It doesn't seem like an easy fix, during the analysis It came across that IE has some bug when dealing with overflow and position properties. There are many work around for different scenarios but I did not find any to fix this problem.

revision 15505.

If the draggable or the droppable component needs to be used inside a container which has a fixed height and the overflow is set to "auto" or "scroll", the css "position" property of the container element must has to be set to the "relative".

<div class="navTree" id="navTree" style="overflow:auto; position:relative;" >
<ice:tree id="tree" .....>
<ice:treeNode>
<f:facet name="content">
<ice:panelGroup dropTarget="true" dragOptions="dragGhost" draggable="true">
.......
</ice:panelGroup>
</f:facet>
</ice:treeNode>
</ice:tree>
</div>

The following note has been added to the TLD DOC of ice:panelGroup component.

The "position" property of the container div must need to be set to the "relative", if its "overflow" property of the css is set to the "auto" or the "scroll" and all the draggable panelGroups inside the container div must be using the dragOptions="dragGhost".

revision for above commit: 15506