IBBI Advises Insolvency Professionals To Seek ED-Attached Assets To Boost Recoveries

The Insolvency and Bankruptcy Board of India (IBBI), noting that assets of entities in insolvency are often under attachment by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA), has issued a circular guiding insolvency professionals on seeking restitution of such assets. In a circular issued on November 4, addressed to all registered insolvency professionals, the board observed that restitution of attached assets can significantly enhance the value of corporate debtors, leading to higher realizations during insolvency resolution or liquidation. The circular advises insolvency professionals to file applications before Special Courts under sections 8(7) or 8(8) of the PMLA for restitution of attached assets. To facilitate faster disposal of such applications, IBBI, in consultation with the ED, has prescribed a standard undertaking to be submitted along with the application. Under the undertaking, insolvency professionals need to ensure that restituted assets are not sold, transferred, or otherwise utilized to benefit ineligible persons under the Insolvency and Bankruptcy Code, 2016, or those named as accused in ED investigations. They are also required to submit quarterly reports to the court detailing the status, usage, monetization, and distribution of restituted assets, and to disclose all properties under ED attachment in information memoranda or auction notices, updating them as new information arises. In addition, insolvency professionals are expected to cooperate fully with the ED by providing details of preferential, undervalued, fraudulent, or extortionate transactions, information on the Committee of Creditors, and details of successful resolution applicants. Documents requested by the ED must be furnished promptly, while commercially sensitive information can only be shared after written acknowledgment of its sensitivity. The circular further, clarifies that these obligations remain in force until the approval of the resolution plan or dissolution order by the insolvency tribunal. Click here to read/download circular

IBBI Advises Insolvency Professionals To Seek ED-Attached Assets To Boost Recoveries

Sahyaja MS

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