NCLAT Upholds NCLT Order Directing Suspended Directors To Refund ₹32 Lakh Withdrawn During CIRP; Imposes ₹5 Lakh Cost Each for Repeated Litigation
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Arun Baroka (Technical Member), and Mr. Barun Mitra (Technical Member), has dismissed an appeal filed by the suspended directors of A to Z Barter Pvt. Ltd., thereby upholding an order passed by the National Company Law Tribunal (NCLT), New Delhi, directing them to deposit ₹32 lakh, withdrawn during the Corporate Insolvency Resolution Process (CIRP), along with interest at 12% per annum. The Tribunal also imposed a cost of ₹5 lakh on each appellant for abuse of process and repeated litigation over a settled issue.
Background
The appeal arose out of the NCLT’s order dated 16.01.2025 in I.A. No. 2021/2022 filed by the Liquidator in CP (IB) No. 643(ND)/2018. The Adjudicating Authority had directed the suspended directors—appellants herein—to deposit ₹37,64,953 (including interest on ₹32,00,000) into the liquidation estate of the corporate debtor. The amount represented funds withdrawn in contravention of the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016.
The appellants contended that the amount in question had not been withdrawn directly by them but was paid through the encashment of post-dated cheques issued in favour of one Kewal Kisan, prior to the initiation of the CIRP. They argued that the cheques were issued to discharge a pre-existing loan liability of the corporate debtor and not for personal use.
Respondent’s Case
The Liquidator opposed the appeal, submitting that the appellants had already been directed to return the withdrawn amount by the Adjudicating Authority in an earlier application (I.A. No. 2025/2020), and the said direction had attained finality. He submitted that the appellants failed to comply with that order and instead engaged in repeated and frivolous litigation, severely hampering the CIRP and subsequent liquidation process.
He pointed out that due to the unauthorized withdrawals, the Liquidator could not pay fees to himself or other professionals. Moreover, the conduct of the suspended directors—marked by non-cooperation and blatant disregard of judicial directions—necessitated strict action.
Tribunal’s Observations
The Appellate Tribunal noted that the issue of ₹32 lakh withdrawn from the corporate debtor’s account had already been adjudicated by the Adjudicating Authority in its order dated 09.11.2020 in I.A. No. 2025/2020. That order was challenged by the appellants in Company Appeal (AT) (Ins.) No. 47 of 2021, but the appeal was dismissed as withdrawn on 29.01.2021 after the Tribunal found no valid grounds for retention of the withdrawn amount.
Further, the Tribunal took note of its judgment in Company Appeal (AT) (Ins.) No. 1103 of 2020, delivered on 14.02.2022, where the same issue was again raised and already settled. The NCLAT emphasized that despite the finality of earlier rulings, the appellants continued to raise identical contentions under new proceedings, thus wasting judicial time.
It rejected the appellants' argument that the payment through post-dated cheques absolved them of responsibility, noting that such withdrawals, even if traceable to earlier-issued instruments, could not override the statutory bar under Section 14 of the Code.
Referring to its earlier judgments, the Tribunal held that the unauthorized withdrawal during CIRP amounted to a fraudulent transaction and a willful contravention of the moratorium under Section 14. It held that the repeated filing of applications and appeals on the same issue was a clear abuse of the process of law.
Non-Cooperation with the Liquidator
The Tribunal also noted that the Liquidator had consistently complained of non-cooperation by the suspended directors, who failed to comply with earlier cost orders and never made any serious effort to return the withdrawn funds. The NCLT, in its order dated 16.01.2025, had clearly recorded that the appellants continued to display non-cooperation even during the liquidation stage.
Verdict
The Appellate Tribunal held that the orders passed by the NCLT directing the appellants to deposit ₹32 lakh with 12% interest were in line with earlier judgments and warranted no interference. It ruled that the appellants were barred by the principle of res judicata from re-agitating the issue and had failed to show any reason to justify reopening of the settled matter. Accordingly, the appeal was dismissed. The NCLAT directed that each of the suspended directors must deposit ₹5 lakh as costs into the Prime Minister's Relief Fund in addition to depositing the previously ordered amount.
“We find no error in the impugned order passed by the Adjudicating Authority allowing IA No. 2021 of 2022 and directing the suspended directors to deposit the amount which they had earlier withdrawn in violation of the Code,” the Bench concluded.
Appearance
For Appellant: Mr. Pulkit Atal, Advocate
For Respondent: Mr. K.D. Sharma, Liquidator
Cause Title: Sh. Ashish Chaturvedi and Ors. V. Sh. Sanjay Garg and Ors.
Case No: Company Appeal (AT) (Insolvency) No. 432 of 2025
Coram: Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]
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