Current Legal Position On Conflicts Between Attachments Under The Prevention Of Money Laundering Act, 2002 And Moratorium Under Section 14 Of Insolvency And Bankruptcy Code 2016
- IJLLR Journal
- Jan 17
- 1 min read
Tanushvi Singh, Amity Law School, Noida
INTRODUCTION
The framework of the Indian legal system has witnessed friction between the two statutes enacted to serve competing purposes. On one side, there is Prevention of Money Laundering Act, 2002 (“PMLA”) which is a statute enacted to combat economic offences and prevent money laundering by enabling Enforcement Directorate (“ED”) to confiscate/ attach assets which are believed to be involved in money laundering as covered under the Section 5 of the PMLA Act, 2002.
However, on the other side, the Insolvency and Bankruptcy Code, 2016 (“IBC”) was enacted in order to tackle the banking crisis with a time-bound process for resolving debts and insolvency. The Section 14 more specifically acts like a cornerstone of the IBC code to provide a "moratorium" period in order to protect the Corporate Debtor during the Corporate Insolvency Resolution Process (“CIRP”). This moratorium staysthe continuation or institution of proceedings, the transfer of assets, and, most importantly, any action which aims to recover or enforce any interest over the security of the Corporate Debtor. The objective is to facilitate the resolution process by preserving the Corporate Debtor and maximising the value of its assets in order to benefit its stakeholders, more particularly the Financial Creditors.
Therefore, conflict arises when these two statutes collide as, the PMLA empowers the ED to attach or confiscate the assets whereas, the IBC prohibits any action against those assets and even puts a bar on the enforcement once moratorium under Section 14 of the Code begins.
