TaxTMI 
TaxTMI 
NCLAT Reiterates in Indian Bank v. Anshul Gupta That Tax Refunds During CIRP Form Part of the Corporate Debtor’s Estate
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....CLAT Reiterates in Indian Bank v. Anshul Gupta That Tax Refunds During CIRP Form Part of the Corporate Debtor’s Estate<br>By: - Abhay Singh<br>Corporate Laws / IBC / SEBI<br>Dated:- 15-7-2025<br>The National Company Law Appellate Tribunal (NCLAT), in its judgment dated 8th July 2025 in Indian Bank Versus Anshul Gupta, Liquidator Topsgroup Services & Solutions Ltd. - 2025 (7) TMI 570 - NATIO....
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....NAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB, Liquidator of Topsgroup Services & Solutions Ltd., has held that a bank cannot withhold any amount received during the Corporate Insolvency Resolution Process (CIRP). Once CIRP has begun, all funds and assets of the corporate debtor must be under the control of the Resolution Professional (RP). Anyone who has been regularly prac....
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....ticing before the NCLT knows this is a recurring issue. Often, when any third party (like a bank, government authority, or other institution) receives money on behalf of the corporate debtor during CIRP, they tend to withhold it, forcing the RP to file multiple applications just to recover what is legally part of the insolvency estate. In a Nutshell: What the Judgment Was About In two clubbed ap....
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....peals filed by Indian Bank, the NCLAT upheld the earlier order of the National Company Law Tribunal (NCLT), Mumbai, directing the bank to transfer a sum of ? 4.65 crores, received as an Income Tax refund, to the liquidation account of the corporate debtor, Topsgroup Services & Solutions Ltd. The appeals were dismissed, and the Appellate Tribunal made it clear: compliance with the IBC framework is ....
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....mandatory. Background: The Insolvency and the Dispute The insolvency process against Topsgroup Services & Solutions Ltd. was initiated on 19th February 2021 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). Upon commencement, a moratorium under Section 14 came into effect, freezing all recovery and enforcement actions against the corporate debtor and placing all its assets and r....
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....eceivables under the RP's control. In June 2021, during this moratorium period, Indian Bank, where the company held a current account, received an Income Tax refund of ?4,65,58,425.87 on behalf of the company. However, instead of transferring it to the designated CIRP account (maintained with Yes Bank), Indian Bank withheld the refund, claiming it had a security interest under a hypothecation ag....
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....reement covering all receivables, including government refunds. The Legal Proceedings Frustrated by the bank's refusal, the RP filed I.A. No. 2967/2021 before the NCLT, requesting directions to the bank to transfer the amount to the CIRP account. Despite receiving notice, Indian Bank did not appear before the Tribunal. On 20th December 2022, the NCLT allowed the application and directed the ban....
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....k to transfer the amount to the CIRP account which later became the liquidation account after liquidation commenced on 21st September 2022. Despite the NCLT"s clear directions, Indian Bank still did not transfer the funds. As a result, the Liquidator filed I.A. No. 2074/2023, a contempt application alleging wilful disobedience of judicial orders. In response, Indian Bank filed I.A. No. 2481/2023....
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...., seeking recall of the earlier NCLT order, claiming that the order was passed ex-parte due to an internal communication lapse between its branches. It reiterated that it had a secured claim on the funds and was therefore not obliged to transfer them. Observations made by the Hon'ble NCLAT The Tribunal reaffirmed that once CIRP begins, all assets and receivables of the corporate debtor inclu....
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....ding tax refunds fall under the RP's authority. The refund was received during the moratorium, and thus formed part of the estate of the corporate debtor. Even if the refund fell under "receivables" as defined in the hypothecation agreement, that did not grant the bank any right to withhold it. The appropriate process for a secured creditor is to either relinquish or enforce its security under th....
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....e IBC not to self-appropriate or delay transfers. The bank did not dispute receiving the notice of the RP's application. It merely claimed the notice "went unnoticed" at the branch level. The Tribunal observed that administrative oversight does not excuse non-compliance with a court order. Indian Bank objected to transferring the funds to a private sector bank account (Yes Bank) and insisted it ....
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....should be to a public sector bank. The Tribunal rightly held that the RP has full authority to decide where the funds should go, and the bank has no say in this matter. JUDGEMENT The NCLAT dismissed both appeals filed by Indian Bank and upheld the orders of the NCLT: * Indian Bank must immediately transfer ?4.65 crores to the liquidation account. * The Liquidator is free to initiate contempt....
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.... proceedings if the bank fails to comply. * The bank's claim as a secured creditor will be considered as per law by the Liquidator but that does not justify unilateral withholding of funds received during CIRP.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....