No "Safe Harbour" For Proceeds Of Crime Under IBC

Corporate creditors and insolvency professionals already have their hands full running the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). Add the Directorate of Enforcement (ED) attaching a corporate debtor’s properties under the Prevention of Money Laundering Act, 2002 (PMLA), and what you get is a problematic turf war between two statutes.

In a recent ruling, the National Company Law Appellate Tribunal (NCLAT), in Value Wise Consultancy Private Limited v. The Deputy Director, Directorate of Enforcement (June 30, 2026), read together with its earlier reasoning in Kiran Shah v. Enforcement Directorate, has left little doubt about where the law stands: the IBC offers no safe harbour, and certainly no "cleansing ritual," for proceeds of crime. 

Here’s what that means in practice for creditors and the concrete steps needed to keep corporate assets out of reach of economic offence proceedings.

The Core Conflict: Commercial Resolution vs. National Interest

The IBC and the PMLA pull in different directions, and both are doing their job at the same time: 

• The IBC is built to maximise asset value and resolve a debt-ridden company’s distress as quickly as possible. 

• The PMLA sits squarely in public law: it exists to fight economic crime, trace "tainted" assets, and eventually confiscate them. 

The NCLAT’s June 2026 ruling repeats a point it has made before: Parliament never meant the IBC to launder ill-gotten wealth. The moratorium under Section 14 (or Section 33(5) at the liquidation stage) protects the debtor only from civil suits and money claims that would add to its civil liabilities. It has no bearing on penal proceedings or on the state’s pursuit of proceeds of crime under the PMLA. 

The National Company Law Tribunal (NCLT) and the NCLAT owe their existence to a specific commercial statute, and that does not confer on them any power of judicial review over the ED’s enforcement actions. So an attachment order or a restraint notice issued under Section 50 of the PMLA is simply not something an insolvency tribunal can quash. 

Safeguards Creditors Cannot Skip

A PMLA stand-off can quietly erode a corporate debtor’s asset pool, so financial and operational creditors need to get ahead of it. A few things help:

• Thorough Forensic Due Diligence at Admission: Creditors should run deep forensic audits before or right at the start of the CIRP. Spotting early whether key assets are "tainted" or were bought with diverted loan funds gives a realistic sense of what the ED might eventually go after. 

• Leaning on Section 32A After Resolution: It’s worth remembering that an ongoing CIRP won’t stop a PMLA attachment, but Section 32A of the IBC does offer a clean slate after a resolution plan is approved. Creditors need to confirm the incoming resolution applicant has no structural ties to the previous, fraud-tainted management – that’s what secures the property’s statutory immunity from past offences once control changes hands. 

• Acting Fast to Ring-Fence Untainted Assets: When the ED slaps a blanket provisional attachment on a large pool of assets, say thousands of vehicles or several commercial properties, the Resolution Professional (RP) needs to move quickly and file factual representations showing which assets came from clean, independent corporate revenue, so those can be carved out of the "proceeds of crime" definition. 

How to Actually Get Attached Property Released

Once the ED has attached the corporate debtor's property, filing a miscellaneous application before the NCLT and hoping for a quick release simply will not work. Creditors have to go through the remedies the PMLA framework actually provides: 

1. Approach the PMLA Special Court for Restitution

   The Insolvency and Bankruptcy Board of India (IBBI) has since spelt this out in Circular No. IBBI/CIRP/87/2025. Once the ED attaches a corporate debtor's assets, the right course is for the resolution professional to file an application before the PMLA Special Court under Sections 8(7) or 8(8) of the PMLA, seeking restitution or restoration of those assets. 

2. Contest Before the PMLA Adjudicating Authority

   A provisional attachment order under Section 5 of the PMLA has to be contested within 180 days before the Adjudicating Authority. The RP or the affected creditors need to appear and formally object to confirmation of the attachment, backed by proof of clean title and a secured commercial interest. 

3. File a Statutory Appeal Before the PMLA Appellate Tribunal

   If the Adjudicating Authority confirms the attachment anyway, the next step for the aggrieved creditors or RP is a statutory appeal under Section 26 of the PMLA before the Appellate Tribunal. 

4. Move the High Court

   If the Appellate Tribunal does not grant interim relief, or the ED challenges an order vacating the attachment without securing a stay, the answer is to invoke the writ or appellate jurisdiction of the jurisdictional High Court under Section 42 of the PMLA, not to try shortcutting the process through the NCLT. 

Conclusion

The NCLAT has been consistent on this point: commercial equity does not trump criminal accountability. The NCLT cannot rescue the corporate debtor’s assets from a criminal attachment. Real protection comes from working through the PMLA's own adjudicatory machinery and getting the Section 32A requirements right when handing over to a clean, untainted resolution applicant.