Unauthorised dealing with estate property: proceeds treated as estate funds and ordered restored to preserve creditor interests.

Unauthorised dealing with estate property during moratorium that produced receipt by related parties was treated as proceeds of the liquidation estate and ordered restored; the tribunal applied principles permitting summary restorative relief under the insolvency framework to protect creditor interests and preserve the liquidation estate. The tribunal emphasised timing and conduct of allegations, the absence of contemporaneous criminal proceedings, and close related party nexus as weakening the defence that the receipt was an independent unsecured loan, and upheld the deposit order with interest into the liquidation estate.

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Issues: Whether the Adjudicating Authority was justified in directing the appellants to deposit Rs. 1 crore with interest into the liquidation estate on the basis that the sum received by the appellant company was part of sale consideration for estate property sold during liquidation without the authority of the Liquidator.

Analysis: The Tribunal examined the factual matrix showing (i) commencement of CIRP and liquidation of the corporate debtor prior to the alleged Agreement to Sell dated 13.12.2019, (ii) receipt of Rs. 1 crore by the appellant company on the date of the Agreement, and (iii) close family and business nexus between the corporate debtor's promoter and the appellant entities, indicating that the transaction affected the liquidation estate. The Tribunal considered the scope of Sections 60(5), 33 and 66 of the Insolvency and Bankruptcy Code, 2016 and authorities on what issues are suitable for summary treatment in insolvency proceedings. It noted that the Adjudicating Authority did not decide criminal guilt or finally determine forgery; rather it addressed whether an unauthorised dealing with estate property during moratorium resulted in monies that ought to be restored to the liquidation estate. The timing, conduct, and belatedness of allegations of forgery and the absence of contemporaneous criminal proceedings weakened the appellants' defence that the amount was an independent unsecured loan. The Tribunal found the Adjudicating Authority's restorative approach, to protect creditor interests and preserve the liquidation estate, legally sustainable within the Code's framework.

Conclusion: The impugned direction to deposit Rs. 1 crore with interest into the liquidation estate is upheld and the appeal is dismissed; the decision is in favour of the Respondent (liquidator).

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