IPs asked to file application before PMLA courts to seek restitution of assets attached by ED

In a significant move to boost recoveries in insolvency cases, the Insolvency and Bankruptcy Board of India (IBBI) has formally directed all Insolvency Professionals (IPs) to actively seek the release of corporate assets attached by the Enforcement Directorate (ED) under money laundering laws. The regulator has issued a circular mandating IPs to file applications before special PMLA courts for the “restitution of assets” to help enhance the value of the corporate debtor and lead to higher realizations for creditors.

To streamline this previously challenging process, the IBBI, in consultation with the ED itself, has formulated a standard undertaking that IPs must submit to the court. This undertaking is designed to address the ED’s concerns and facilitate faster court approvals.

The circular dated November 4, 2025 has been issued under the authority of Section 196 of the Insolvency and Bankruptcy Code (IBC). It is addressed to all Registered Insolvency Professionals, their entities, and agencies.

Key commitments in the undertaking

The standardized undertaking requires the IP, acting as a Resolution Professional or Liquidator, to make several binding commitments until a resolution plan is approved or a dissolution order is passed:

• Restricted use of assets: A critical clause states that if the promoter is ineligible under Section 29A of the IBC, the restituted assets cannot be sold, transferred, or used to directly or indirectly benefit any person accused or charge-sheeted in the related PMLA case.
• Quarterly reporting: IPs must submit detailed quarterly reports to the Special Court, disclosing the status of the freed assets, their usage, details of monetization, a list of beneficiaries from any distribution, and information on any sale or transfer.
• Full disclosure to stakeholders: The details of all ED-attached properties must be clearly disclosed in the Information Memorandum for bidders or the auction notice, ensuring transparency in the insolvency process.
• Cooperation with ED: The IP undertakes to provide “full cooperation” to the ED’s investigation. This includes sharing details of fraudulent transactions identified, the composition of the Committee of Creditors (CoC), and information about the Successful Resolution Applicant (SRA) or bidder.

Balancing transparency and commercial sensitivity

A key aspect of the undertaking involves the handling of sensitive documents. While the IP must provide non-commercially sensitive information to the ED immediately, commercially sensitive documents—such as valuation reports and resolution plans—will only be furnished after the ED acknowledges their sensitive nature in writing and confirms they are still required for the investigation.

Industry impact

This directive is seen as a crucial step to resolve the long-standing friction between the objectives of the IBC—maximizing asset value for creditors—and the ED’s mandate to attach “proceeds of crime” under the PMLA.

Legal experts believe that by providing a clear, pre-approved framework for cooperation, the IBBI’s move will reduce legal ambiguities and court delays, ultimately freeing up more capital for distribution in the insolvency process and improving the overall efficacy of the IBC.

Also Read: NCLT can under Section 32A order release of corporate debtor’s properties attached by ED