NCLAT Ruling on IBC and PMLA Conflict

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The **National Company Law Appellate Tribunal (NCLAT)** ruled that the **IBC, 2016** moratorium cannot shield crime proceeds from attachment under the **PMLA, 2002**.
This ruling arose during insolvency proceedings for **Siddhi Vinayak Logistics Ltd.**, where the **Enforcement Directorate (ED)** attached assets despite ongoing resolution process.
The company liquidator cited the **P. Mohanraj v. Shah Brothers Ispat (2021)** judgment, which prevents coercive recovery actions during the insolvency moratorium.
In response, the ED cited the **Embassy Property Developments v. State of Karnataka (2019)** case, which limits insolvency tribunals from reviewing decisions made by independent statutory bodies.

The tribunal held that the **IBC, 2016** and the **PMLA, 2002** operate in completely distinct statutory legal domains.
While the **IBC, 2016** manages corporate resolution and creditor recovery, the **PMLA, 2002** focuses on tracing and confiscating illegal assets.
The moratorium under **Section 14** of the **IBC, 2016** protects only legitimately acquired assets of a company.
Public criminal law actions under the **PMLA, 2002** do not create civil debt and cannot be stopped by an insolvency moratorium.
Furthermore, **Section 41** of the **PMLA, 2002** prevents civil courts from interfering in matters that money laundering authorities decide.
The NCLAT stressed that national interest in seizing illegal money takes priority over financial haircuts taken by commercial creditors.
Insolvency tribunals like **NCLT** lack the legal power to challenge attachment orders passed by the **Enforcement Directorate**.

The primary goal of the **IBC, 2016** is rescuing failing companies, whereas the **PMLA, 2002** aims to seize illegal wealth.
The **IBC, 2016** functions as a civil commercial law, while the **PMLA, 2002** acts as a criminal public law.
The **IBC, 2016** protects valid business assets, whereas the **PMLA, 2002** targets tainted property regardless of corporate status.
Under **Section 14**, the insolvency moratorium stops civil suits, but it does not stop the **Enforcement Directorate** from freezing illegal assets.
Insolvency matters are decided by the **NCLT** and **NCLAT**, while money laundering issues are handled by designated **PMLA** courts.