Would IBC Prevail Over The PMLA?

INTRODUCTION

One of the recent issues which has gained prominence under the Insolvency & Bankruptcy Code, 2016 (“the Code”) is that in case of a company undergoing a Corporate Insolvency Resolution Process (“CIRP”), would the Prevention of Money Laundering Act (PMLA) or an attachment under it have priority over the Code? Both the PMLA and the Code are special statutes that operate in the financial domain. The PMLA is an Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. The IBC, on the other hand, is an Act to amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, and balance the interests of all the stakeholders. Of late, these two Statutes have been at loggerheads and an interesting battle is brewing between them.

PRIOR OFFENCES

The issue comes into focus if the violations were committed by the previous management of the corporate debtor which is undergoing insolvency resolution. Once a resolution applicant has submitted a resolution plan and the same has be