Interplay Between The Insolvency Proceedings And Prevention Of Money Laundering Proceedings

Author: LawSphereX

Category: Corporate & Insolvency

Published: 2026-08-23T20:22:47.294212+00:00

Updated: 2026-08-30T07:10:41.505Z

INTERPLAY BETWEEN THE INSOLVENCY PROCEEDINGS

AND PREVENTION OF MONEY LAUNDERING PROCEEDINGS Alisha Mehta, Masters’ program student at University of Toronto – Faculty of Law, former Associate at Wadia Ghandy & Co. (Ahmedabad) and Wadia Ghandy & Co. (Mumbai), and former student of Jindal Global Law School, O. P. Jindal Global University

ABSTRACT

The Insolvency and Bankruptcy Code, 2016 (“IB Code”) and the Prevention of Money Laundering Act, 2002 (“PMLA”) are two distinct legislations. The latter’s raison d’etre is to prevent money laundering and to provide for a mechanism to confiscate the property accrued from laundering money, the former legislation governs the framework for providing a resolution process for insolvency and bankruptcy as well as the liquidation process. In this paper, by using the doctrinal approach, I intend to focus on how the two legislations lock horns in an ongoing dispute and their interplay in the Indian Courts. Further, since both the statutes are special legislations, I will also tackle the question of which legislation will trump the other in an ongoing dispute.

Moratorium under the IB Code India’s corporate landscape is riddled with nefarious promoters, keen on cheating their shareholders of their money. 1 Considering the fact that many commercial entities were unable to manage their finances in an efficient manner and were failing to meet their obligation towards their financial and / or operational creditors, the legislative branch envisaged the introduction of a statute that would enable a corporate debtor to resolve its insolvency position. Whilst there were other statutes that were introduced by the legislature in the past, for instance, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Recovery of Debts and Bankruptcy Act, 1993; there was a lacuna in the statutory enforcement mechanism for resolving financial crunches and insolvency.

In order to fill this lacuna, the Ministry of Law and Justice of India on the 28th May 2016 introduced the IB Code as an umbrella legislation for insolvency resolution of all entities in India — both corporate and individuals. 2 The IB Code provides a resolution mechanism for distressed commercial entities. These entities foresee a financial shortfall or probable bankruptcy. The IB Code ensures that the assets of these entities are optimized to ensure that the interests of all the stakeholders are considered before determining the fate of the entity. It is with this intent that a Corporate Insolvency Resolution Process (“CIRP”) can be initiated against a corporate debtor3, who has time and again failed to pay the outstanding debt4 owed to the financial creditor(s)5 and / or to the operational creditor(s).

6 The most significant and unique aspect of the IB Code is the imposition of a ‘Moratorium’. 7 Once the Adjudicating Authority, established under the IB Code, has admitted the claims of a financial and / or operational creditor against the corporate debtor, the Adjudicating Authority

1 Marcellus, How to spot naughty lenders in India?, MARCELLUS INVESTMENT MANAGERS PVT LTD (Sept. 16,

2020), https://marcellus.in/newsletter/kings-of-capital/how-to-spot-naughty-lenders-in-india/#.

2 International Finance Corporation World Bank Group and Insolvency and Bankruptcy Board of India,

Understanding the IBC, INTERNATIONAL FINANCE CORPORATION 11-16 (2020), https://ibbi.gov.in/uploads/whatsnew/e42fddce80e99d28b683a7e21c81110e.pdf. 3 Insolvency and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 3(7) and Section 3(8).

4 Insolvency and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 3(11).

5 Insolvency and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 3(10).

6 Insolvency and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 3(10).

7 Insolvency and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 14.

has the power to declare a Moratorium on the corporate debtor. The purpose of imposition of a Moratorium is to ensure that the corporate debtor is not burdened with any additional stress. 8 Consequentially, during the Moratorium period, the viability of the debt is analyzed and the creditors’ interests are preserved, without affecting the operations of the corporate debtor’s business. This is possible only when a moratorium is imposed on all recovery actions against the corporate debtor, so that an Interim Professional, appointed under the IB Code,9 can manage and operate the commercial affairs of the corporate debtor effectively. 10 Accordingly, pursuant to the imposition of a Moratorium, the legal proceedings initiated against a corporate debtor come to a halt.

As per Section 14 of the IB Code, upon declaration of Moratorium, all the existing suits, legal proceedings, and recovery actions against the corporate debtor are held in abeyance, allowing the corporate debtor to resolve its status during the CIRP process. 11 The Moratorium ceases to have effect once a resolution plan for the corporate debtor is approved by the Adjudicating Authority. However, in case the resolution plan is not approved and the Adjudicating Authority comes to a conclusion that the corporate debtor is to be liquidated, even in this circumstance, the IB Code, for the duration of the liquidation process, envisages for a stay on the suit and other legal proceedings instituted by or against the corporate debtor.

12 Despite the aforementioned protections granted to ensure that the corporate debtor does not have to face subsequent legal proceedings, there were several instances wherein the corporate debtor was subjected to civil and quasi-criminal legal proceedings. To address this consequence, Section 32A was introduced in the IB Code by way of the Insolvency And Bankruptcy Code (Second Amendment) Bill, 2019 with the intent to cease the liability of a corporate debtor under certain circumstances for an offence committed prior to the

8 International Finance Corporation World Bank Group and Insolvency and Bankruptcy Board of India,

Understanding the IBC, INTERNATIONAL FINANCE CORPORATION 11-16 (2020), https://ibbi.gov.in/uploads/whatsnew/e42fddce80e99d28b683a7e21c81110e.pdf. 9 Insolvency and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 13 read with Section 16.

10 International Finance Corporation World Bank Group and Insolvency and Bankruptcy Board of India,

Understanding the IBC, INTERNATIONAL FINANCE CORPORATION 11-16 (2020), https://ibbi.gov.in/uploads/whatsnew/e42fddce80e99d28b683a7e21c81110e.pdf.

11 Insolvency and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 14.

12 Insolvenc and Bankruptcy Code, 2016, Act No. 31, Acts of Parliament, 2016 (India), Section 33(5).

commencement of CIRP. 13 The purpose of a co-joint reading of Section 14, Section 33(5) and Section 32A of the IB Code is to ensure that a distressed corporate debtor is able to successfully resolve the financial obligations without additional burdens. However, the question that arises is whether this intention also extends to a stay and / or non-initiation of legal actions under the PMLA as well. Action under the Prevention of Money Laundering Act, 2002 The PMLA is a special statute enforced for the purpose of confiscation of property derived from or involved in money laundering. Under the PMLA, if the concerned officer has reason to believe that a person or an entity has in its possession any proceed of crime, i. e.

, property derived or obtained directly or indirectly by any person, as a result of criminal activity, then the concerned officer is empowered to initiate proceedings under the PMLA. 14 One of the major grievance arising under the PMLA is the provisional attachment of the assets of an entity which are identified as proceeds of crime by a concerned officer. Pursuant thereto, the order of provisional attachment is also required to be confirmed by the Adjudicating Authority appointed under the PMLA. 15 Since the assets of the corporate debtor are to be maximised at the time of CIRP, the simultaneous initiation / continuation of provisional and / or final attachment of assets of the corporate debtor under PMLA poses a huge risk to the resolution process under the IB Code.

Assuming that a provisional and / or final attachment of the corporate debtor is ordered under the PMLA, it would be then difficult to ensure that the corporate debtor remains a going concern till the time a resolution plan is passed or liquidation proceedings culminate. It is pertinent to note that both the IB Code and the PMLA are special statutes that invite special proceedings under the statutes. However, the IB Code, upon imposition of a Moratorium, imposes a stay on all other proceedings. Consequentially, the issue arises as to whether such a stay can be imposed on proceedings wherein the governmental agencies are potentially investigating for the proceeds of crime.

The debate revolves around whether the right of a financial / operational creditor to procure the amounts from the corporate debtor is a right that 13 Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, Bill No. 376, Acts of Parliament, 2019 (India) Statement and Objects. 14 Prevention of Money Laundering Act, 2002, Act No. 15, Acts of Parliament, 2003 (India), Section 5 and Section 2(u). 15 Prevention of Money Laundering Act, 2002, Act No. 15, Acts of Parliament, 2003 (India), Section 8. supersedes the right of the government to investigate and recover the amount which is a proceed of crime or vice versa. The sentiment behind supporting the operation of PMLA over the IB Code prevails in the national security interest.

This thought is rooted in the conception of the Crown Debts and the idea that the debts of the Crown have a preferential right of recovery over the debts of other creditors. 16 However, this position has been changed post the judgment passed by the Supreme Court in Rana Girders Limited v. Union of India and Others17 wherein it was concluded that “A debt, which is secured or which by reason of the provisions of a statute becomes the first charge over the property must be held to prevail over the Crown debt which is an unsecured one. ” In light of this, the discussion over whether the IB Code prevails over PMLA or vice versa becomes even more crucial. Debate over IB Code and PMLA Act Before determining whether IB Code prevails over PMLA Act or vice versa, it is important to ascertain at which stage in the proceeding do the two statutes collide.

The two scenarios wherein the proceeding under the special statutes can possibly lead to a controversy on which statute prevails over the other are: (a) at the time of imposition of Moratorium under Section

14 of the IB Code and (b) at the time of conclusion of the resolution process or liquidation

process as envisaged under Section 32A of the IB Code. A.

At the time of imposition of Moratorium under Section 14 of IBC Code: In Directorate of Enforcement v. Manoj Kumar Agarwal18 the Hon’ble National Company Law Appellate Tribunal (“NCLAT”) has held that the proceeding under PMLA is civil in nature and Section 14 of IB Code would thus be attracted and applied. Accordingly, in a case where proceedings under the PMLA have been initiated and the assets of the corporate debtor have been provisionally attached and subsequently a Moratorium under the IB Code is imposed, in that case Section 14 of the IB Code will hit the institution and continuation of proceedings under the PMLA Act.19 Relying on P. Mohanraj and Others v. Shah Brothers Ispat Private Limited20 the Hon’ble NCLAT also observed that Section 14 of the IB Code applies to quasicriminal proceedings of the corporate debtor. The Hon’ble NCLAT finally concluded that there

16 Dena Bank v Bhikhabhai Prabhudas Parekh & Co. and Others, (2000) 5 SCC 694 (India).

17 Rana Girders Limited v Union of India and Others, (2013) 10 SCC 746 (India).

18 Directorate of Enforcement v Manoj Kumar Agarwal, 2021 SCC OnLine NCLAT 121 (India).

19 Directorate of Enforcement v Manoj Kumar Agarwal, 2021 SCC OnLine NCLAT 121, Para 56 (India).

20 P. Mohanraj and Others v Shah Brothers Ispat Private Limited, 2021 SCC OnLine SC 152, Para 63 (India). is no conflict between PMLA and IB Code and that “even if a property has been attached in the PMLA which is belonging to the Corporate Debtor, if CIRP is initiated, the property should become available to fulfil objects of IBC till a resolution takes place or sale of liquidation asset occurs in terms of Section 32A”. 21 Further, even in the case of SREI Infrastructure Finance Limited v. Sterling International Enterprises Limited,22 the National Company Law Tribunal (Mumbai bench) has concluded that the provisional attachment order passed under the PMLA becomes non-est in view of Section 14 of the IB Code.

Moreover, the bench in the said case has also held that the resolution professional appointed under the IB Code pursuant to the imposition of Moratorium can proceed to take charge of the properties of the corporate debtor and deal with them under the IB Code as if there was no attachment under PMLA. 23 In contradiction to the aforementioned position, in Varrsana Ispat Limited v. Deputy Director, Directorate of Enforcement24 the NCLAT has held that since PMLA and the provisions therein relates to ‘proceeds of crime’ and the offence relates to money laundering, Section 14 of the IB Code is not applicable to proceedings initiated under PMLA. 25 In the instant case, it was also observed that since the proceedings under PMLA were initiated prior to commencement of CIRP, the rigor of Moratorium under Section 14 of IB Code will not prevail.

26 A similar view has also been taken in Deputy Director Directorate of Enforcement Delhi v. Axis Bank and Others27 by the Hon’ble Delhi High Court. Further, the Delhi High Court in the said case has also held that “the objective of the legislation in PMLA being distinct from the purposes of the three other enactments viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former”. 28 Even in Shweta Vishwanath Shirke and Others v. Committee of

21 Directorate of Enforcement v Manoj Kumar Agarwal, 2021 SCC OnLine NCLAT 121, Para 63 (India).

22 SREI Infrastructure Finance Limited v Sterling International Enterprises Limited, 2019 SCC OnLine NCLT

6880 (India).

23 SREI Infrastructure Finance Limited v Sterling International Enterprises Limited, 2019 SCC OnLine NCLT 6880, Para 9 (India).

24 Varrsana Ispat Limited v Deputy Director, Directorate of Enforcement, 2019 SCC OnLine NCLAT 236

(India). 25 Varrsana Ispat Limited v Deputy Director, Directorate of Enforcement, 2019 SCC OnLine NCLAT 236, Para

12 (India).

26 Varrsana Ispat Limited v Deputy Director, Directorate of Enforcement, 2019 SCC OnLine NCLAT 236, Para

13 (India).

27 Deputy Director Directorate of Enforcement Delhi v Axis Bank and Others, 2019 SCC OnLine Del 7854

(India). 28 Deputy Director Directorate of Enforcement Delhi v Axis Bank and Others, 2019 SCC OnLine Del 7854, Para

147 (India).

Creditors and Another29 the NCLAT has concluded that if the assets of the corporate debtor are based on the proceeds of crime, it is always open to the Enforcement Directorate to seize the assets of the corporate debtor and act in accordance with the PMLA. Whilst the aforementioned authorities seem to have been struggling to determine whether the Moratorium under IB Code prevails over PMLA proceedings or not, it appears that the Appellate Tribunal instituted under PMLA has concluded that the moratorium under IB Code does stay the PMLA proceedings. In Punjab National Bank v. Deputy Director of Directorate of Enforcement30 and Bank of India v. Deputy Director Directorate of Enforcement31, the Appellate Tribunal under PMLA has duly held that the proceedings under PMLA cannot continue in view of Section 14 of the IB Code.

It is pertinent to note that the aforementioned circumstances do not address a scenario wherein the Adjudicating Authority under the PMLA initiates proceedings against the corporate debtor after the imposition of Moratorium and initiation of CIRP under the IB Code. This question was pending before the Hon’ble Supreme Court in Ashok Kumar Sarawagi v. Enforcement Directorate and Ors32, however, before the question could be addressed on a substantive basis the special leave petition was dismissed on account of being withdrawn. 33 B.

Post conclusion of the CIRP Process: The Supreme Court of India, in one of its recent judgments, has re-emphasized the legislative intent behind the enactment of the IB Code. In Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others34, the Supreme Court has stated that a successful resolution applicant pursuant to the CIRP of a corporate debtor must take over the management of the business of the corporate debtor on a fresh slate. Further, the Supreme Court has also observed that the resolution applicant who has received the assets of the corporate debtor

29 Shweta Vishwanath Shirke and Others v Committee of Creditors and Another, 2019 SCC OnLine NCLAT

1049 (India).

30 Punjab National Bank v Deputy Director of Directorate of Enforcement, 2019 SCC OnLine ATPMLA 5

(India).

31 Bank of India v Deputy Director Directorate of Enforcement, 2019 SCC OnLine ATPMLA 23 (India).

32 Order dated 14th December 2022 in Special Leave Petition (Civil) Diary No. 30092 of 2022 passed by the Supreme Court of India. 33 Order dated 30th July 2024 in Special Leave Petition (Civil) Diary No. 30092 of 2022 passed by the Supreme Court of India. 34Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta and Others, (2020) 8 SCC 531 (India). pursuant to the proceeding under the IB Code should not be subjected to ““undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor.

”35 The Supreme Court in the said judgment has emphasized on the aspect that once the IB Code proceeding is completed, the successful resolution applicant is given a fresh slate to conduct the business of the corporate debtor. With this intention in mind, the legislature on 13th March 2020 also introduced Section 32A of the IB Code by way of the Insolvency and Bankruptcy Code (Amendment) Act 2020. 36 Section 32A was inserted vide the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 which inter alia necessitated the introduction of the provision so as to provide that the liability of a corporate debtor for an offence committed prior to the commencement of the CIRP shall cease under certain circumstances.

37 Accordingly, Section 32A was introduced to the IB Code as a bar against taking any action against the property of the corporate debtor once the same has been subjected to CIRP and / or liquidation process as per the IB Code provisions and rules. Thereafter, in Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited38, the Supreme Court of India has held that the principal objective of the IB Code is revival of the corporate debtor and making it a going concern. Further, it is observed that the resolution plan passed by the committee of creditors is subject to final approval and satisfaction of the Adjudicating Authority under the IB Code to ensure that all the claims of the corporate debtor are taken into consideration.

In view of the approval of the Adjudicating Authority required for the implementation of the resolution plan, the Supreme Court has held that “The legislative intent behind this is to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. If that is permitted, the very calculations on the basis of which the resolution applicant submits its plans would go haywire and the plan would be unworkable. ”39 Thus, it is clear the intention 35Committee of Creditors of Essar Steel India Limited v Satish Kumar Gupta and Others, (2020) 8 SCC 531, Para 107 (India). 36 The Insolvency And Bankruptcy Code (Amendment) Act, 2020, Act No. 1, Acts of Parliament, 2020 (India). 37 Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, Bill No. 376, Acts of Parliament, 2019 (India).

38 Ghanashyam Mishra and Sons Private Limited v Edelweiss Asset Reconstruction Company Limited, (2021) 9 SCC 657 (India). 39 Ghanashyam Mishra and Sons Private Limited v Edelweiss Asset Reconstruction Company Limited, (2021) 9 SCC 657, Para 93 (India). of the legislature is to provide a clean slate to the resolution applicant post the conclusion of the CIRP and / or the liquidation process envisaged under the IB Code read with the relevant rules and regulations. In light of the above jurisprudential development, the Supreme Court of India upheld the constitutional validity of Section 32A which was challenged in Manish Kumar v. Union of India40. The Supreme Court observed that the bar under Section 32A contemplates a connection between the offences committed by the corporate debtor before the commencement of CIRP.

It was concluded that once the properties of the corporate debtor have been subjected to the CIRP Process and a resolution plan has been passed and the same has been approved by the Adjudicating Authority under the IB Code, then those properties of the corporate debtor shall not be subjected to proceeding under an offence committed prior to the commencement of the CIRP of the corporate debtor. In the Manish Kumar v. Union of India and Another41 case, the Petitioners also submitted that Section 32A of the IB Code was a constitutional anathema as it confers undeserved immunity for the property that would be acquired with the proceeds of a crime.

However, the submission of the Petitioners in this regard was not accepted by the Supreme Court and it was in fact observed that Section 32A has been introduced by the legislature out of their experience and that the wisdom of the legislation in this regard is not open to judicial review. It is pertinent to note that the Supreme Court in the instant case has impliedly upheld the supremacy of the IB Code over the PMLA in the specific instance where the resolution process has been completed and the resolution plan of the Corporate Debtor has already been approved by the Adjudicating Authority or where the liquidation process has been completed. Thus, in the selected few circumstances i. e. (i) the resolution plan having been approved by the Adjudicating Authority and / or (ii) the liquidation process having been initiated, the proceedings under PMLA will take a back seat.

Subsequently, the Hon’ble Delhi High Court in Nitin Jain Liquidator PSL Limited v. Directorate of Enforcement42 reinstated the distinction between the operation of Section 32A on the corporate debtor vis-à-vis the persons who were in control of the corporate debtor. The Delhi High Court in this regard observed that the PMLA and the IB Code stand steadfast against

40 Manish Kumar v Union of India and Another, (2021) 5 SCC 1 (India).

41 Manish Kumar v Union of India and Another, (2021) 5 SCC 1 (India).

42Nitin Jain Liquidator PSL Limited v Directorate of Enforcement, 2021 SCC OnLine Del 5281 (India). its dilution against persons who were in control of the corporate debtor in respect of offences committed prior to the commencement of CIRP. 43 The Hon’ble Delhi High Court in Nitin Jain Liquidator PSL Limited v. Directorate of Enforcement44 has also finally concluded that “The issue of reconciliation between the IBC and the PMLA, in so far as the present cause is concerned, needs to be answered solely on the anvil of Section 32A”45. Once the legislature has with the specific intent introduced Section 32A to act as a provision for cessation of liabilities and prosecution, in such a case, Section 32A prevails and governs the extent to which power under PMLA can be exercised during the resolution / liquidation process.

Finally, the said judgment also concludes that the power to provisionally attach the assets of the corporate debtor under the PMLA would cease to be exercisable once the Adjudicating Authority under the IB Code has identified the ‘mode’ of liquidation of the corporate debtor under the Insolvency And Bankruptcy Board Of India (Liquidation Process) Regulations, 2016. 46 The intention of the Union of India behind introduction of Section 32A was once again clarified in JSW Steel Ltd. v. Mahender Kumar Khandelwal and Others47 wherein the Union of India had unequivocally stated that after the completion of the CIRP, there cannot be any threat of criminal proceedings against the corporate debtor, or attachment or confiscation of its assets by any investigating agency, after approval of the resolution plan by the Adjudicating Authority.

48 Pursuant thereto, the Supreme Court concluded that the assets of the corporate debtor of which an entity has become a successful resolution applicant are immune from attachment under the PMLA. 49 Thus, it is evident that the judicial interpretation of the IB Code provisions is to ensure that the resolution applicant whose resolution plan has been approved by the Adjudicating Authority under the IB Code is provided with a clean slate to run the business of the corporate debtor. Moreover, a situation is also envisaged for providing a clean slate wherein the liquidation 43Nitin Jain Liquidator PSL Limited v Directorate of Enforcement, 2021 SCC OnLine Del 5281, Para 98 (India). 44Nitin Jain Liquidator PSL Limited v Directorate of Enforcement, 2021 SCC OnLine Del 5281 (India). 45Nitin Jain Liquidator PSL Limited v Directorate of Enforcement, 2021 SCC OnLine Del 5281, Para 102 (H) (India).

46Nitin Jain Liquidator PSL Limited v Directorate of Enforcement, 2021 SCC OnLine Del 5281, Para 99 and

102 (R) (India).

47JSW Steel Ltd. v Mahender Kumar Khandelwal and Others, 2020 SCC OnLine NCLAT 431 (India). 48JSW Steel Ltd. v Mahender Kumar Khandelwal and Others, 2020 SCC OnLine NCLAT 431, Para 46 (India). 49 JSW Steel Ltd. v Mahender Kumar Khandelwal and Others, 2020 SCC OnLine NCLAT 431, Para 127 (India). process of has been initiated in accordance with the IB Code. Assuming that in such a situation, post the approval of the resolution plan and / or conclusion of liquidation proceedings, if the person / entity identified to run the business of the corporate debtor or to whom the assets of the corporate debtor are sold are subjected to proceedings under the PMLA, then the person acquiring the business / assets of the corporate debtor would be left severely aggrieved. It is this precise issue that has been raised before the Hon’ble High Court of Gujarat in Welspun Steel Resources Pvt. Ltd. & Ors. v.

Union of India and Ors. 49. The Hon’ble High Court of Gujarat in this instance did not proceed with the determination of whether the proceeding initiated under PMLA would be maintainable or not post the approval of the resolution plan and / or conclusion of liquidation proceedings. Had this determination been made, the issue would have come to a rest. However, the Hon’ble High Court of Gujarat approached the issue with a determination of whether the assets of the corporate debtor were in fact ‘proceeds of crime’ and whether there was a ‘reason to believe’ that the assets of the corporate debtor were borne out of a criminal activity.

Since the Hon’ble High Court of Gujarat did not find merit in the argument that the assets of the corporate debtor were ‘proceeds of crime’ and there was not sufficient ‘reason to believe’ the same, it was held that the PMLA proceedings were initiated without jurisdiction. In light of this, the jurisprudence on the issue of maintainability of PMLA proceedings post the approval of the resolution plan and / or conclusion of liquidation proceedings still remains open. Conclusion: A perusal of the judicial pronouncements enumerated hereinabove will showcase that the interplay between the IB Code proceedings and PMLA proceedings envisage varied outcomes depending on the stage of interaction between the two special statutes.

While there is no doubt that PMLA proceedings can proceed unless a Moratorium under Section 14 of IB Code is declared, the determination of whether the PMLA proceedings can continue despite the Moratorium declaration lacks clarity and is yet to be addressed. On the other hand, the aspect of whether PMLA proceedings can apply on the properties of a corporate debtor post the resolution process has culminated appears to have attained a settled position. With the introduction, application, and interpretation of Section 32A of the IB Code, it is crystal clear that PMLA proceedings cannot be brought into action on the properties of the corporate debtor which have been subjected to a resolution plan approved by the Adjudicating Authority under the IB Code or where the mode of liquidation has already been identified.

Unlike in most circumstances where there is absolute clarity on which statute prevails over the other and to what extent, the interaction and interplay between the IB Code and PMLA poses a new set of determining facts on which statute prevails over the other. It is for this reason that an adequate understanding of the stage at which the two statutes interact with each other plays the utmost important role. While certain circumstances are still to be determined by the courts of India qua the interaction between these two statutes, the jurisprudential development made thus far would provide a compelling base for further developments.