The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) aims to revive financially distressed companies. However, when the Enforcement Directorate (ED) attaches assets under laws like the Prevention of Money Laundering Act, 2002 (PMLA), it creates legal and operational challenges for Resolution Professionals (RPs) and prospective Resolution Applicants (RAs).
This article highlights key challenges and practical solutions for RPs managing ED-attached assets during CIRP.
Key Challenges for RPs
- Reduced Asset Pool – ED attachments of movable or immovable assets can lower the enterprise value, affecting the feasibility of resolution plans.
- Operational Hurdles – Attached assets may include critical operational resources such as land, plants, or machinery, making it difficult to manage or monetize them during CIRP.
- Delays and Legal Disputes – RAs may seek clarity or indemnity, causing delays. Litigation over ownership or availability of assets can erode value and slow down the resolution process.
Navigating ED Attachments
- Section 14 Moratorium Does Not Apply – The moratorium under Section 14 of IBC does not prevent ED attachments under PMLA.
- P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd. – Section 14 only bars civil proceedings; criminal or penal actions continue.
- Directorate of Enforcement v. Axis Bank (Delhi High Court) – ED attachments are not covered by IBC moratorium because they target “proceeds of crime,” not debt recovery.
Thus, NCLT applications for release of attached assets are generally unsuccessful, and NCLAT lacks jurisdiction in this context.
- Approach PMLA Authorities for Restitution – A practical route for the RP is to approach the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA) to request the release of attached assets. The Insolvency and Bankruptcy Board of India (IBBI), in coordination with the Enforcement Directorate (ED), has simplified this procedure through its circular dated 4 November 2025. According to the circular, when a corporate debtor’s assets are attached by the ED under the PMLA, the Insolvency Professional can approach the Special Court under Sections 8(7) or 8(8) of the PMLA to seek restitution. With this formalized process in place, RPs can expect a more streamlined and time-efficient approach to recover attached assets
- Section 32A of IBC Provides Post-Approval Protection – Once a resolution plan is approved under Section 31, Section 32A offers immunity to the Successful Resolution Applicant (SRA) against past liabilities.
- Enforcement actions, including ED attachments, cease after approval.
- Including explicit clauses in the resolution plan ensures assets under attachment are protected.
- The NCLAT in Vantage Point Asset Management v. Gaurav Misra & Anr. (15 Oct 2025) confirms this approach.
Conditions for Section 32A:
- Resolution plan approved under Section 31.
- Statutory conditions of Section 32A satisfied.
- No separate application to NCLT/NCLAT required; protection is automatic upon compliance.
Conclusion
ED attachments during CIRP pose significant challenges, but RPs have legal avenues to safeguard asset value:
- PMLA restitution applications provide a direct route to reclaim attached assets.
- Section 32A immunity ensures that once a resolution plan is approved, the SRA is protected from prior liabilities.
Together, these mechanisms help maintain the integrity of the insolvency process, facilitate revival of stressed assets, and protect bona fide resolution applicants—ensuring the CIRP achieves its primary goal of business revival.
