UPSC Prelims Practice Questions — Explained: can the ED attach a firm’s assets after it enters insolvency?
Q1. Under which section of the Insolvency and Bankruptcy Code, 2016 is the moratorium — the statutory stay on institution or continuation of suits and recovery actions — declared once a corporate insolvency resolution process is admitted?
- A. Section 14
- B. Section 29A
- C. Section 32A
- D. Section 7
Q2. With reference to the scope of the Section 14 moratorium under the IBC, consider the following:
1. It stays the institution or continuation of suits against the corporate debtor.
2. It prohibits transfer or disposal of the corporate debtor's assets during the moratorium.
3. It bars the Enforcement Directorate from provisionally attaching proceeds of crime under the PMLA.
4. It operates from the insolvency commencement date until completion of the CIRP.
Which of the above is/are NOT correct?
- It stays the institution or continuation of suits against the corporate debtor.
- It prohibits transfer or disposal of the corporate debtor's assets during the moratorium.
- It bars the Enforcement Directorate from provisionally attaching proceeds of crime under the PMLA.
- It operates from the insolvency commencement date until completion of the CIRP.
- A. 1 and 2
- B. 2 and 4
- C. 1, 2 and 4
- D. 3 only
Q3. Which one of the following is the indispensable precondition for a corporate debtor to obtain immunity under Section 32A of the IBC from prosecution for offences committed before commencement of the CIRP?
- A. Approval of a resolution plan resulting in a change in management or control to a person not connected with the offending management
- B. Mere admission of the CIRP application by the NCLT
- C. Confirmation of the ED's provisional attachment by the PMLA Adjudicating Authority
- D. Declaration of the erstwhile promoters as fugitive economic offenders
Q4. Consider the following statements regarding Section 32A of the IBC:
1. The immunity extends to the corporate debtor's property from attachment for a prior offence once the resolution plan is approved.
2. The immunity is available even where the new management is a related party of the erstwhile promoter.
3. Individuals who actually committed the pre-CIRP offence remain liable to prosecution.
4. The provision was inserted by an amendment made in 2020.
Which of the statements given above are correctly identified?
- The immunity extends to the corporate debtor's property from attachment for a prior offence once the resolution plan is approved.
- The immunity is available even where the new management is a related party of the erstwhile promoter.
- Individuals who actually committed the pre-CIRP offence remain liable to prosecution.
- The provision was inserted by an amendment made in 2020.
- A. 1, 3 and 4
- B. 1 and 2
- C. 2 and 4
- D. 1, 2 and 3
Q5. In the Supreme Court's Bhushan Power & Steel ruling (PNB v. Kalyani Transco, 2025), the PMLA was characterised as a 'public law'. In this context, this characterisation primarily means that —
- A. it protects a public/State interest, so its statutory decisions cannot be reviewed by insolvency tribunals constituted under the Companies Act
- B. it applies only to public sector undertakings and government companies
- C. it can be enforced only through public interest litigation before the High Courts
- D. it automatically overrides all private contractual obligations of the debtor
Q6. With reference to the Supreme Court's Bhushan Power & Steel (Kalyani Transco) ruling, consider the following:
1. The NCLT and NCLAT are constituted under the Companies Act, 2013, not under the IBC.
2. The NCLAT lacks jurisdiction to review a statutory authority's decision under the PMLA.
3. The ED's provisional attachment of the company's assets was valued at about Rs 4,025 crore.
4. A challenge to a PMLA attachment must be filed before the NCLT acting as the adjudicating authority.
Which of the above is/are NOT correct?
- The NCLT and NCLAT are constituted under the Companies Act, 2013, not under the IBC.
- The NCLAT lacks jurisdiction to review a statutory authority's decision under the PMLA.
- The ED's provisional attachment of the company's assets was valued at about Rs 4,025 crore.
- A challenge to a PMLA attachment must be filed before the NCLT acting as the adjudicating authority.
- A. 1 and 2
- B. 2 and 3
- C. 1 and 3
- D. 4 only
Q7. Consider the following statements about the NCLAT ruling (2025) on the interplay of the IBC moratorium and PMLA attachment:
1. The IBC cannot override the PMLA.
2. An ED attachment validly made and confirmed cannot be undone under the IBC.
3. Property alleged to be proceeds of crime and under PMLA adjudication is not part of the freely available resolution estate.
4. The NCLAT may direct release of PMLA-attached assets to maximise creditor value.
Which of the statements given above are correctly identified?
- The IBC cannot override the PMLA.
- An ED attachment validly made and confirmed cannot be undone under the IBC.
- Property alleged to be proceeds of crime and under PMLA adjudication is not part of the freely available resolution estate.
- The NCLAT may direct release of PMLA-attached assets to maximise creditor value.
- A. 1 and 2
- B. 2 and 3
- C. 1, 3 and 4
- D. 1, 2 and 3
Q8. With reference to the reasoning in the NCLAT/NCLT ruling on ED attachment during insolvency, consider the following:
1. The PMLA is a special penal statute with a distinct adjudicatory mechanism.
2. Until the attachment is set aside by the PMLA adjudicating authority, the NCLT has no jurisdiction to direct its release.
3. PMLA attachment is a recovery mechanism comparable to SARFAESI enforcement.
4. The moratorium does not shield proceeds of crime from PMLA attachment.
Which of the above is/are NOT correct?
- The PMLA is a special penal statute with a distinct adjudicatory mechanism.
- Until the attachment is set aside by the PMLA adjudicating authority, the NCLT has no jurisdiction to direct its release.
- PMLA attachment is a recovery mechanism comparable to SARFAESI enforcement.
- The moratorium does not shield proceeds of crime from PMLA attachment.
- A. 1 and 2
- B. 2 and 4
- C. 1, 2 and 4
- D. 3 only
Q9. Consider the following statements comparing the PMLA attachment-and-adjudication structure with the IBC:
1. A provisional attachment order passed by an ED officer lapses after 180 days unless confirmed by the PMLA Adjudicating Authority.
2. Confirmation of an ED provisional attachment is done by the NCLT acting as the adjudicating authority.
3. Orders of the PMLA Adjudicating Authority can be challenged before the PMLA Appellate Tribunal.
Which of the statements given above are correct?
- A provisional attachment order passed by an ED officer lapses after 180 days unless confirmed by the PMLA Adjudicating Authority.
- Confirmation of an ED provisional attachment is done by the NCLT acting as the adjudicating authority.
- Orders of the PMLA Adjudicating Authority can be challenged before the PMLA Appellate Tribunal.
- A. 1 only
- B. 1 and 3 only
- C. 2 and 3 only
- D. 1, 2 and 3
Q10. Under which provision of the Prevention of Money-Laundering Act, 2002 does an authorised officer of the Enforcement Directorate pass an order provisionally attaching property suspected to be proceeds of crime?
- A. Section 5
- B. Section 3
- C. Section 8
- D. Section 24
Q11. Which one of the following bodies regulates insolvency professionals and insolvency professional agencies under the Insolvency and Bankruptcy Code, 2016?
- A. Insolvency and Bankruptcy Board of India
- B. National Company Law Tribunal
- C. Securities and Exchange Board of India
- D. Serious Fraud Investigation Office
Q12. Under which one of the following laws does confiscated property vest absolutely in the Central Government, free from all encumbrances, once a person is declared by a Special Court?
- A. Fugitive Economic Offenders Act, 2018
- B. Prevention of Money-Laundering Act, 2002
- C. SARFAESI Act, 2002
- D. Insolvency and Bankruptcy Code, 2016