Moratorium period fund withdrawals require direct proof of personal diversion; operational payments alone do not establish breach.

Under the Insolvency and Bankruptcy Code moratorium, alleged debits from a corporate debtor's bank accounts did not, by themselves, prove unauthorised diversion of funds. The record showed both credits and debits during the insolvency period, and the payments were supported as doctors' fees, staff salary and vendor payments made to keep the hospital operating as a going concern during the pandemic. In the absence of direct evidence that the disputed sums were transferred into the respondent's personal account, personal diversion was not established. Restoration of funds and punitive relief were therefore rejected.

---

---

Issues: Whether the respondent had unauthorisedly withdrawn or diverted the corporate debtor's funds during the moratorium period in violation of the Insolvency and Bankruptcy Code, 2016, so as to warrant restoration of the amount and punitive action.

Analysis: The application arose out of alleged debits from the corporate debtor's bank accounts after commencement of the corporate insolvency resolution process. The relevant legal position under Section 14 of the Insolvency and Bankruptcy Code, 2016 is that a moratorium operates from the insolvency commencement date, but the record showed that the accounts had both debits and credits during the relevant period. The materials produced indicated that payments were made towards doctors' fees, staff salary and vendor payments in the context of keeping the hospital operational as a going concern during the pandemic. The applicant did not produce direct evidence of transfer of the disputed amounts into the respondent's personal account, and the bank statements did not establish personal diversion of funds.

Conclusion: The allegation of personal diversion of corporate debtor funds was not proved, and no violation warranting restoration or punishment was made out.

Final Conclusion: The application seeking restoration of funds and penal action failed, and the proceedings were disposed of by rejecting the reliefs claimed.

Ratio Decidendi: In the absence of direct evidence of personal diversion, transactions undertaken to keep the corporate debtor running as a going concern during moratorium are not enough by themselves to establish a breach warranting restoration or punishment.

---