2021 (6) TMI 650 - AT - Insolvency and Bankruptcy

Payment of LCs were made by debiting the Cash Credit Account - GST refund - adjustment of the said amount to settle the liability on account of the LCs opened during pre-CIRP period - HELD THAT - The agenda reveals that the Members of the PNB (Appellant herein) has agreed to revert the aforesaid amount. There are no illegality in the impugned order passed by Ld. Adjudicating Authority, National Company Law Tribunal, Special Bench, Chennai - appeal dismissed.

Summary

Issues:
1. Interpretation of Section 14 of the Insolvency and Bankruptcy Code.
2. Validity of debiting Corporate Debtor's account for LC payments during CIRP.
3. Compliance with CoC decisions regarding refund of wrongly recovered amounts.
4. Role and actions of the Interim Resolution Professional (IRP).
5. Adherence to moratorium provisions during insolvency proceedings.

Analysis:

1. Interpretation of Section 14 of the Insolvency and Bankruptcy Code:
The Appellant, a Financial Creditor, challenged an order directing them to credit a specific amount to the Corporate Debtor's account during the Corporate Insolvency Resolution Process (CIRP). The Appellant argued that the order violated Section 14 of the IBC, which imposes a moratorium on recovering amounts from the Corporate Debtor's account during insolvency proceedings.

2. Validity of debiting Corporate Debtor's account for LC payments during CIRP:
The Appellant justified debiting the Corporate Debtor's account for honoring Letter of Credit (LC) payments, claiming it was essential to keep the Corporate Debtor operational. They highlighted approvals from the Interim Resolution Professional (IRP) for such payments and emphasized that the actions were in the best interest of the Corporate Debtor.

3. Compliance with CoC decisions regarding refund of wrongly recovered amounts:
The Committee of Creditors (CoC) decided on the refund of certain amounts recovered during the moratorium period. However, the Appellant failed to comply with the CoC's decision, leading to a legal dispute. The Respondent argued that the Appellant should reverse the amounts as directed by the CoC, emphasizing the importance of adhering to decisions made collectively.

4. Role and actions of the Interim Resolution Professional (IRP):
The actions of the IRP, specifically in approving LC payments and subsequent replacement, were subject to scrutiny. The Appellant's reliance on IRP approvals for transactions during CIRP was a key argument, while the Respondent raised concerns about the IRP's conduct in a separate disciplinary case, indicating potential issues with the IRP's decisions.

5. Adherence to moratorium provisions during insolvency proceedings:
The judgment highlighted the importance of upholding moratorium provisions under the IBC to protect the Corporate Debtor's assets and ensure fair resolution processes. The Appellant's failure to comply with moratorium restrictions and CoC decisions raised legal concerns, ultimately leading to the dismissal of the appeal and affirming the lower court's decision.

In conclusion, the judgment emphasized the significance of following legal procedures, respecting CoC decisions, and upholding moratorium provisions to maintain the integrity of insolvency proceedings and protect the interests of all stakeholders involved in the resolution process.