Moratorium protection under insolvency law bars unilateral bank recovery from the debtor's account; claim must go through resolution process.

Once a moratorium is declared on admission of a Section 7 insolvency application, a financial creditor cannot debit, appropriate or recover amounts from the corporate debtor's account for its own dues; instead, it must lodge its claim before the resolution professional. Amounts deposited after commencement of moratorium cannot be adjusted by the bank against its dues, and the corporate debtor must be allowed to operate the account through the resolution process. The directions to restore and defreeze the account during moratorium were maintained. The cost imposed on the financial creditor was set aside.

---

---

Issues: (i) Whether the financial creditor could debit, appropriate, or otherwise recover amounts from the corporate debtor's account after commencement of moratorium, and whether the account had to be restored and defrozen during the moratorium period; (ii) whether the order imposing costs on the financial creditor was sustainable.

Issue (i): Whether the financial creditor could debit, appropriate, or otherwise recover amounts from the corporate debtor's account after commencement of moratorium, and whether the account had to be restored and defrozen during the moratorium period?

Analysis: Once an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is admitted and moratorium is declared, the financial creditor is required to lodge its claim before the resolution professional and cannot recover amounts from the corporate debtor's account by debit entries or encashment against its own dues during the moratorium. Any amount deposited in the account after commencement of moratorium could not be appropriated by the bank for adjustment of its dues. The interim view that the bank could not debit the account, and that the corporate debtor must be permitted to operate the account through the resolution professional, was affirmed.

Conclusion: The bank was not permitted to debit or appropriate amounts during the moratorium, and the directions to restore the account position and defreeze the account during the moratorium were maintained.

Issue (ii): Whether the order imposing costs on the financial creditor was sustainable?

Analysis: Although the statutory violation of moratorium justified interference with the bank's conduct, the appellate tribunal found no reason to sustain the penal consequence of cost imposed by the adjudicating authority in the circumstances of the case.

Conclusion: The cost of Rs. 25,000 was set aside.

Final Conclusion: The substantive moratorium-based directions were upheld, but the monetary penalty imposed as costs was removed, resulting in only partial success for the appellant.

Ratio Decidendi: After commencement of moratorium under the Insolvency and Bankruptcy Code, 2016, a financial creditor cannot unilaterally recover, debit, or appropriate amounts from the corporate debtor's account for its own dues, and claims must be pursued through the resolution process.

---