IBBI and ED reach solution on insolvency law and PMLA interface issues

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The Insolvency and Bankruptcy Board and the Enforcement Directorate have arrived at a solution to address the problem related to the interface between the insolvency law and the PMLA in resolving stressed assets.

"I hope that in a month or two, we should be able to issue a circular as to how to go about it so as to solve the problem," Insolvency and Bankruptcy Board of India (IBBI) Chairperson Ravi Mital said on Wednesday.

There have been issues in resolution of certain cases under the Insolvency and Bankruptcy Code (IBC) where there have been suspected assets involving black money. Under the Prevention of Money Laundering Act (PMLA), the Enforcement Directorate (ED) can attach such assets. The IBC provides a moratorium on assets of an entity undergoing insolvency resolution process.

"There is a problem in the interface between the IBC and the PMLA. There is a case pending in the Supreme Court and we faced problems in some cases. So we have had discussions with ED and we have arrived at a solution. The solution will be good for the IBC and the PMLA. That is we will maintain the sanctity of both laws and try resolve the issues," Mital said.

He was speaking at the ninth annual day of the IBBI, which is a key institution under the IBC.

The IBC, introduced in 2016, provides for a market-linked and time-bound resolution of stressed assets.

Mital also said the IBBI is working on implementing certain directions made by the Supreme Court in two judgements related to the real estate sector.

"Recently, Supreme Court gave two judgements related to real estate. So we have started working on those directions given by the Supreme Court and in the next two, three months I hope that we should be able to implement those suggestions," he said.

Meanwhile, the IBBI is also working on draft regulations with respect to the proposed amendments to the IBC.

In August this year, the government introduced a bill to amend the Code in the Lok Sabha and was referred to a select committee of the House.

Various amendments proposed in the bill were decided upon after extensive stakeholder consultations, and back in January 2023, the government issued a discussion paper to seek stakeholder inputs on further improving the Code.

"We have started working on draft regulations so that as and when the Parliament approves it, we do not take much time in the process...," Mital said on Wednesday.

So far, the Code has undergone six legislative interventions since its enactment, and the last amendment was made in 2021.

After the first amendment in 2017, the Code was also amended once in 2018, twice in 2019 and once in 2020.