New Delhi: The Insolvency and Bankruptcy Board of India (IBBI) is sharing data on dubious transactions by defaulting promoters with the Directorate of Enforcement (ED), a move aimed at strengthening investigations under the anti-money laundering law and aiding recovery of siphoned assets.
In a statement on Sunday, the ED said it held discussions with the IBBI on the operation of the Insolvency and Bankruptcy Code (IBC) and its interface with the Prevention of Money Laundering Act (PMLA) that ED administers.
Avoidance transactions include preferential, undervalued, fraudulent and extortionate deals undertaken before companies entered bankruptcy. Such transactions worth ₹₹4.28 trillion have so far been identified and placed before the National Company Law Tribunal (NCLT) for recovery action, according to information available from IBBI.
Debt resolution professionals appointed by banks are required to identify such transactions and seek directions from NCLT for their recovery from promoters and other executives involved. Sharing this data with ED is expected to aid in the investigation of such transactions and the recovery of assets.
ED stated that the issue came up at its 34th quarterly conference of zonal officers held in Guwahati, Assam, a three-day event that ended on Saturday.
Process explained
ED said that IBBI officials explained the corporate insolvency resolution process starting with the admission of cases in the national Company Law Tribunal (NCLT) to the approval of resolution plans. The officials highlighted key IBC provisions relevant to ED’s functioning.
These include the moratorium under Section 14 of IBC on recoveries of a company admitted for debt resolution by tribunals, the ineligibility of willful defaulters under Section 29A for bidding for the company, the conditional protection under Section 32A provided to new unrelated investors in the bankrupt company from liability for actions of the previous management, and avoidance transactions, ED said.
ED stated that the conference also discussed the status of attached properties under the PMLA. “Emphasis was laid on expediting pending investigations, filing of prosecution complaints in appropriate cases, and strengthening follow-up in matters of confirmation, possession, and restitution of attached properties.”
ED said the conference also emphasized that, with significant statutory powers available under PMLA comes a corresponding responsibility to exercise them with caution, fairness and accountability.
“It was advised that officers must remain mindful of the impact of enforcement actions and ensure that summons and other statutory notices are issued judiciously, based on clear necessity and proper application of mind.”
ED has a target of filing 500 prosecution complaints in the current financial year. The investigating agency is preparing for an enhanced target in the next financial year.
“The need for this enhanced target is to proactively conclude long-pending investigations and to systematically reduce the lifecycle of new investigations to a reasonable timeframe of one to two years, except in exceptionally complex cases,” the agency stated.
The agency also directed senior officials to intensify efforts in tracing and securing proceedings of crime parked abroad, particularly in jurisdictions such as Dubai and Singapore.
