2018 (7) TMI 2146 - AT - Insolvency and Bankruptcy

Amount debited from the current account of the Corporate Debtor subsequent to the declaration of moratorium - HELD THAT - In the present case we do not intend to go into question as to when the order of moratorium was received by the Bank. Even if it is assumed that it was received by the Bank on 19.12.2017, it was not open to them to debit any amount from the account of the Corporate Debtor subsequent to order of moratorium. Further, as the order of moratorium came into its effect immediately i.e. on 15.12.2017, the date of receipt of order has no relevancy with the same. Once Resolution Plan is approved or rejected by the Adjudicating Authority under Section 31 of I B Code and as the order of moratorium comes to an end, it is always open to the Bank to rewrite its ledger book including accrued of interest and may debit the amount as recorded in a separate record/ ledger. The Resolution Professional is directed not to withdraw any amount during Resolution Process except for day to day functioning of the Corporate Debtor to ensure that the Corporate Debtor remains ongoing concern - Appeal disposed off.

Summary

Issues:
1. Debiting of amount by a bank from the corporate debtor's account post moratorium declaration.
2. Interpretation of the moratorium order's effective date.
3. Applicability of Section 14 of the Insolvency and Bankruptcy Code.
4. Bank's actions during the Corporate Insolvency Resolution Process.

Analysis:
1. The case involved a Miscellaneous Application by the Interim Resolution Professional regarding the ICICI Bank debiting amounts from the corporate debtor's account after the moratorium declaration. The Adjudicating Authority directed the bank to deposit the debited amount back into the corporate debtor's account.

2. The Appellant argued that the moratorium order was communicated after the debit transactions, but the Adjudicating Authority emphasized that regardless of the order's receipt date, the bank was not permitted to debit any amount post the moratorium declaration date.

3. Referring to the Insolvency and Bankruptcy Code, the Appellate Tribunal highlighted that during the moratorium period, actions like recovery of security interests or alienation of assets of the corporate debtor were prohibited to maintain the sanctity of the resolution process.

4. Previous judgments by the Appellate Tribunal in similar cases reinforced the stance that banks cannot debit amounts from the corporate debtor's account post moratorium. However, after the resolution plan approval or rejection, the bank could adjust its ledger accordingly, including accrued interest, but not beyond the available balance to prevent excessive withdrawals.

5. The final decision allowed the bank to act as per the observations made in previous cases, directing the Resolution Professional to ensure no unauthorized withdrawals during the resolution process. Any withdrawals made should be debited to maintain accurate books of account, ensuring the corporate debtor's ongoing operations. The order clarified the Adjudicating Authority's previous decision and disposed of the appeal without costs.