Chase insolvency cases with large ‘haircuts’, ED chief tells officers

The Enforcement Director (ED) chief, Rahul Navin, has instructed his teams to investigate fraudulent practices in insolvency cases where promoters receive unusually large "haircuts" allowing them to reacquire assets. At a conference, Navin also urged officers to spot warning signs and start money laundering investigations against key suspects, as well as address the issue of state police not acting on their recommendations.

He proposed creating joint teams with state police, along with leveraging their powers under the Bharatiya Nagarik Suraksha Sanhita (BNSS) to seize assets.

Navin's directive stems from a recent controversy involving Zee founder Subhash Chandra, who received a limited repayment plan for personal guarantees on loans totaling ₹22,000 crore. The order was later overturned by a larger NCLT bench. The ED intends to file a case in this matter soon, according to officials. The agency will also file cases related to IBC and PMLA violations, focusing on "collusive resolution cases involving disproportionately large haircuts through which promoters re-acquire assets."

During the conference, Navin discussed the interplay between the IBC and PMLA, and identified issues like circumventing section 29A, which bans resolution plans for certain individuals, inflating related-party claims, manipulating the Committee of Creditors, asset stripping, and imposing artificially large haircuts. The ED is also looking into the delayed registration of first information reports (FIRs) based on its references to state police forces under the PMLA.

Navin stressed the importance of fast-tracking trials and achieving convictions within six to eight months. Additionally, he ordered a review of ED's requests for international cooperation, extradition, and fugitive management, emphasizing the need for quality drafting and treaty compliance in Letters Rogatory requests.