2019 (8) TMI 431 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of Corporate Insolvency Resolution Process - recovery of dues by way of deduction of its instalments through exercising its right to lien on the accounts of the Corporate Debtor - HELD THAT - The plea taken by the Appellant is that they can recover the amount even during the period of Moratorium and, on the other hand, is making some sort of statement that the amounts have not been recovered during the Moratorium period, being conflicting, the stand taken by the Appellant- Canbank Factors Limited cannot be accepted. Appeal dismissed.

Summary

Issues:
1. Enforcement of security interest during the moratorium period.
2. Recovery of dues by a financial creditor during the moratorium period.
3. Applicability of moratorium provisions under Section 14 (1) (c) of the Insolvency and Bankruptcy Code.

Analysis:
1. The judgment dealt with the enforcement of security interest during the moratorium period. The Adjudicating Authority held that creditors cannot enforce their security interest during the moratorium. The Appellant, a financial creditor, was directed to refund the amount collected for the enforcement of its security against the corporate debtor within two weeks.

2. The Appellant, Canbank Factors Limited, had proceeded with the recovery of dues during the moratorium period despite being instructed not to do so by the Interim Resolution Professional. The Appellant had recovered and retained a significant sum payable to the corporate debtor, which was deemed impermissible during the moratorium period.

3. The Appellant argued that they had the right to recover the amount during the moratorium period based on liens imposed prior to the initiation of insolvency proceedings. However, the Tribunal rejected this argument, emphasizing that the moratorium provisions would apply to any recovery made after the commencement of the moratorium period.

4. The Appellant's contention that no amount was recovered during the moratorium period was contradicted by the lack of evidence provided, such as bank account records. The Tribunal highlighted the conflicting statements made by the Appellant regarding the recovery of amounts during the moratorium period, leading to the dismissal of the appeal.

5. The judgment underscored the importance of adhering to the moratorium provisions under the Insolvency and Bankruptcy Code, emphasizing that creditors must refrain from enforcing security interests or recovering dues during the specified period. The Tribunal found no merit in the appeal and dismissed it without costs.