NCLT: IBC Moratorium No Bar on Reversal of Funds Mistakenly Credited to Corporate Debtor
Pranav B Prem
The National Company Law Tribunal (NCLT), New Delhi Bench, has clarified that the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) does not bar reversal of funds inadvertently transferred into the account of a corporate debtor. The Bench comprising Jyotsna Sharma (Member-Judicial) and Anu Jagmohan Singh (Member-Technical) delivered the ruling while allowing an application filed by Mecon Ltd., a Government of India enterprise, seeking reversal of funds mistakenly transferred to the account of Intec India Ltd., a corporate debtor under CIRP.
Background
The applicant inadvertently transferred ₹35,22,923.62 and ₹14,39,566.33 through RTGS on 01.11.2023 to the account of Intec India Ltd. (corporate debtor) instead of the intended beneficiary, Intec Infonet Pvt. Ltd. The error was promptly reported to the applicant’s banker (HDFC Bank), which in turn requested Yes Bank (banker of the corporate debtor) to reverse the funds. Intec India Ltd. itself acknowledged receipt of the funds by email dated 04.11.2023, confirming that it was under CIRP and asking the applicant to take appropriate steps for reversal. Despite repeated reminders to Yes Bank, the funds were not re-credited, as the corporate debtor’s account was subject to moratorium under Section 14 of IBC. Mecon Ltd. thus approached the NCLT under Rule 11 of the NCLT Rules, 2016, seeking partial lifting of the moratorium only for the limited purpose of reversing the mistaken transfer.
Respondent’s Stand
The Resolution Professional for the corporate debtor opposed the application, contending that once moratorium is imposed, no payments can be withdrawn from the corporate debtor’s account except for CIRP costs or to keep the company as a going concern. It was further submitted that moratorium can only be lifted if CIRP is concluded or liquidation is initiated, neither of which applied here.
Tribunal’s Observations
The Tribunal rejected the RP’s objections, emphasizing that the funds in question were not assets of the corporate debtor: “The money came into account of the Corporate Debtor wrongfully and definitely that money is not the asset of the Corporate Debtor. At the most it can be said that money is held in the account of the Corporate Debtor in trust for the right beneficiary.” The Bench observed that Section 14 of the IBC was never intended to impose a blanket ban on all transactions involving the corporate debtor’s account, especially when the money did not belong to the debtor or its stakeholders.It stressed that neither the corporate debtor nor any other person can claim rights over funds mistakenly credited. The moratorium, therefore, cannot prevent reversal of such funds, and the question of “lifting” the moratorium does not arise.
The NCLT directed the Resolution Professional and the concerned banks to take immediate steps to reverse the mistaken transfers and re-credit the funds either to the account of the intended beneficiary (Intec Infonet Pvt. Ltd.) or back to the applicant, Mecon Ltd. Accordingly, the application was allowed and disposed of.
Appearance
For the Applicant: Mr. Joydip Bhattacharya, Ms. Ipsita Biswal in IA/625/2024
For the Respondent: -
For the RP: Mr. Abhishek Anand, Mr. Karan Kohli, Ms. Palak Kalra, Advs
For the CoC: R. A. Iyer, Adv.
Cause Title: Mr. B. A. Chandrasherkara Setty and Ors V. M/s. Intec India Limited Ltd
Case No: IA 625/2024 IN Company Petition No. (IB) – 2432/(PB)/2019
Coram: Jyotsna Sharma (Member-Judicial), Anu Jagmohan Singh (Member-Technical)
