Creditors Vs. Crime – Fighters: Who Wins When India’s IBC And PMLA Clash Over Corporate Assets?
Prarthana Ramesh, Shardul Amarchand Mangaldas
The intersection of insolvency law and anti-money laundering legislation in India has given rise to significant jurisprudential debate, particularly concerning the relationship between the Insolvency and Bankruptcy Code, 2016 (IBC) and the Prevention of Money Laundering Act, 2002 (PMLA). Both statutes occupy critical positions within India’s legal framework, yet their concurrent application often creates friction that affects the rights of creditors, resolution applicants, and the broader objectives of economic governance. This article examines the nature and extent of this conflict, analyses relevant judicial pronouncements, and offers perspectives in harmonizing these legislative instruments.
Understanding the Legislative Framework
The Insolvency and Bankruptcy Code, 2016 was enacted as a comprehensive legislation to consolidate and amened laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. The Code aims to maximize the value of assets, promote entrepreneurship, ensure the availability of credit, and balance the interest of all stakeholders. It introduced a paradigm shift from the erstwhile debtor- in-possession model to a creditor-in-control framework, establishing the National Company Law Tribunal (NCLT) as the adjudicating authority for corporate insolvency matters.
The Prevention of Money Laundering Act, 2002, on the other hand, was enacted to prevent money laundering, provide for confiscation of property derived from or involved in money laundering, and address matters connected therewith. The Act empowers the Enforcement Directorate (ED) to attach properties involved in money laundering and prosecute individuals engaged in such activities. The PMLA operates under the presumption that proceeds of crime must be recovered and confiscated to deter financial crimes and preserve the integrity of the economic system.
