors undergoing insolvency proceedings, leading to higher realizations for financial creditors. It harmonizes the operations of both the IBC and PMLA, potentially reducing litigation and increasing transparency in asset disposal. Experts view this as a practical step to maximize asset value under IBC while respecting PMLA's penal objectives and simplifying the process for practitioners.

**Impact Rating**: 8/10

**Difficult Terms**: * **Insolvency Professionals (IPs)**: Licensed individuals appointed to manage the resolution or liquidation of a company or individual facing financial difficulties. * **Corporate Debtors**: Companies that are unable to repay their outstanding debts. * **Resolution Pool**: The total assets of a company in insolvency that are available for distribution to creditors or for the company's revival. * **Prevention of Money Laundering Act (PMLA)**: Indian law aimed at preventing money laundering and confiscating proceeds of crime. * **Insolvency and Bankruptcy Code (IBC)**: Indian legislation consolidating and amending laws relating to resolution and insolvency of corporate entities, partnership firms, and individuals. * **Restitution**: The act of restoring something to its rightful owner or to its original condition. * **Predicate Agency**: An investigative or prosecutorial body involved in a primary offense, often related to financial crimes. * **Preferential, Undervalued, Fraudulent, or Extortionate (PUFE) Transactions**: Transactions deemed unfair, illegal, or detrimental to creditors' interests under insolvency laws. * **Committee of Creditors (CoC)**: A group composed of financial creditors who oversee the corporate insolvency resolution process for a debtor company. * **Jurisdiction**: The official authority granted to a legal body to make legal decisions and judgments.