New Delhi — The Enforcement Directorate (ED), India's premier financial investigation agency, has embarked on an aggressive new drive targeting alleged fraud under the Insolvency and Bankruptcy Code (IBC) and questionable write-offs by creditors, marking one of the most sustained efforts yet to root out abuse of the country's insolvency framework.
Sources close to the matter told this desk that the ED has identified multiple corporate insolvency cases across several states where assets were allegedly siphoned off before formal proceedings began, shell companies were used to mask beneficial ownership during resolution, and lenders appeared to approve excessive haircuts on loans that later resurfaced through related-party transactions.
Under the Prevention of Money Laundering Act (PMLA), the ED has jurisdiction to investigate proceeds of crime that flow through or around insolvency proceedings. Officials said the latest round of cases centres on patterns such as preferential transfers — where a defaulting company pays certain creditors ahead of others shortly before entering IBC — and undervalued asset sales to entities linked to promoters.
Creditors, particularly public-sector banks, have also come under scrutiny. Over the past few years, several banks faced allegations that they structured resolution plans favourably toward specific bidders or approved steep write-downs without adequate due diligence. In some instances, recovered values far exceeded what lenders had provisioned, raising questions about earlier provisioning discipline.
Legal experts say the push signals a shift from treating IBC cases purely as civil-commercial disputes to also examining whether criminal financial offences underpin them. "The line between a bad loan and a structured fraud is often drawn only after the money trail is followed," said a senior advocate who specialises in PMLA litigation. "This crackdown suggests the ED is doing exactly that — following the trail."
The government has not released official numbers for the new drive, but insiders indicate the operation spans at least half a dozen high-profile corporate groups and multiple states. Affected creditors include both state-owned and private sector lenders.
Analysts note the timing is significant. With the Reserve Bank of India tightening gross non-performing asset (NPA) monitoring and the government pushing faster insolvency resolutions, any finding of deliberate fraud could reopen settled cases or derail ongoing ones, creating fresh uncertainty for lenders and investors alike.
