Moratorium under the Insolvency and Bankruptcy Code bars tax recovery from a corporate debtor's account and requires refund of sums recovered.

During an operative moratorium under section 14 of the Insolvency and Bankruptcy Code, recovery proceedings and execution against a corporate debtor are barred, including tax recovery efforts for pre-CIRP dues. A tax notice seeking recovery from the debtor's bank account under the Gujarat Value Added Tax Act was therefore inconsistent with the insolvency regime. The Code's overriding effect under section 238 was applied to displace conflicting recovery mechanisms under other laws, and the fact that the claim had already been admitted in the insolvency process reinforced that recovery had to proceed within the Code. The amount recovered was consequently directed to be refunded to the corporate debtor's account.

---

---

Issues: Whether the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 barred recovery of tax dues from the corporate debtor during the continuing insolvency process, and whether the amount recovered from the corporate debtor's bank account was liable to be refunded.

Analysis: The application was founded on the continuing operation of the corporate insolvency resolution process and the statutory moratorium. A tax recovery notice issued under the Gujarat Value Added Tax Act sought payment from the corporate debtor's account for pre-CIRP dues. The Tribunal held that section 14(1)(a) prohibits continuation of proceedings and execution of orders against the corporate debtor, and that section 238 gives the Code overriding effect over inconsistent provisions of other laws. On that basis, the recovery action was found to be barred by the moratorium. The Tribunal also noted that the claim had already been admitted in the insolvency process, and that recovery outside the Code was inconsistent with the distribution scheme under the Code.

Conclusion: The recovery action was held to be impermissible during moratorium, and the amount recovered was directed to be refunded to the corporate debtor's account.

Ratio Decidendi: During an operative moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016, recovery proceedings and execution against the corporate debtor are barred, and any inconsistent recovery mechanism under another law yields to the Code by virtue of section 238.

---