New Delhi: The Insolvency and Bankruptcy Board of India (IBBI) is sharing data on dubious transactions of defaulting promoters with the Enforcement Directorate (ED), a move aimed at strengthening investigations under the Anti-Money Laundering Act and helping in recovery of stolen assets.
In a statement on Sunday, the ED said it has held discussions with the IBBI on the functioning of the Insolvency and Bankruptcy Code (IBC) and its interface with the Prevention of Money Laundering Act (PMLA), which the ED administers.
Avoidance transactions include preferential, undervalued, fraudulent and extortionate deals made before companies entered bankruptcy. Such transactions are worth it ₹4.28 trillion have so far been identified and brought before the National Company Law Tribunal (NCLT) for recovery, according to information available from IBBI.
Debt resolution professionals appointed by banks are required to identify such transactions and seek directions from the NCLT to recover them from the promoters and other executives involved. Sharing this data with the ED is expected to help in the investigation of such transactions and recovery of assets.
The ED said the issue came up at its 34th Zonal Officers Quarterly Conference held in Guwahati, Assam, a three-day event that ended on Saturday.
Process explained
The ED said the IBBI officials explained the process of resolving the company’s insolvency starting from the admission of cases in the National Company Law Tribunal (NCLT) to the approval of resolution plans. The officials highlighted the key provisions of the IBC relevant to the functioning of the ED.
These include a moratorium under Section 14 of the IBC on the recovery of claims of a company admitted to settle a debt by a court, disqualification of willful defaulters under Section 29A to bid for a company, conditional protection under Section 32A given to new unrelated investors in an insolvent company against liability for acts of previous management and avoidance of transactions, the ED said.
The ED said the conference also discussed the status of attached properties under PMLA. “Emphasis has been placed on expediting ongoing investigations, filing prosecution complaints in appropriate cases, and strengthening follow-up in matters of confirmation, possession and restitution of seized assets.”
The ED said the conference also emphasized that with significant statutory powers available under the PMLA comes a corresponding responsibility to exercise them carefully, fairly and responsibly.
“It was recommended that police officers must be aware of the impact of enforcement action and ensure that summonses and other statutory notices are issued judiciously, based on clear necessity and the right application of mind.”
The ED aims to file 500 prosecution complaints in the current financial year. The investigative agency is gearing up for an increased target in the next financial year.
“The need for this expanded goal is to proactively close long-running investigations and systematically shorten the life cycle of new investigations to a reasonable time frame of one to two years, except in exceptionally complex cases,” the agency said.
The agency has also directed senior officials to step up efforts to trace and secure the proceeds of crime parked abroad, particularly in jurisdictions such as Dubai and Singapore.
