This coordinated step — between the ED and the Insolvency and Bankruptcy Board of India (IBBI) — aims to unlock the value of assets earlier frozen during money laundering probes, ensuring creditors, banks, and homebuyers get maximum recovery through the insolvency process.

Why This Matters

Until now, if a company under insolvency had its assets attached by ED under PMLA, those properties could not be sold or used by the Resolution Professional — even when a resolution plan was ready.
This created long delays and value erosion for creditors and homebuyers stuck in stalled projects or bankrupt real estate companies.

Now, ED has introduced a standard mechanism for restitution (release) of such assets, allowing them to be used in the Corporate Insolvency Resolution Process (CIRP) or liquidation — with strict safeguards.

How It Works

1. Resolution Professionals (RPs) can now file applications before the PMLA Special Court under Sections 8(7) or 8(8) of the Act to request release of attached assets.
2. A standard undertaking — finalised jointly by ED and IBBI and circulated on November 4, 2025 — must be submitted by the Insolvency Professional.
3. The undertaking ensures that:
   • Released assets are used only for creditors’ benefit, not for promoters or accused persons.
   • Full reporting and compliance continue until the insolvency resolution is complete.
   • Quarterly reports are submitted to the Special Court showing how restituted assets are being used or monetised.

Safeguards Built In

To prevent any misuse:

• Restituted assets cannot be sold to any ineligible promoter or related party (under Section 29A or 32A of IBC).
• Insolvency Professionals must disclose all attached properties in the Information Memorandum or Auction Notice.
• ED will continue to receive cooperation and updates on:
  • PUFE (Preferential, Undervalued, Fraudulent, Extortionate) transactions,
  • Committee of Creditors’ structure, and
  • Details of the successful bidder or resolution applicant.

The undertaking remains valid until the resolution plan or dissolution order is approved by the NCLT.

Why It’s a Big Policy Shift

This marks a turning point in India’s enforcement and insolvency coordination.
Previously, strict PMLA attachments often clashed with IBC resolution efforts — leaving projects stuck and creditors helpless.

Now, ED and IBBI have clarified that “enforcement and value recovery are not conflicting goals.”
Instead, when aligned, they ensure that:

• Economic offenders are prosecuted, and
• Public and creditor interests are protected through lawful recovery.

Impact on Real Estate & Homebuyers

Many stalled housing projects — where developer companies face both PMLA probes and insolvency — can now move forward under this framework.
Attached lands or unfinished towers may now be legally restored to the insolvency process, paving the way for homebuyer refunds or possession through resolution plans.

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The dispute centers around a Power Purchase Agreement (PPA) between Gujarat Urja Vikas Nigam Ltd. and the corporate debtor, previously known as Era Infrastructure Limited. The CIRP was initiated on December 5, 2018, after the corporate debtor failed to supply power since March 2015. Following this, Gujarat Urja issued a default notice and subsequently terminated the PPA, seeking compensation of Rs. 3.36 crores.

Despite this, the RP stated that the termination of the PPA during the ongoing CIRP was impermissible due to the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code. The RP emphasized that claims related to termination could not be verified as valid during the CIRP, leading to the rejection of Gujarat Urja’s claim filed in July 2021.

The NCLAT upheld the RP’s position, stating that the appellant had delayed filing claims by 849 days, which should have been submitted before March 5, 2019, in accordance with CIRP regulations. The tribunal also noted that the public announcement of the CIRP proceedings was sufficient notification for all creditors, including Gujarat Urja, which is a wholly owned public sector unit of the Gujarat government.

The ruling reiterated that claims can only be entertained if they are filed in relation to the CIRP commencement date, emphasizing that subsequent claims do not automatically discharge and must follow different legal proceedings if recovery is sought.

In conclusion, the NCLAT found no merit in the appeal, confirming the Adjudicating Authority’s earlier decision that the RP acted correctly in rejecting claims that arose after the initiation of the CIRP. The tribunal dismissed the appeal without costs, closing any pending interim applications.

Also Read: Anirudh Agro gets NCLAT Nod to Acquire Viceroy Hotels, To Infuse Over Rs 150 Crore

The post NCLAT Ruling: Claims Arising Post-CIRP Cannot Be Entertained by Resolution Professionals appeared first on Square Feat India.