Insolvency moratorium overrides criminal court relief on corporate debtor funds; bank account access required prior restitution.

Once moratorium under the Insolvency and Bankruptcy Code commenced, the corporate debtor's assets, including bank balances, came under the control of the resolution professional and could not be dealt with in a manner inconsistent with Section 14. The Court held that an order under Section 482 CrPC could not permit lifting of lien or operation of bank accounts where the disputed transfer had occurred after commencement of insolvency proceedings. It further held that the respondent could not operate its account without first restoring the transferred amount to the corporate debtor, while leaving any civil or other claims to be pursued in the appropriate forum. The interim relief was modified accordingly.

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Issues: (i) Whether an order passed under Section 482 of the Code of Criminal Procedure, 1973 could permit operation of bank accounts and lifting of lien where the corporate debtor was under moratorium under the Insolvency and Bankruptcy Code, 2016 and the disputed transfer had been made after commencement of the insolvency process. (ii) Whether the direction allowing the respondent to operate its account could stand without requiring restoration of the amount transferred from the corporate debtor's account.

Issue (i): Whether an order passed under Section 482 of the Code of Criminal Procedure, 1973 could permit operation of bank accounts and lifting of lien where the corporate debtor was under moratorium under the Insolvency and Bankruptcy Code, 2016 and the disputed transfer had been made after commencement of the insolvency process.

Analysis: Once the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was admitted, moratorium under Section 14 came into force and the management of the corporate debtor vested in the resolution professional under Sections 17 and 23(2). The statutory scheme prohibits transfer or encumbrance of the corporate debtor's assets, including money lying in bank accounts, save to the extent permitted by the Code. Section 14(2) preserves essential supplies and Section 14(2A) permits continuance of critical goods or services only to the extent the resolution professional considers them necessary to preserve value and manage the corporate debtor as a going concern. The impugned order was found to overlook these limits and to countenance a result inconsistent with the statutory moratorium.

Conclusion: The order could not be sustained insofar as it permitted lifting of lien and operation of the accounts in a manner inconsistent with the moratorium and the control of the resolution professional.

Issue (ii): Whether the direction allowing the respondent to operate its account could stand without requiring restoration of the amount transferred from the corporate debtor's account.

Analysis: The disputed payment of Rs. 32.50 lakhs had been made from the corporate debtor's account after the insolvency process had commenced. The Court held that the respondent could not be allowed to operate the account without first restoring that amount to the corporate debtor's account. At the same time, the Court clarified that the respondent's civil or other claims regarding entitlement to that sum could still be pursued in the appropriate forum in accordance with law, and that the order would not determine the merits of the FIR or the proceedings under Section 482.

Conclusion: The respondent was required to remit Rs. 32.50 lakhs to the corporate debtor before operating its account, and the interim relief was modified accordingly.

Final Conclusion: The appeal succeeded by modifying the High Court's interim relief to conform with the insolvency moratorium and the control of the resolution professional, while leaving the criminal and restitutionary controversies open for decision in the appropriate proceedings.

Ratio Decidendi: Once moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates, a court cannot use its inherent criminal jurisdiction to sanction dealings with the corporate debtor's assets in a manner that undermines the statutory control of the resolution professional; any relief affecting such assets must remain consistent with the Code.

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