Moratorium under insolvency law governs encashed bank guarantee proceeds retained pending final entitlement.

Amount realised on encashment of a bank guarantee, once the guarantee had ceased to exist, was treated as an asset of the corporate debtor because entitlement had not yet been finally determined and the sum had been furnished only as security in arbitration. The moratorium under the Insolvency and Bankruptcy Code was therefore already operating, so the retained amount and accrued interest could be dealt with only under orders passed in the insolvency proceedings. Section 14(3)(b) did not apply on the facts. The direction to keep the amount with the Registrar General subject to the insolvency process was upheld, and the challenge failed.

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Issues: Whether the amount realised on encashment of the bank guarantee, kept with the Registrar General, could be made subject to orders in the corporate insolvency proceedings and whether Section 14(3)(b) of the Insolvency and Bankruptcy Code, 2016 excluded such treatment.

Analysis: The amount was encashed and retained after the bank guarantee itself had ceased to exist. On that date, the amount remained an asset of the corporate debtor and not of the appellant, since it had been furnished as security in the arbitration proceedings and the entitlement to it had not yet been finally determined. In these circumstances, the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 was already operating, and the retained amount together with accrued interest could properly be dealt with only in accordance with the orders passed in the insolvency proceedings. The exception in Section 14(3)(b) did not assist the appellant on the facts.

Conclusion: The challenge failed. The direction that the amount be retained with the Registrar General subject to the insolvency proceedings was upheld, and the appeal was dismissed.

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