The Insolvency Bankruptcy Board of India has directed insolvency professionals to file applications before special courts under the Prevention of Money Laundering Act for restitution of assets of corporate debtors, attached by the Enforcement Directorate.
The IBBI said the move aims to enhance the value of the corporate debtor, thereby leading to higher realisation under the Insolvency and Bankruptcy Code.
In a circular issued on Tuesday, IBBI said, "Insolvency professionals are advised that in cases where assets of the corporate debtor are attached by the ED under the provisions under PMLA, the Insolvency Professional (IP) may file an application before the Special Court under sections 8 (7) or 8 (8) of the PMLA for restitution of such assets."
Section 8 (7) of the PMLA addresses situations where a trial cannot proceed, requiring the court to make a final decision on confiscation or release of the property.
Section 8 (8) allows the special court to order the restoration of confiscated property to a claimant who proves they acted in good faith, took all reasonable steps to prevent loss, and were not involved in the money-laundering offence.
To facilitate the expeditious disposal of such applications by the special courts, the Board, in consultation with the ED, has formulated a standard undertaking to be furnished by the IP, along with the application for restitution of assets.
The undertaking mandates that restituted assets must not benefit persons accused under PMLA, requires quarterly reporting to the Special Court on the status and usage of such assets, and directs insolvency professionals to extend full cooperation to the ED during investigations.
IBBI said the obligations under the undertaking will remain effective until the approval of the resolution plan or dissolution order by the adjudicating authority.
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