Supreme Court Orders Banks to Reverse Improper Credits in Corporate Insolvency Process The Supreme Court, upholding decisions by lower courts, directed multiple banks to reverse specific amounts credited during the Corporate Insolvency ...
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Supreme Court Orders Banks to Reverse Improper Credits in Corporate Insolvency Process
The Supreme Court, upholding decisions by lower courts, directed multiple banks to reverse specific amounts credited during the Corporate Insolvency Resolution Process. The Resolution Professional's application to reverse bank appropriations of receivables was successful, with the Adjudicating Authority ordering Central Bank of India, Syndicate Bank, Bank of India, and State Bank of India to reconcile outstanding balances and reverse due amounts within five weeks. The banks' actions during the CIRP were scrutinized, emphasizing the need for proper appropriation of funds towards the loan accounts of the Corporate Debtor.
Issues: Unilateral appropriation of receivables by banks during Corporate Insolvency Resolution Process.
Analysis: 1. The Resolution Professional filed an application under Section 14, 17, and 60(5) of the Insolvency and Bankruptcy Code against four banks for appropriating receivables of the Corporate Debtor. The NCLT, NCLAT, and Supreme Court upheld the initiation of the Corporate Insolvency Resolution Process and the subsequent Resolution Plan approval.
2. The application aimed to reverse the appropriation of payments made by the banks during the Corporate Insolvency Resolution Process. The respondents claimed that some payments were made by the Resolution Professional and not appropriated towards the loan due of the Corporate Debtor, citing the judgment in "Indian Overseas Bank Vs. Mr. Dinkar T. Venkatsubramaniam."
3. The Adjudicating Authority directed a meeting between the Resolution Professional and the respondents to reconcile the outstanding amounts. The lenders had credited amounts towards the loan accounts of the Corporate Debtor during the CIRP period.
4. The banks provided details of the outstanding balances as per the claim form, showing that amounts were credited towards the loan accounts of the Corporate Debtor during the CIRP period.
5. The Central Bank of India, Bank of India, and State Bank of India presented their positions regarding the outstanding amounts and the actions taken during the CIRP, emphasizing the non-appropriation of funds by the banks.
6. The Resolution Professional submitted a table indicating the amounts to be reversed by each bank, which was not agreed upon during the meeting. The Adjudicating Authority directed the banks to reverse specific amounts credited during the moratorium period.
7. The Order directed Central Bank of India, Syndicate Bank, Bank of India, and State Bank of India to reverse due amounts within five weeks, based on the reconciliation of outstanding balances and payments made during the Corporate Insolvency Resolution Process.
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