Tribunal rules against bank's actions during insolvency moratorium.

The tribunal found a violation of Section 14(1)(c) of the Insolvency and Bankruptcy Code, prohibiting actions on security interests during the moratorium. A cost of Rs. 25,000 was imposed on the non-applicant. It was ruled that banks cannot appropriate funds during the moratorium, with the State Bank of India instructed to reverse debit entries. Disputed amounts deposited in the Corporate Debtor's account post-moratorium cannot be used by banks. The imposition of the cost was discussed, with the appellate tribunal setting it aside but maintaining interim orders. The bank was directed to follow RBI guidelines post-moratorium.

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Issues:
1. Violation of Section 14(1)(c) of the Insolvency and Bankruptcy Code
2. Appropriation of funds during the moratorium period
3. Disputed amount deposited in the Corporate Debtor's account
4. Imposition of cost on the non-applicant

Violation of Section 14(1)(c) of the Insolvency and Bankruptcy Code:
The judgment highlighted a direct violation of Section 14(1)(c), which prohibits any action to foreclose, recover, or enforce any security interest created by the corporate debtor during the moratorium period. The tribunal found that there was a breach of the moratorium order passed by the National Company Law Appellate Tribunal on 01.06.2017. Consequently, a cost of Rs. 25,000 was imposed on the non-applicant for the statutory violation.

Appropriation of funds during the moratorium period:
The judgment emphasized that once the moratorium is in effect, financial creditors, including banks, must submit their claims to the Resolution Professional for consideration along with other claims as per the law. It was ruled that during the moratorium period, the bank cannot recover any amount from the Corporate Debtor's account or appropriate any funds towards its dues. The State Bank of India was directed to roll back all debit entries made in the Corporate Debtor's account after 01.06.2017 and restore the account to its state as of that date.

Disputed amount deposited in the Corporate Debtor's account:
The judgment addressed a disputed amount deposited in the Corporate Debtor's account after the moratorium order. The tribunal held that any funds deposited by any entity, such as the Sales Tax Department, after the moratorium order cannot be appropriated by the bank towards its own dues during the moratorium period. It was clarified that such deposited amounts should not be treated as debited for adjustment by the bank.

Imposition of cost on the non-applicant:
The judgment discussed the imposition of a cost of Rs. 25,000 on the non-applicant for the direct statutory violation and non-compliance with the moratorium order. However, the appellate tribunal set aside the order imposing the cost but made the interim order absolute, which would continue during the moratorium period. After the moratorium ends, the bank was directed to manage the account in accordance with the Reserve Bank of India guidelines. The appeal was disposed of with these observations, and no costs were awarded.

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