TaxTMI 
TaxTMI 
2025 (6) TMI 27
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....y Law Tribunal, Mumbai Bench-I) in M.A. No. 1833 of 2019 in CP (IB) No. 2295/MB/2018. By the impugned order, the Adjudicating Authority has allowed M.A. No. 1833 of 2019 filed by the Resolution Professional-Respondent No.1 and set aside certain transactions made by the Appellant and Respondent No.6 with Respondent Nos.2 to 5 and issued directions holding the Appellant and Respondent Nos. 2 to 6 to be jointly and severally liable for refunding the sums of money involved in the said transactions to the asset of the Corporate Debtor. The Adjudicating Authority has also directed that IBBI be kept informed for initiation of appropriate proceeding under Section 74(1) of IBC on the Appellant and Respondent No. 2 to 6 for having breached the moratorium provision. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- ex promoter of M/s. Sunil Hitech Engineering Ltd. 2. The brief facts in the present case which are necessary to be noticed for deciding the matter are as follows:- * M/s. Sunil Hitech Engineering Limited was admitted into Corporate Insolvency Resolution Process ('CIRP' in short) under Section 7 of IBC on 07.09.2018. The order ad....
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....phase included transactions during period of 10.09.2018 to 14.09.2018 while the second phase was for transactions during 27.09.2018 to 10.11.2018. While admitting that these transactions did happen, it was contended that these transactions were routinely done in the course of ordinary business and not done for purposes of unjust enrichment or personal gain of the Appellant or with any other malafide intention. 4. Explaining the background of the impugned transactions, it was pointed out that Respondent Nos. 2 to 5 were long term service providers/vendors of the Corporate Debtor who were having an ongoing and continuing contract with the Corporate Debtor and therefore entitled to receive their dues for the goods and services provided by them. Since the IRP took time to take over the management of the Corporate Debtor which happened on 14.09.2018, had the Appellant and Respondent No.6 not cleared the outstanding dues of these four vendors, the running of the Corporate Debtor as a going concern would have run the risk of facing an abrupt halt. Since these payments were made to further the objective of the IBC of keeping the Corporate Debtor running as a going concern, the Adjudicat....
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....ed out Respondent Nos. 2 to 5 to refund the amounts paid to them at a time when there were several other vendors/suppliers to whom payments had also been released but from whom refunds had not been sought. 7. Shri J. Rajesh, Ld. Advocate representing the Respondent No.1-RP rebutted the arguments canvassed by the Appellant to contend that the Appellant and Respondent No.6 had made these payments from the account of the Corporate Debtor after commencement of CIRP in contravention of Section 14(1)(b) of IBC which prohibits any payment to be made by the suspended management after commencement of CIRP. It was submitted that these payment transactions were made from the account of the Corporate Debtor in two phases. The first phase was between 10.09.2018 to 14.09.2018 and the second set of transactions occurred between 27.09.2018 to 10.10.2018. These transactions included the unauthorised payments made by the Appellant to Respondent Nos. 2 to 5 amounting to Rs 11.01 Cr. after commencement of CIRP. It was asserted that once the CIRP order is pronounced, the legal consequences flow from the date of pronouncement of such order. The operation of the order thus became effective from the da....
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....anner as laid down in section 16. (2) The public announcement referred to in clause (b) of sub-section (1) shall be made immediately after the appointment of the interim resolution professional. Section 14: Moratorium. 14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such proper....
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.... may be. 12. From a bare reading of the above statutory provisions, it becomes clear that as soon as an application of CIRP is admitted under Section 7, 9 or 10 of the IBC, it marks the commencement of insolvency. Section 13(1)(a) of the IBC stipulates that the Adjudicating Authority on admission of a Section 7, 9 or 10 application is inter alia required to impose a moratorium for the purposes referred to in Section 14 and appoint an IRP. In terms of Section 14 of IBC, moratorium kicks into effect as soon as the Corporate Debtor is admitted into CIRP proceedings. In other words, moratorium becomes enforceable from the date the CIRP application is admitted or as indicated in the said order. The provisions of moratorium inter-alia provides for a stand-still period during which Financial or Operational creditors cannot resort to individual debt enforcement action in respect of debts which had accrued during the period prior to commencement of CIRP proceedings. Once moratorium has been declared upon the admission of Sections 7, 9 or 10 application, it is not open for any Financial or Operational creditor to recover any amount from the account of the Corporate Debtor except by filing....
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.... notice that after commencement of CIRP on 07.09.2018, certain payment transactions were made from the account of the Corporate Debtor in two phases. The first phase was between 10.09.2018 to 14.09.2018 amounting to Rs 9.54 Cr. The details of these transactions have been placed at pages 127 to 138 of the Appeal Paper Book ("APB" in short). The second set of transactions which occurred between 27.09.2018 to 10.10.2018 amounted to Rs 6.80 Cr. as has been placed at page 139 of APB. These two sets of transactions aggregated to an amount of Rs 16.35 Cr. However, from out of these transactions, the RP had sought to set aside twelve payments only and these impugned transactions were made by the Appellant to Respondent Nos. 2 to 5 amounting to Rs 11.01 Cr. The rest of the payments amounting Rs 5.34 cr have been allowed as these were purportedly made towards workers dues, salaries, wages, statutory dues etc. 17. For sake of convenience, the impugned transactions made by the Appellant to Respondent Nos. 2 to 5 for which the RP had sought the directions of the Adjudicating Authority to be set aside is reflected in the chart of payments given below : S. No. Party Name ....
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....s and the chronology of the impugned transaction, we proceed to find out whether these impugned transactions made by the suspended management of the Corporate Debtor after commencement of CIRP were tenable within the statutory construct of IBC or were statutorily impermissible in view of provisions of moratorium as provided under Section 14 of IBC. 20. At the outset, it may be necessary to find out whether the impugned transactions were authorised by IRP. We notice that the RP had issued an email on 08.12.2019 to the IRP seeking confirmation as to whether these payments made by the Appellant and Respondent No.6 were authorised by IRP or not. In response, the IRP had clarified that all payments made by him had been duly approved by the CoC and all these CoC approved payments were disbursed by him only through the UCO Bank account. It is significant to note that the payments in the impugned transactions were made by Appellant and Respondent No. 6 not from UCO Bank account but from some HDFC Bank account of the Corporate Debtor. This clearly shows that the IRP had not authorised these payments. Moreover, we also notice that the Appellant had admittedly informed the IRP for the firs....
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....ard and not the actions of the officers of the Company. Therefore, the officers of the Company were completely justified in making the aforesaid payments. Further, the officers took direction from the erstwhile board of directors of the Company until the IRP took charge of the Company on September 14, 2019. The account was opened by the officers of the Company on the authority given by the board of directors of the Company and was being used in the routine operations of the Company. H. Further, as the Company had duly directed the officers of the Company to not make any payment without the permission of the Company, I am not liable under Section 66, Section 68 and Section 74 of the IBC. I have neither committed any act of fraud or concealment of property nor have I contravened the moratorium. I. In light of the aforesaid facts, I submit that I have not committed any violation of the IBC and the Admission Order and therefore request you to not initiate any proceeding against me in the NCLT as any such action against me is unfair and is totally unwarranted. Also, I hereby request you to have a meeting with me anytime next week as may be convenient to you, which may ....
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....um qua the Corporate Debtor, there shall be no transfer, encumbrance, alienation or disposal of the assets or any legal right or beneficial interests by the Corporate Debtor during the moratorium. Needless to add, the provisions of Section 14(1)(b) of IBC are very tightly framed with the reason that moratorium is declared to serve the purpose of keeping the assets of the Corporate Debtor together during the insolvency resolution process so as to facilitate the timely, orderly and efficient completion of the resolution process for revival of the Corporate Debtor. 25. Once moratorium is declared, the suspended management of the Corporate Debtor has to willy-nilly and mandatorily abide by this clear and express provision contained in the IBC statute and cannot raise grounds of exception to the applicability of Section 14(1)(b) of IBC. Merely by advocating the criticality of clearing payments in the ordinary course of business to make the Corporate Debtor continue running as a going concern cannot constitute sufficient mitigating circumstances for not giving effect to the statutory provisions of moratorium as contained in Section 14. Once declaration of moratorium after admission of....
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....nce the encashment of the cheques were post-moratorium, the Adjudicating Authority had concluded that the cheques were deliberately ante-dated only to conjure the impression that they were handed over before commencement of CIRP. We also find that the Adjudicating Authority arrived at this conclusion since nothing was explained by the Appellant as to why these cheques though issued prior to CIRP commencement date were kept on hold by Respondent Nos. 2 to 5 and encashed after the commencement of CIRP. 28. Assailing the above finding of the Adjudicating authority, the Appellant has relied on the judgment of this Tribunal in Pratim Bayal of Rajpratim Agencies Pvt. Ltd. Vs Tata Motors Finance Solutions Ltd. in CA(AT)(Ins.) No. 1309 of 2013 to contend that the date on which the cheque is handed over is the relevant date and the payment shall be treated to have been made on that date. It is also the case of the Appellant that the onus to explain why these cheques were encashed after moratorium is not on them but on the recipients. It has not escaped our attention that the Adjudicating Authority in the impugned order has already distinguished the facts of the present case with the Prat....
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....statutory provision of moratorium which precludes any such recovery, the cheques cannot be encashed after moratorium starts. Since no such arrangement is envisaged in the IBC and yet the amounts have been encashed, the RP in seeking recovery of the same is found to have acted well within the boundaries of the IBC. The recourse open to the Respondent Nos 2 to 5 is to file their claim before the RP/Liquidator in respect of such dues. 31. As noted by us already, the RP was in fact duty bound to recover the same and reappropriate the sums involved in the impugned transactions towards the assets of the Corporate Debtor. The Adjudicating Authority has therefore rightly set aside all the impugned transactions and directed Respondent Nos. 2 to 6 as well as Appellant to refund the amounts received by them within 30 days. 32. This brings us to the last limb of defence raised by the Appellant that the RP had not subjected payments made to some other similarly placed Operational Creditor/Vendors for reversal. On this ground, the impugned transactions should also be accorded similar treatment. We are not persuaded to accept any such line of argument of inequity arising out of differential....