ED, IBBI set new rules to ensure cheated homebuyers, banks get assets back

Assets of bankrupt companies and their promoters attached by the ED, under the anti-money laundering law, will now be restored to the affected parties, such as banks or home buyers, following the finalisation of a new standard operating procedure, the federal probe agency said on Wednesday.

The Insolvency and Bankruptcy Board of India (IBBI) issued a circular in this context on November 4, following "multiple rounds" of coordination meetings between its officials and the investigators of the Enforcement Directorate (ED).

As a result of this coordinated approach, the agency said in a statement, a "standard undertaking" will be filed by Insolvency Professionals (IPs) before the special PMLA court to release the assets from ED's attachment and offer them for restitution or restoration to the creditors.

Currently, in several insolvency cases, the assets of the corporate debtor were under PMLA attachment, which "restricted" their use in the resolution process.

To address this issue, the ED and IBBI have created a standard mechanism for restitution of attached assets when liquidation proceedings are on.

The restitution or restoration of assets to the affected parties, such as banks and homebuyers who were cheated, is a remedy available under the PMLA.

"This process now enables Resolution Professionals to seek release of such assets through applications filed under Sections 8(7) and 8(8) of PMLA," the ED said.

The new mechanism will ensure that the restituted assets are used only for the benefit of creditors; no advantage flows back to the accused/promoters, and full reporting and compliance safeguards remain in place until resolution is completed, it said.

"This initiative demonstrates that strict enforcement under PMLA and value maximisation under IBC are not conflicting objectives. Instead, when coordinated, they ensure prosecution of economic offenders while protecting public and creditor interest through lawful resolution," the agency said.

It added that the ED remains "committed" to ensuring that proceeds of crime are not enjoyed by offenders, and at the same time, the recovery value for creditors is enhanced through timely cooperation with the insolvency framework.

"The above initiatives were taken to expedite the resolution process before the IBC. Further, this simplified mechanism would help to resolve the various litigations pending before the courts," it added.