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of <h1>NCLAT quashes order, directs bank to hold funds, parties may seek High Court guidance</h1> <h3>Canara Bank Versus Valecha Engineering Ltd.</h3> The NCLAT quashed the Impugned Order, directing the bank to hold the appropriated amount and allowing both parties to seek further directions from the ... Winding up proceedings - Section 73(4) of the Companies Act, 2013 - tax refund of TDS - HELD THAT:- By the Impugned Order under the Companies Act in a Petition pending under Section 73(4) of the Companies Act, 2013, the NCLT could not have passed such Order directing the Bank to reverse the entry when the bank claims that it had dues of more than ₹ 30 Crores which were to be recovered from the Respondent Company. There appears no source of power giving jurisdiction to give such direction to the Bank in the facts of this matter. According to us, this Order needs to be set aside. The Impugned Order is quashed and set aside and the Canara Bank is directed to hold the amount of ₹ 15.41 Crores, which is said to have been appropriated from the account of Respondent Company, in interest bearing Account - Appeal disposed off. Issues:1. Application under Section 73(4) of the Companies Act, 2013 for repayment of fixed deposits.2. Legality of passing an order directing the bank to reverse an entry in the context of pending winding-up proceedings.3. Jurisdiction of the NCLT to issue directions to the bank in the absence of legal basis.Analysis:1. The judgment pertains to an Application under Section 73(4) of the Companies Act, 2013 filed by fixed deposit holders against a company seeking repayment of their fixed deposits. The Respondent Company had filed an application claiming that a bank had appropriated a significant amount towards its outstanding dues and intended to utilize the remaining amount to repay the fixed deposit holders. The NCLT passed an order directing the bank to refund the appropriated amount to a specific account for repayment to the fixed deposit holders.2. The Appellant argued that the Respondent, against whom winding-up proceedings were initiated, should not have been allowed to move the NCLT with the said application while winding-up proceedings were ongoing. The High Court had previously ordered the winding up of the Respondent Company, which was stayed pending appeal. The effect of the Companies Act, 2013, particularly Section 283, was highlighted in this context.3. The NCLAT, after considering the arguments from both sides, concluded that the NCLT did not have the jurisdiction to pass an order directing the bank to reverse the entry in the given circumstances. The bank claimed outstanding dues exceeding the amount in question, and there was no legal basis for the NCLT to issue such directions. Consequently, the Impugned Order was set aside, and the bank was directed to hold the appropriated amount in an interest-bearing account until further directions were obtained from the High Court regarding the winding-up proceedings.In conclusion, the NCLAT quashed the Impugned Order, directing the bank to hold the appropriated amount and allowing both parties to seek further directions from the High Court. The judgment emphasized the importance of legal basis and jurisdiction in issuing directions in such matters, particularly in the context of pending winding-up proceedings.
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