Interplay between Moratorium under IBC, 2016 and PMLA, 2002

This paper examines the complex legal interplay between the moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) and the attachment powers under the Prevention of Money Laundering Act, 2002 (PMLA), focusing on the tension between insolvency resolution and criminal asset recovery. The IBC seeks to ensure value maximization of the corporate debtor through a time-bound Corporate Insolvency Resolution Process (CIRP), with Section 14 imposing a moratorium that halts all legal proceedings and enforcement actions. In contrast, the PMLA empowers authorities to attach and confiscate properties derived from proceeds of crime, reflecting a punitive and preventive objective. The paper analyses how these conflicting objectives create legal uncertainty, particularly when assets of a corporate debtor are subjected to attachment under PMLA either before or during CIRP. It explores key statutory provisions, including Sections 14, 32A, and 238 of the IBC, alongside Section 5 and Section 71 of the PMLA, to assess their operational overlap. Judicial interpretations reveal a nuanced approach: attachments made prior to the initiation of CIRP are generally upheld, while those made during CIRP are often scrutinized for violating the moratorium and disrupting resolution efforts. Further, the paper evaluates the role of non-obstante clauses and the doctrine of purposive interpretation in resolving statutory conflicts. Case law demonstrates that courts prioritize the timing, nature, and purpose of proceedings, distinguishing between civil recovery and criminal enforcement. Section 32A emerges as a critical provision, granting immunity to the corporate debtor post-resolution and facilitating a “clean slate” for successful revival. The study concludes that while courts have attempted to harmonize the objectives of both statutes, inconsistencies persist. It advocates for clearer legislative guidance and institutional coordination to balance economic rehabilitation with the enforcement of anti-money laundering laws, thereby ensuring legal certainty and procedural efficiency.