2026 (3) TMI 759 - AT - IBC

Moratorium on assets bars unilateral set offs; refund ordered with interest from filing date until payment.

Tribunal jurisdiction under Section 60(5)(c) is affirmed: questions of law or fact arising from CIRP and an approved resolution plan fall within its ... Overriding effect of the Insolvency and Bankruptcy Code - jurisdiction of the National Company Law Tribunal under Section 60(5)(c) - shares as assets of the corporate debtor protected during CIRP - violation of moratorium by unauthorised adjustmentsJurisdiction of the National Company Law Tribunal under Section 60(5)(c) - overriding effect of the Insolvency and Bankruptcy Code - Scope of NCLT's jurisdiction to entertain the SRA's application against a Multi State Cooperative Bank which had filed claims in the CIRP - HELD THAT: - The Tribunal held that a Multi State Cooperative Society falls within the inclusive statutory definition of 'person' under the Code and therefore is not outside the IBC's scope. Section 238 gives the Code overriding effect so that Section 121 of the Multi State Cooperative Societies Act (which makes Companies Act provisions inapplicable) does not exclude applicability of the IBC or oust the NCLT's jurisdiction. Since the appellant had itself filed and had an admitted claim in the CIRP, it could not contend that the adjudicating authority lacked jurisdiction. The adjudicating authority therefore had jurisdiction under Section 60(5)(c) to decide questions arising out of or in relation to the insolvency proceedings of the corporate debtor. [Paras 11, 12, 13, 14, 21]NCLT possessed jurisdiction under Section 60(5)(c) to entertain and decide the application notwithstanding Section 121 of the Multi State Cooperative Societies Act, 2002.Shares as assets of the corporate debtor protected during CIRP - violation of moratorium by unauthorised adjustments - Whether adjustments by the appellant of dividends/value of shares during CIRP and after plan approval were impermissible and whether such shares constituted assets of the corporate debtor - HELD THAT: - The Tribunal accepted the adjudicating authority's finding that the shares held by the corporate debtor (reflected in the Information Memorandum) were assets of the corporate debtor. Adjustments/unilateral set offs of dividends and share value made during the CIRP period and post plan were found to be violative of the moratorium and the protection afforded to assets under the Code. Those payments/adjustments therefore had to be refunded. [Paras 6, 13, 14]The adjustments/set offs effected by the appellant were in violation of the moratorium and the shares qualified as assets of the corporate debtor; refund was warranted.Violation of moratorium by unauthorised adjustments - Relief and interest on the refund ordered by the adjudicating authority - HELD THAT: - The appellate Tribunal upheld the adjudicating authority's direction to refund the aggregated amount but modified the operative date for interest. While the adjudicating authority had directed interest from each respective adjustment date, the Tribunal held that interest on the refund should run from the date of filing of the SRA's application and substituted the rate/order to award interest at 10% per annum from that filing date until payment, with payment to be made within 45 days. [Paras 22, 23, 24]Refund of the amount directed, with 10% per annum interest from the date of filing of the application (04.03.2025) until payment, to be paid within 45 days; rest of the adjudicating authority's order upheld.Final Conclusion: The appeal is partly allowed: the Tribunal affirmed NCLT's jurisdiction under the IBC, agreed that the shares were assets and that the appellant's adjustments violated the moratorium, and modified the interest direction so refund bears 10% p.a. interest from the date of filing of the SRA's application until payment, with the balance of the adjudicating authority's order upheld. Issues: (i) Whether the adjudicating authority/Tribunal has jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to entertain the application post-approval of the resolution plan; (ii) Whether the adjustments/set-offs effected by the appellant from the share/dividend account aggregating Rs. 56,00,000/- during CIRP and post-plan violated the moratorium under Section 14 and/or the extinguishment provisions under Section 32A, and whether the shares are assets of the corporate debtor; (iii) What reliefs are to be granted, in particular whether refund with interest is payable and from which date.Issue (i): Whether the Tribunal has jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to decide the application arising out of the CIRP and approved resolution plan.Analysis: Section 60(5)(c) confers jurisdiction on the National Company Law Tribunal over questions of law or fact arising out of or in relation to insolvency resolution or liquidation proceedings. The definition of 'person' in Section 3(23) of the Insolvency and Bankruptcy Code, 2016 includes entities established under a statute, bringing Multi-State Cooperative Societies within the Code's scope when they participate in CIRP. Section 238 of the Insolvency and Bankruptcy Code, 2016 gives the Code overriding effect over other laws. The appellant filed and got its claim admitted in the CIRP, participated in the process, and received payments under the resolution plan. The question raised by the successful resolution applicant arises from the CIRP and the approved plan, engaging Section 60(5)(c). Prior exclusive dispute-resolution provisions in the Multi-State Cooperative Societies Act, 2002 (such as Section 84 or exclusions of Companies Act applicability under Section 121) do not oust the Code where matters arise in relation to CIRP and fall within Section 60(5)(c).Conclusion: In favour of the respondent on this issue; the Tribunal has jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to entertain and decide the application arising out of the CIRP and approved resolution plan.Issue (ii): Whether the adjustments/set-offs from the share/dividend account during CIRP and post-plan violated the moratorium under Section 14 and/or the extinguishment provisions under Section 32A, and whether the shares are assets of the corporate debtor.Analysis: The shares and dividends attributable to the corporate debtor were recorded in the Information Memorandum and constitute assets for purposes of CIRP under Section 18 read with Section 3(37) of the Insolvency and Bankruptcy Code, 2016, subject to exceptions in the Explanation to Section 18. Adjustments made by the appellant of dividends and share value during the CIRP and after plan approval reduced assets and receipts belonging to the corporate debtor. Section 14 moratorium restricts actions that interfere with corporate debtor assets during CIRP. Where adjustments amount to unilateral appropriation of sums due to the corporate debtor during the moratorium or in breach of the entitlements recognized in CIRP, they contravene the moratorium and the protective scheme of the Code. The adjudicating authority found the adjustments of Rs. 56,00,000/- violative of the moratorium and treated the shares and dividends as assets of the corporate debtor; that finding was supported by the record of dividends and by the appellant's participation in CIRP without declaring mutual credits or security over the shares.Conclusion: In favour of the respondent on this issue; the adjustments/set-offs aggregating Rs. 56,00,000/- violated the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 and the shares/dividends qualify as assets of the corporate debtor for the purposes of CIRP.Issue (iii): What reliefs are to be granted, specifically whether the appellant must refund Rs. 56,00,000/- with interest and from which date.Analysis: The adjudicating authority directed refund of Rs. 56,00,000/- with 10% per annum interest from the respective adjustment dates. The Tribunal found the refund direction appropriate but held that interest should run from the date of filing of the SRA's application (04.03.2025) rather than from each respective earlier adjustment date. The adjudicating authority's other directions, including denial of relief on Prayer (B), were examined and upheld where not inconsistent with the Code and precedent relied upon.Conclusion: Partly in favour of the appellant on this issue; the refund of Rs. 56,00,000/- is directed with interest at 10% per annum, but interest is to be calculated from 04.03.2025 until payment, and payment is to be made within 45 days. The rest of the adjudicating authority's order dated 30.10.2025 is upheld.Final Conclusion: The appeal is partly allowed to the limited extent of modifying the interest commencement date for the refund; the adjudicating authority's finding that the Tribunal has jurisdiction, that the shares/dividends were assets of the corporate debtor, and that the adjustments violated the moratorium is affirmed, with the refund and interest direction adjusted as stated.Ratio Decidendi: The Insolvency and Bankruptcy Code, 2016 has overriding effect over conflicting statutory provisions; Section 60(5)(c) empowers the Tribunal to decide questions of law or fact arising out of or in relation to CIRP, and adjustments of assets or receipts belonging to the corporate debtor in breach of the moratorium under Section 14 constitute wrongful appropriation entitling the resolution applicant to refund with interest.