How 2025 Reshaped Boundaries Of Resolution Estate Under Insolvency And Bankruptcy Code 2016

November 2025, brought with it major advancements into the debt restructuring ecosystem of India that reshape the contours of India's resolution estate under the Insolvency and Bankruptcy Code, 2016 ('the Code')^[1].

First is the circular dated 4^th November 2025 ('the Circular') issued by the Insolvency and Bankruptcy Board of India ('IBBI') which permits insolvency professionals to seek restoration of assets attached under the provision of Prevention of Money Laundering Act, 2002 ('PMLA')^[2], offering a structured mechanism to bring back assets attached by the Enforcement Directorate ('ED') into the resolution estate.^[3]

Further the Supreme Court's 11^th November 2025 order in the case of Directorate of Enforcement Vs. V Hotels Limited^[4], highlighted the willingness of the judiciary to allow restoration of assets, where it adds to effective resolution without hampering ongoing PMLA proceedings. Simultaneously, the NCLAT's ruling in the case of Pankaj Mahajan v. Edelweiss Asset Reconstruction Co.^[5], where it was held that Regulation 29 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('the CIRP Regulations') permits sale of encumbered assets without mandatory public auction, given that the secured creditors have given their express consent.

Interpreted together, these developments expand the range of assets available to the resolution estate, potentially improving recovery rates for creditors. However, questions remain about how legal hierarchies, coordination between regulators, and creditor protections will be managed.

2025 circular: A Structured Route

On 4^th November, 2025, the IBBI issued the Circular, which for the first time formally operationalized an institutionalized pathway for retrieving attached assets by the ED into the resolution estate, allowing Insolvency Professionals ('IPs') to approach Special Court under Section 8 of the PMLA.^[6] The accompanying obligations envisaged in the circular like extended disclosure requirements, post- restitution reporting, etc. indicate a regulatory attempt to balance value maximization with safeguards against laundering risks. The Code essentially calls for deliberate coordination between the IBBI and ED, challenging the mindset that enforcement of PMLA provisions and insolvency resolution operate in exclusive silos.

The circular does not affect the primacy of PMLA, but rather attempts to create a pathway for IPs to contend that such attached assets are essential to be preserved to keep the corporate debtor as a going concern, which is one of the soul intents of the Code.

The structure provided, therefore calls for a nuanced shift that allows objectives of insolvency to be taken into consideration within PMLA proceedings. The legacy of the circular will depend on how courts advocate this balance between enforcement imperatives versus core principles of the Code.

The Counterbalance

In July 2025, a three-judge bench of the NCLAT in the case of Mr. Anil Kohli Vs Directorate of Enforcement^[7] gave a major clarification on how the Code interacts with PMLA. The bench held that the statutory consequences of any attachment made in compliance with the provisions of PMLA cannot be dislodged by provisions of the Code. The court believed that when a court has decided on attachment, the attached assets acquire a legal personality as proceeds of crime and therefore, the custody transfers to criminal enforcement. In such situations, the resolution estate cannot absorb assets that underwent a separate judicial procedure under a penal statute.

When the principles are read in toto, it reestablishes a hierarchy embedded in legislative intent. Although section 14 of the Code provides moratorium to ensure that a debtor is not subject to civil actions and enforcement proceedings, the assets that are involved in money laundering investigations are outside its scope. When an attachment is confirmed, it represents a judicial confirmation that attached properties are sufficiently linked to a crime. And the Code cannot be read to dilute penal legislation despite its economic objectives.

This ruling of the NCLAT goes a long way in determining how the November circular issued by the IBBI will practically operate. The circular introduces a procedural method of seeking restitution, but doesn't assure reliefs with regard to attached assets. Provisional or pre- adjudication assets can only realistically be pursued to be reinstated hence creating a fact based, nuanced terrain from IPs.

Supreme Court's decision in V Hotels: Case- Specific Relief, Systemic Signals

The 11^th November 2025 order of the Supreme Court in the case of Directorate of Enforcement Vs. V Hotels Limited^[8], reinstated 12 properties annexed by ED to Lodha Developers who was the successful resolution applicant. The order, despite its expressly non-precedential and consent-based nature, indicated the Court's readiness to coordinate the enforcement of PMLA with the principles of debt restructuring, as opposed to allowing statutory inflexibility to emphasize the results of CIRP.

Although the order is not binding, its effect is undeniable. It is likely to push confidence of bidders, to induce insolvency professionals to pursue restitution of attached assets more actively and to expand the utility of such attached assets in the process of recovery. The order in this case therefore shows how interaction between the Code and PMLA is contingent on the facts and circumstances of the case.

The NCLAT Mandate

The NCLAT in its ruling in the case of Pankaj Mahajan,^[9] has attempted to examine the underlying intent behind regulation 29 of the CIRP Regulations. The dispute arose from the sale of non- core parcels of land, which were subject to charges held by secured creditors. Although the Committee of Creditors ('CoC') had approved such sale, the NCLT ordered fresh public auction. The Appellate Tribunal overruled the NCLT order and highlighted that when secured creditors have consented to sale of any encumbered assets, the requirement of public auction becomes non mandatory because such a consent satisfies the requirement of Regulation 29. The NCLAT further criticized the NCLT's attempt to impose bidding frameworks borrowed from unrelated proceedings, reestablishing the case specific nature of CIRP.

The decision of the NCLAT adds strength to the ability of CoC to purse private or negotiated sale of non-core encumbered assets particularly immovable assets, which often forms a substantial portion of a debtor's balance sheet. This flexibility has the potential to enhance liquidity and shorten timelines. At the same time, the judgement also obligates creditors and IPs to ensure that the mechanism followed for such private sale is robust, transparent and defensible, given the reduced dependency on auction-based safeguards.

An enlarged but contingent estate

Taken together, the new regulatory and judicial developments, including the restitution framework by the IBBI and the flexibility of the NCLAT to sales of encumbered assets and the intervention of the Supreme Court in V Hotels, has started to recalibrate the boundary of the resolution estate under the Code. Although none of these steps, in itself, represents a doctrinal change, their aggregate impact cannot be ignored. The resolution estate potentially broadens thereby leading to higher recovery and lesser haircuts.

This expansion is however not unconditional. Even though the Supreme Court allowed recovery of attached property, it did so on the basis of a substantial security deposits, evidentiary determinations of bona fides, and with a strict caveat that ED will retain the ability to revive the proceedings in case any further nexus with the proceeds of crime is discovered at a later stage. In manner, the expansion of resolution estate becomes conditional, based on a platform of judicial review and the statutory protections instead of a blanket dispensation of enforcement limits.

Ultimately, the result is a delicate, inter- statutory balance which is a resolution estate which undoubtedly is broader, but its boundaries are determined not only by the principles of insolvency but also by the imperative of anti- money laundering enforcement. It now provides a higher degree of value maximisation, yet remains hooked to legal and ethical limitations that pulls CIRP away from being a conduit for laundering tainted assets.

Practical Guidance and Emerging Policy Considerations

The overlap between the Code and PMLA calls for stakeholders and professionals to adopt structured & risk- sensitive strategies. IPs shall ensure that provisional attachments are clearly distinguished from confirmed attachments, pursue application for restitution at the earliest, maintain proper documentation, and ensure timely updates to the Information Memorandum. Secured creditors, shall evaluate if negotiated sales add to recoveries and utilise strategically in CoC and bidder negotiations. Resolution applicants, on the other hand, shall include restitution strategies into valuation models, secure indemnities against future attachments and rely on conditional valuation tools such as escrows or holdbacks.

The operational developments unfold policy concerns. Restitution proceedings have the potential to disrupt CIRP timelines, and the involvement of multiple parallel authorities creates the risk of conflicting directions. The lack of consistence standards for restitution raises concerns of uneven judicial response and opens the door to moral hazards especially in cases where promoters of corporate debtor attempt to exploit CIRP to gain control over stressed assets. These challenges strengthen the need for a codified and balanced protocol governing the interaction between insolvency and money- laundering provisions.

The developments when studied together marks a pivotal moment in the insolvency ecosystem of India. By introducing a well-developed mechanism for restitution of assets attached under PMLA and allowing flexible monetisation of encumbered assets whilst reasserting the protective boundaries of PMLA, courts and IBBI have added a new tool in the corporate rescue toolkit.

For stakeholder, this offers practical opportunity for maximum recovery, but limited only to those who come with transparent structuring, careful diligence and an understanding of the inter- statutory balance. The next steps should therefore aim at consistency, coherence and guided coordination between forums. If these factors are firmly considered, the developing framework has the potential to strengthen both corporate rescue and integrity of financial system of India.

Author is an Advocate. Views Are Personal. 

References

1. The Insolvency and Bankruptcy Code, 2016
2. The Prevention of Money Laundering Act, 2002.
3. Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
4. Insolvency & Bankruptcy Board of India, Circular No. IBBI/CIRP/87/2025. (Nov. 4, 2025).
5. Director of Enforcement Vs. V Hotels Limited (Crim. Appeal No. 2925/2025).
6. Pankaj Mahajan v. Edelweiss Asset Reconstruction Co. (Comp. App. (AT) (Ins.) No. 1451 of 2025).
7. Mr. Anil Kohli Vs Directorate of Enforcement (Crim. Appeal No. 2925/2025).

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1. The Insolvency and Bankruptcy Code, 2016, Act No. 21, Acts of Parliament, 2016 (India). ↑

2. The Prevention of Money Laundering Act, 2002, Act No. 15, Acts of Parliament, 2003 (India). ↑

3. Insolvency & Bankr. Bd. of India, Circular No. IBBI/CIRP/87/2025 (4^th Nov, 2025). ↑

4. Director of Enforcement Vs. V Hotels Limited (Crim. Appeal No. 2925/2025). ↑

5. Pankaj Mahajan Vs. Edelweiss Asset Reconstruction Co. (Comp. App. (AT) (Ins.) No. 1451 of 2025) ↑

6. See IBBI Circular No. IBBI/CIRP/87/2025, supra note 1. ↑

7. Mr. Anil Kohli Vs. Directorate of Enforcement (Company Appeal (AT) (Ins.) No. 389 of 2018) ↑

8. V Hotels, supra note 4. ↑

9. supra note 2. ↑