ED–IBBI pact allows return of attached assets to creditors

The SOP aligns anti-money laundering and insolvency frameworks, allowing Insolvency Professionals to seek release of attached assets through special PMLA courts.
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VIBHU H/The Hindu

In a major relief for banks and home buyers, assets of bankrupt companies and their promoters attached by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) can now be restored to affected creditors, following the finalisation of a new standard operating procedure (SOP) jointly framed by the ED and the Insolvency and Bankruptcy Board of India (IBBI).

The IBBI issued a circular on November 4 after “multiple rounds” of coordination meetings with the ED, formalising a mechanism to align insolvency resolution and anti-money laundering processes.

Under the new arrangement, Insolvency Professionals (IPs) will file a “standard undertaking” before the special PMLA court seeking release of assets attached by the ED so they can be restored to rightful creditors — including banks, homebuyers, and other investors.

Unfreezing stalled resolutions

Earlier, assets of several companies undergoing insolvency proceedings were frozen under PMLA, preventing their use in resolution or liquidation. The restitution or restoration of assets to the affected parties, such as banks and homebuyers who were cheated, is a remedy available under the PMLA.

The new mechanism addresses this hurdle by enabling assets to be returned to victims while ensuring compliance with both legal frameworks.

According to the ED, the process will enable Resolution Professionals to seek release of attached properties under Sections 8(7) and 8(8) of PMLA. The restituted assets will be used solely for the benefit of creditors, with safeguards in place to prevent promoters or accused parties from benefiting from the process.

“This initiative demonstrates that strict enforcement under PMLA and value maximisation under the Insolvency and Bankruptcy Code (IBC) are not conflicting objectives,” the ED said in a statement. “When coordinated, they ensure prosecution of economic offenders while protecting public and creditor interests through lawful resolution.”

Balancing enforcement and recovery

The agency added that the move would not only enhance recovery value for creditors but also expedite the resolution of pending insolvency cases.

“The ED remains committed to ensuring that proceeds of crime are not enjoyed by offenders, while cooperating with the insolvency framework to protect legitimate creditor interests,” the statement said.

The new SOP is also expected to reduce litigation and streamline asset recovery in cases where PMLA attachments have delayed insolvency proceedings.

Published on November 5, 2025