Can the ED attach a company’s assets after it enters insolvency? | Explained
The NCLAT has ruled that the Enforcement Directorate can attach assets linked to money laundering even if a company is undergoing insolvency proceedings. The court clarified that the Insolvency and Bankruptcy Code does not provide immunity for criminal proceeds.
Why it matters
This establishes a legal precedent that criminal law enforcement takes precedence over corporate insolvency protections, impacting how creditors and regulators handle distressed assets.
The story so far: The National Company Law Appellate Tribunal (NCLAT) has held that the Insolvency and Bankruptcy Code (IBC) moratorium cannot shield assets alleged to be “proceeds of crime” from attachment under Prevention of Money Laundering Act (PMLA) . The ruling came in a case involving Siddhi Vinayak Logistics Ltd., where the Enforcement Directorate (ED) had attached assets despite the company entering insolvency proceedings. “Parliament did not legislate IBC with an intent to create a holy Ganges out of the IBC to wash the corporate debtor of its sin of criminality under the PMLA”, the Principal bench of NCLAT observed on June 30.
The article reports on a legal ruling neutrally, summarizing the court's logic and the context of the case without taking a side.
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