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 4th 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 11th 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 4th 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 CounterbalanceIn 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 SignalsThe 11th 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...

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

Saptadip Nandi Chowdhury

Tags