2018 (9) TMI 1954 - AT - Insolvency and Bankruptcy

Direction to Appellant to pay back the sum to the Corporate Debtor, which was paid to them after the order of moratorium - HELD THAT - Such submission made by learned counsel for the Appellant is not acceptable as the order of moratorium was passed by the Adjudicating Authority after hearing the Corporate Debtor. After passing said order it came in effect from the same date i.e. 15th January, 2018. Therefore, the Corporate Debtor being under the control of the Resolution Professional, the (Suspended) Board of Directors had no jurisdiction to divert funds to the creditors. Such transfer of funds, during the period of moratorium, in favour of the Creditors namely Mr. Bijay Kumar Garodia, Mr. Nishant Garodia and Mr. Ram Goapal Garodia being illegal, the Adjudicating Authority rightly directed them to refund the amount. The appellants are directed to refund the amount immediately to the Corporate Debtor, not beyond 30 days, failing which it will be open to the Resolution Professional to move before the Adjudicating Authority for initiating contempt proceeding - Appeal dismissed.

Summary

Issues:
1. Appeal against order directing repayment post moratorium.

Analysis:
The judgment pertains to an appeal by three creditors against an order passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, directing them to repay the sum received from the Corporate Debtor after the imposition of a moratorium. The appellants argued that they were unaware of the moratorium order as it was passed on 15th January, 2018, and published in the newspaper on 22nd January, 2018. However, the Tribunal rejected this argument, stating that the moratorium order was effective from the date of passing and that the Corporate Debtor, under the control of the Resolution Professional, had no authority to make payments to creditors during the moratorium period. The Tribunal deemed the transfer of funds to the creditors as illegal and upheld the Adjudicating Authority's decision to order repayment.

The Tribunal found no merit in the appeal and dismissed it. The appellants were directed to refund the amount to the Corporate Debtor within 30 days. Failure to comply would empower the Resolution Professional to seek contempt proceedings before the Adjudicating Authority. The appeal was dismissed with these directions, affirming the Adjudicating Authority's decision to order repayment by the creditors who received funds post the moratorium period.