Punjab National Bank Violated Insolvency Code by Debiting During Moratorium: Tribunal Orders Account Credit

The Tribunal found that Punjab National Bank violated Section 14 of the Insolvency and Bankruptcy Code by appropriating amounts during the moratorium period. The Tribunal directed the bank to credit specific sums to the Corporate Debtor's Account for amounts debited during the Corporate Insolvency Resolution Process for honoring pre-CIRP LCs. Future issuance of LCs during the CIRP must comply with conditions set by the bank and directives from the IRP/RP in consultation with the CoC.

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Issues:
- Violation of Section 14 of the Insolvency and Bankruptcy Code, 2016 by a Financial Creditor during the moratorium period.
- Appropriation of amounts by the Financial Creditor (Punjab National Bank) during the moratorium period.
- Dispute over the credit of certain amounts to the Corporate Debtor's Account.
- Interpretation of legal provisions regarding moratorium and creditor actions during the Corporate Insolvency Resolution Process (CIRP).

Violation of Section 14 of the Insolvency and Bankruptcy Code:
The Applicant, a Corporate Debtor, filed an application alleging that the Respondent, Punjab National Bank, violated Section 14 of the Insolvency and Bankruptcy Code by appropriating amounts during the moratorium period. The Applicant sought the recovery of these amounts, citing precedents emphasizing the prohibition on financial creditors from recovering any dues from the Corporate Debtor during the moratorium.

Appropriation of Amounts by the Financial Creditor:
The Applicant detailed various transactions where the Respondent, Punjab National Bank, had appropriated significant amounts during the moratorium period, despite the legal restrictions imposed by the Insolvency and Bankruptcy Code. The Applicant highlighted specific instances of appropriation, including LC payments and GST refunds, seeking a direction for the return of these amounts to the Corporate Debtor's Account.

Dispute Over Credit of Amounts:
The application involved a dispute over the credit of specific amounts to the Corporate Debtor's Account, operated by the Resolution Professional. The Applicant requested the Respondent, Punjab National Bank, to credit certain sums, including funds recovered for LCs honored before and during the Corporate Insolvency Resolution Process, as well as a GST refund received during the CIRP period.

Interpretation of Legal Provisions during CIRP:
The Respondent, Punjab National Bank, contended that certain transactions were necessitated to maintain the Corporate Debtor as a going concern during the CIRP period. The Respondent argued that actions taken were in compliance with directions from the NCLAT and the IRP, emphasizing the need for fresh LCs and adherence to banking guidelines. The Tribunal examined the material presented and concluded that the Respondent's actions contravened Section 14 of the IBC, directing the credit of appropriated amounts to the Corporate Debtor's Account.

Conclusion:
The Tribunal allowed the application to the extent of amounts debited during the CIRP for honoring pre-CIRP LCs, directing the Punjab National Bank to credit specific sums to the Corporate Debtor's Account. The judgment clarified that any future issuance of LCs during the CIRP must adhere to conditions imposed by the Respondent and directives from the IRP/RP in consultation with the CoC.

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