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2018 (6) TMI 1750 - Tri - Insolvency and BankruptcySeeking direction to reverse amounts that have been debited by ICICI bank after 15.12.2017 from the current account of the Corporate Debtor - seeking to transfer the same to current account of the Corporate Debtor maintained with ICICI - HELD THAT - If characteristics of ownership is read into the given situation, since right of disposal is the basic characteristic of ownership, as long as monies are at the disposal of a person, such person has to be treated as a person having right of disposal over the given monies - If the same analogy is applied here saying that the corporate debtor is treated as debtor, the creditor will have right of recovery, not right of disposal over the monies lying in its current account. The right of the creditor being a remedy for realization and that remedy being suspended in the period of moratorium, such right of remedy could not be exercised soon after declaration of moratorium. Once the monies lying in current account is construed as the asset of the Corporate Debtor, section 14 will trigger in over the said asset as well. For it has been admitted that the respondent/the creditor appropriated the monies lying in the account of Corporate Debtor against the loan account soon after moratorium has been declared, such transaction has to be held as hit by sec 14 of the Code, for this reason, this Bench hereby holds that the appropriation of the monies of the Corporate Debtor against the loan account of the Corporate Debtor by the creditor herein is bad in law, hence it is hereby declared invalid directing the Respondent/IClCl Bank to deposit the same in the account of the Corporate Debtor. Application allowed.
Issues:
1. Debiting of funds by ICICI Bank from the Corporate Debtor's account after the declaration of moratorium. 2. Interpretation of Section 14(1)(b) of the Insolvency & Bankruptcy Code. 3. Rights and duties of the Interim Resolution Professional (IRP) under Sections 17(1)(d) and 28(1)(e) of the Code. 4. Determination of whether funds in the Corporate Debtor's account constitute an asset of the Corporate Debtor. 5. Validity of ICICI Bank's appropriation of funds from the Corporate Debtor's account against a loan account post moratorium declaration. Analysis: 1. The case involves a Miscellaneous Application filed by the Interim Resolution Professional (IRP) concerning ICICI Bank's debiting of funds from the Corporate Debtor's account after the moratorium declaration. The IRP sought relief for the reversal of these transactions, arguing that they contravened the moratorium provisions. 2. The core issue revolves around the interpretation of Section 14(1)(b) of the Insolvency & Bankruptcy Code, which prohibits the transfer, encumbrance, or disposal of assets by the Corporate Debtor. The Applicant's counsel contended that the funds in the Corporate Debtor's account are covered under this provision, and any actions contrary to it should be reversed. 3. The IRP's rights and duties under Sections 17(1)(d) and 28(1)(e) were also discussed. While acknowledging the IRP's authority over the Corporate Debtor's accounts, it was clarified that these provisions do not grant the IRP the power to override the restrictions imposed by Section 14(1)(b). 4. The Tribunal deliberated on whether the funds in the Corporate Debtor's account should be considered as assets of the Corporate Debtor. The argument centered on the right of disposal, with the conclusion that as long as the funds are at the disposal of the Corporate Debtor, they should be treated as the Corporate Debtor's assets. 5. Lastly, the Tribunal deemed ICICI Bank's appropriation of funds from the Corporate Debtor's account post moratorium as invalid under Section 14 of the Code. The judgment directed ICICI Bank to deposit the appropriated funds back into the Corporate Debtor's account, emphasizing that creditors lose the right of lien over the Corporate Debtor's assets once the moratorium is in effect.
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