INDIA Trends and Developments Contributed by: Vijayendra Pratap Singh, Priyank Ladoia, Arjun Narang and Puneet Dhanoa, AZB & Partners
Court and the PMLA rules mandating the framing of charges as a precondition operates as a significant impediment to the smooth and timely restitution/res - toration process envisaged under the PMLA. Statutory Immunity Under Section 32A of the IBC Section 32A of the IBC was introduced through the IBC (Amendment) Act, 2020, which came into force on 28 December 2019. As per Section 32A, liability for offences of the corporate debtor committed prior to the CIRP ceases if: • a National Company Law Tribunal (NCLT)-approved resolution plan is in place; or • there is a change in management or control to an eligible person. The immunity under Section 32A only applies if the new person in control is not: • a promoter or part of the erstwhile management; • a related party to the former management; or • suspected by investigators of abetting or conspir - ing in the offence. No action can be taken against the corporate debtor’s property for prior offences once the control changes to an eligible person as per Section 32A(2) of the IBC. Such action includes attachment, seizure, retention or confiscation of property under such law applicable to the corporate debtor. The provision represents a legislative attempt to strike a balance – ie, while the corporate debtor and its assets receive protection post-resolution, individual wrongdoers (including promoters and officers respon - sible for the misconduct) remain fully liable to investi - gation and prosecution. From Collision to Coexistence: the BPSL Landscape The pre-existing uncertainty It is crucial to understand how the courts and tribunals historically grappled with the IBC-PMLA conflict. Both statutes contain non-obstante clauses, in Section 238 in the IBC and Section 71 in the PMLA, leading to a complex tug-of-war situation.
The early consensus heavily favoured the suprema - cy of the PMLA in matters involving tainted assets. Various courts in India observed that the moratorium under the IBC does not apply to criminal proceed - ings or penal actions under the PMLA. The National Company Law Appellate Tribunal (NCLAT), in Roto- mac Global Private Limited v Deputy Director , Com- pany Appeal (AT) (Insolvency) No 140 of 2019, held that the PMLA can be invoked simultaneously with the IBC, with neither having an overriding effect over the penal actions of the other. Later, the NCLAT in Kiran Shah, RP of KSL and Industries Ltd v Enforcement Directorate , Company Appeal (AT) (Insolvency) No 817 of 2021 held that the NCLT fundamentally lacks the jurisdiction to handle issues falling under the purview of the PMLA. The Delhi High Court in Rajiv Chakraborty RP of EIEL v Directorate of Enforcement WP(C) 9531/2020 held that Section 32A acts as the terminal point, since authori - ties under the PMLA would cease to have power to attach or confiscate when a resolution plan has been approved or where a measure towards liquidation has been adopted. The constitutional validity of Sec - tion 32A was upheld by the Supreme Court in Manish Kumar v Union of India , (2021) 5 SCC 1, while noting that protecting the corporate debtor’s assets post- resolution is critical to economic revival and ensuring that new investors are not haunted by the sins of the erstwhile management. Despite these clarifications, the physical release of assets remained a significant procedural bottleneck. This was exemplified in Anil Kohli v Directorate of Enforcement , Company Appeal (AT) (Insolvency) No 389 of 2018 when the NCLAT reiterated that PMLA attachments validly made prior to the CIRP could not be undone merely because the insolvency process was ongoing. This persistent friction set the stage for the pivotal BPSL litigation, which ultimately necessi - tated a shift towards the current model of structured co-operation. The pivotal point The Supreme Court’s decision in Kalyani Transco v Bhushan Power and Steel Ltd , 2025 INSC 1165 and Kalyani Transco v Bhushan Power and Steel Ltd , 2025 INSC 621 (BPSL) serves as the definitive pivot point
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