TaxTMI 
TaxTMI 
2026 (1) TMI 1086
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....Subhash Chandra Mishra has given personal guarantee for Corporate Debtor- M/s. Niroz Insulations Pvt. Ltd. and M/s. Triveni Agrotraders Pvt. Ltd. The Appellant filed an application under Section 94(1) for initiating personal insolvency against the Appellant with respect to amount of Rs. 5,35,53,097/-. The Adjudicating Authority appointed a Resolution Professional who submitted report on the basis of which order was passed admitting Section 94 application. Resolution Professional prepared list of creditors. Repayment plan was placed before the creditors which plan was rejected by the creditors. Adjudicating Authority vide order dated 05.01.2024 rejected the Resolution Plan and permitted the Applicant to file application for initiation of bankruptcy process. CP No.(IB)- 27/122/JPR/2024 was filed by the Appellant seeking initiation of bankruptcy against the Applicant/personal guarantor which application came to be allowed by the Adjudicating Authority vide order dated 06.11.2024. The Respondent No.1 was appointed as Bankruptcy Trustee. Consequential orders were also passed by the Adjudicating Authority. Bankruptcy Trustee after having been appointed directed the Bank to freeze the acc....
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....Bankrupt aggrieved by the said order has come up in this Appeal. On 11.09.2025, following order was passed by this Tribunal:- "11.09.2025: Respondents dasti. Issue notice. Appellant is also permitted to serve both the Appellant is also permitted to file an Additional Affidavit. Let Reply be filed by the Respondents within three weeks. List this appeal on 07.10.2025. In the meantime, we permit the appellant to approach the Bankruptcy Trustee praying for transfer of particular amount supported by necessary document to justify the withdrawal of the amount, which may be considered by the Bankruptcy Trustee and appropriate instructions may be given to the Bank." 2.4. A reply has been filed to the Appeal by the Bankruptcy Trustee. An additional-affidavit has also been filed by the Appellant on 13.11.2025. An additional affidavit dated 06.11.2025 has also been filed by the Appellant. 3. Learned Counsel for the Appellant challenging the order impugned submits that the amount lying in the bank account of the Appellant were amount which amount was sent by Appellant's daughter and other members of the family and friends which amount cannot be said to ....
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....aid money has rightly been taken into custody/ control by the Respondent for distribution to the creditors. Adjudicating Authority by the impugned order has rightly dismissed the application. The judgment relied by the Appellant in "P. Veerasamy vs. Official Assignee High Court, Madras" (supra) is not applicable. The said judgment relates to the provisions of the Presidency Towns Insolvency Act, 1909. Under the IBC Code, there is no provisions exist, which allows the Bankruptcy Trustee to pay money to the bankrupt from the money lying the bank account of the bankrupt. 5. We have considered the submissions of the Counsel for the parties and perused the record. 6. Before we proceed to enter into respective submissions of the parties, certain provisions of the IBC relating to bankruptcy need to be noticed. Bankruptcy order is contemplated under Section 126 of the IBC. In the present case bankruptcy order was passed on 06.11.2024. Section 128 of the IBC provides for 'effect of bankruptcy order' which is as follows:- "128. Effect of bankruptcy order. - (1) On the passing of the bankruptcy order under section 126, - (a) the estate of the bankrupt shall vest in the....
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....s follows:- "155. Estate of bankrupt. - (1) The estate of the bankrupt shall include, - (a) all property belonging to or vested in the bankrupt at the bankruptcy commencement date; (b) the capacity to exercise and to initiate proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the bankrupt for his own benefit at the bankruptcy commencement date or before the date of the discharge order passed under section 138; and (c) all property which by virtue of any of the provisions of this Chapter is comprised in the estate. (2) The estate of the bankrupt shall not include - (a) excluded assets; (b) property held by the bankrupt on trust for any other person; (c) all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund; and (d) such assets as may be notified by the Central Government in consultation with any financial sector regulator." 10. One more relevant provision to be noticed is Section 159 which deals with 'after-acquired property of bankrupt'. Section 159 is as follows:- "159. After-acqu....
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....property of the insolvent or of any part thereof, or to carry on the trade (if any) of the insolvent, for the benefit of his creditors, and in any other respect to aid in administering the property in such manner and on such terms as the official assignee may direct. (2) Subject as aforesaid, the Court may, from time to time, make such allowance as it thinks just to the insolvent out of his property, for the support of the insolvent and his family, or in consideration of his services, if he is engaged in winding up his estate, but any such allowance may at any time be varied or determined by the Court." 12. Section 75(2) empowers the Court from time to time, make such allowance as it thinks just to the insolvent out of his property, for the support of the insolvent and his family. In 'The Provincial Insolvency Act, 1920', Section 66 also contained provision 'management by and allowance to insolvent'. Section 66 of the Act is as follows:- "66. Management by and allowance to insolvent.-(1) The Court may appoint the insolvent himself to superintend the management of the property of the insolvent or of any part thereof, or to carry on the trade (if any) of the inso....
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....idered as to whether the said amount lying in the account is part of the assets of bankrupt and whether the amount can be held to be covered by excluded assets within the meaning of Section 79(14)(b) of the Code. 16. Bankruptcy order was passed against the Appellant on 06.11.2024. Section 128 deals with 'effect of bankruptcy order'. By virtue of Section 128 on the passing of the bankruptcy order, the estate of the bankrupt shall vest in the bankruptcy trustee. Section 154 provides that the estate of the bankrupt shall vest in the bankruptcy trustee immediately from the date of his appointment. Bankruptcy trustee is appointed by the same order dated 06.11.2024 by which bankruptcy commenced. Section 155 deals with the 'estate of the bankrupt'. Sub-section (1) of Section 155 provides that the estate of the bankrupt includes all property belonging to or vested in the bankrupt at the bankruptcy commencement date. The expression of 'property' is defined in Section 3(27) which contains a very vide definition. Amount lying in the bank account of the Appellant is clearly property of the Appellant which amount shall stand vested in the bankruptcy trustee on passing of the bankruptcy order....
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....umbered tools, books, vehicles and other equipment as are necessary to the debtor or bankrupt for his personal use or for the purpose of his employment, business or vocation. The word used in sub- clause (b) has to be interpreted ejusdem generis. When we look into the word 'provisions' as occurring in sub-clause (b), the said word has to take colour from other expressions used in same sub-section (b) i.e. unencumbered furniture, household equipment. The expression 'provisions' as are necessary for satisfying the basic domestic needs of the bankrupt and his immediate family. This can be explained by taking an example in one dwelling unit which is as per the Regulation namely- Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtor) Rules, 2019. One unencumbered single dwelling unit owned by the debtor is excluded assets as per Section 79(14)(b) read with Rule 5 of 2019 Rules. The provisions which are lying in the dwelling unit which are necessary for satisfying the basic domestic needs of the bankrupt and his immediate family are included in the excluded assets thus, provisions like food grains, vegetables a....
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....er person no direction could have been passed for release of such amount. 21. Learned Counsel for the Appellant has relied on judgment of the Hon'ble Supreme Court in "P. Veerasamy vs. Official Assignee High Court, Madras" (supra) which need to be noticed. The above judgment of the Hon'ble Supreme Court arose out of the proceeding under the Presidency Towns Insolvency Act, 1909. The Appellant before the Hon'ble Supreme Court was declared as bankrupt under the Act and he filed an application before the insolvency court for permitting the Appellant to restart his kerosene business under license as agent of the Tamil Nadu Civil Supplies Department which application was rejected. The Division Bench also affirmed the Appeal against which order the matter was taken in the Hon'ble Supreme Court. Reliance was placed on Section 75 and other provisions of the Presidency Towns Insolvency Act, 1909. In the above context, the Hon'ble Supreme Court had occasion to consider common law principles and Section 75 of the Act. In paragraphs 35, 36 and 37 of the judgment, following was laid down:- "35. In our view, the above common law principles relating to earnings from personal labour of....
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.... of the English Act, 1986, the author says (p. 188) that the principle of releasing monies for the support of the insolvent and his family is based on a policy "both as an aspect of the device to preserve the dignity and self-respect of the bankrupt and his dependants, and in the interests of avoiding the creation of a further burden on the resources of the State if the bankrupt's family are rendered destitute. A rule has therefore been adopted whereby the bankrupt is allowed to retain a proportion of his income to the extent deemed necessary to maintain him and his family in reasonable circumstances". As to what is a reasonable provision for support of the insolvent and his family, the author says: (p. 190) "It will be a question of fact in each case to establish what are to be considered as the reasonable domestic needs of the bankrupt and his family and what proportion of his income he should be allowed to meet them." After the Cork Report and Section 310 of the English Act, 1986, "the court would be acting within a spirit expressed in the Cork Report in advocating the adoption of a more humane and realistic attitude towards the position of the debtor and his family....
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....IBC provides that bankruptcy trustee shall conduct the administration and distribution of the estate of the bankrupt. Thus, the said provision entrust the administration of the estate of the bankrupt on bankruptcy trustee. It is true that the estate of the bankruptcy trustee is essentially for distribution of the estate of bankrupt in accordance with provision of Chapter V of Part III and the assets are to be distributed amongst the creditors as provided under Section 128(1)(b). The entire estates of the bankrupt having been taken under by the bankruptcy trustee which estate are essentially for distribution amongst the creditors. The question for which there is no clear answer in the IBC is as to whether the bankrupt can be allowed utilisation of any part of the assets for any genuine purpose including the medical need. In this context, we need to refer the correspondence between the bankrupt and the bankruptcy trustee which has been brought on the record. On 19.11.2024 bankrupt has written an e-mail to the bankruptcy trustee which is brought on record as Annexure A3 to the following effect:- "Subhash Chandra Mishra <[email protected]> Tue,....
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.... I understand your concerns regarding medical expenses, household needs, and other financial requirements. However, as per the NCLT order and the IBC, I do not have the authority to release funds from your accounts independently. If you require access to funds for specific purposes, you are advised to file an application with the NCLT to seek approval. 2. Legal Position on Account Freeze The freezing of your accounts is in compliance with my duties as Bankruptcy Trustee, as mandated by the NCLT order and the provisions of the IBC. This action is not intended to cause inconvenience but is necessary to preserve the bankruptcy estate and ensure compliance with the law. 3. Adjudication Please note that I am not an adjudicating authority and cannot decide on the release of funds for purposes outside the bankruptcy process. Such matters require the approval of the NCLT or a competent authority. Clarification on Telephonic Discussion During our recent telephonic discussion, I did not state that I would approve individual transactions. Instead, I requested specific details and supporting documents for any immediate and essential exp....
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....T. The bankruptcy trustee being administering the estates of the bankrupt and the NCLT being control of the entire bankruptcy process is fully entitled to consider any application filed by the bankrupt for release of any amount for any specific purpose which is proved by bankruptcy trustee. The Hon'ble Supreme Court in "P. Veerasamy vs. Official Assignee High Court, Madras" (supra), as noted above, has categorically held that the Court has to take a humanistic view towards honest insolvents and the court must also guard against undue exploitation of the above principles and provisions of law. The estate of the bankrupt being under the administration of the bankruptcy trustee and the bankruptcy trustee himself having taken the stand for specific purpose, bankrupt should approach the NCLT for filing an application. We are of the view that it is open for the Appellant to make appropriate application before the NCLT seeking any direction for release of any amount from the estate of the bankruptcy estate which NCLT can consider and decide in accordance with law. Application which has given rise to this Appeal having contained only prayer for defreezing account which prayer was rightly r....