Respondents ordered to return funds withdrawn during Insolvency Process, face consequences for non-compliance

The National Company Law Tribunal, New Delhi, found the respondents in violation of Section 14 of the Insolvency and Bankruptcy Code by withdrawing funds during the Corporate Insolvency Resolution Process. The Tribunal directed the respondents to deposit the withdrawn amount of Rs. 32 lakhs with 12% interest per annum back into the Corporate Debtor's accounts within 21 days. Failure to comply would result in filing an affidavit of non-compliance. The judgment stressed adherence to IBC provisions, moratorium regulations, and protection of the Corporate Debtor's interests.

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Issues: Violation of Section 14 of the IBC, Non-compliance with depositing withdrawn amount, Direction to deposit amount with interest

In the judgment delivered by the National Company Law Tribunal, New Delhi, the issue revolved around the violation of Section 14 of the Insolvency and Bankruptcy Code (IBC) by the respondents. The Resolution Professional highlighted that during the Corporate Insolvency Resolution Process (CIRP), the respondents, as authorized signatories of the Corporate Debtor, withdrew significant amounts totaling approximately Rs. 32 lakhs in contravention of the moratorium declared under Section 14 of the IBC. Despite repeated opportunities and a specific application requesting the deposit of the withdrawn amount back into the accounts of the Corporate Debtor, the respondents failed to comply by neither filing a reply nor submitting an affidavit to address the issue.

The Tribunal, after considering the submissions made by the Resolution Professional and the Respondents, issued a directive to the respondents to deposit the entire amount of Rs. 32 lakhs, along with interest at the rate of 12% per annum from the date of withdrawal. The respondents were mandated to deposit this total sum into the accounts of the Corporate Debtor maintained by the Resolution Professional within a strict timeline of 21 days from the date of the order. Furthermore, the judgment required the Respondent(s) to file an affidavit of compliance in the Registry to confirm the deposit of the amount as directed.

Consequently, the Interlocutory Application (IA) presented before the Tribunal was deemed disposed of in accordance with the directives issued in the judgment. The decision emphasized the importance of upholding the provisions of the IBC, ensuring compliance with the moratorium regulations, and safeguarding the interests of the Corporate Debtor during the insolvency resolution process.

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