Clash Of Jurisdiction: Analysing The IBC-PMLA Conundrum

The Insolvency and Bankruptcy Code (IBC) 2016 and the Prevention of Money Laundering Act (PMLA) 2002 operate in distinct domains yet intersect in complex ways, leading to legal challenges and policy dilemmas. Section 71 of the PMLA and Section 238 of the IBC both assert supremacy, causing judicial conflicts. Courts have varied in their rulings on this issue. \r

For instance, in Rajiv Chakraborty vs. Directorate Of Enforcement, the Delhi High Court upheld IBC provisions over PMLA, emphasizing corporate debtors' immunity post-resolution. However, in Varrsana Ispat Ltd v. Deputy Director of Enforcement, the NCLAT ruled that PMLA proceedings could continue despite IBC's moratorium. \r

The Supreme Court, in JSW Steel Ltd v. Mahender Kumar Khandelwal & Ors, underscored the need for legislative clarity, directing the government to reconcile these laws. This legal ambiguity impacts investor confidence, necessitating reforms to balance economic recovery with stringent anti-money laundering measures. Legislative clarity and harmonization are essential to resolve these conflicts and ensure effective economic governance.