AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (5) TMI 1527
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....missed. Through the said application, the Appellant had sought directions against Dakshin Gujarat Vij Company Limited (DGVCL)/ Respondent No.1 herein, for restoration of the Security Deposit amounting to Rs. 8,30,25,606/, which according to the Appellant had been illegally adjusted by the Respondent No.1 after commencement of the Corporate Insolvency Resolution Process ("CIRP"), and further sought re-credit/refund of an amount of Rs. 3,78,78,845.48/-, which had allegedly been appropriated by the Respondent No.1 towards pre-CIRP electricity dues in violation of the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'Code'). The Eagle Group which is the Successful Resolution Applicant (SRA) in the aforesaid CIRP has been Arrayed as Respondent No.2. Aggrieved by dismissal of its application by the Adjudicating Authority, Sumeet Industries Limited/ Corporate Debtor has filed this appeal through the Resolution Professional before this Appellate Tribunal. Brief Facts of the Case 2. The facts relevant for deciding this matter are as given below: i. Proceedings against the Corporate Debtor were originally initiated by ....
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....posit adjustment" amounting to INR 8,29,34,548/- had been appropriated by the Respondent No.1. vii. Pursuant to the public announcement inviting claims, the Respondent No.1 on 06.01.2023 submitted its proof of claim in Form-B before the Resolution Professional together with calculation sheets, consumer ledger report, December 2022 Energy Bill and Adjustment Details Report. After adjustment of Security Deposit of Rs. 8,30,25,606/- the Respondent No.1 filed its net claim amount to Rs. 3,03,78,845/-. viii. The Corporate Debtor thereafter made payment of Rs. 6,56,60,308/- on 11.01.2023 towards the December 2022 electricity bill. However, according to the Appellant, the Respondent No.1 illegally appropriated the entire amount towards dues for the whole month of December 2022 including dues relating to the period prior to 20.12.2022, i.e., the insolvency commencement date. It was specifically alleged that an amount of Rs. 3,78,78,845.48/- paid after initiation of CIRP was unlawfully adjusted against pre-CIRP dues in violation of Section 14 of the IBC. ix. Along with the May 2023 electricity bill dated 01.06.2023 an Adjustment Report was issued by the Respondent....
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....residual claim of Rs. 3,03,78,845/- after adjustment of the security deposit, that the filing of proceedings before the Gujarat High Court amounted to forum shopping, and that the application had been filed after approval of the Resolution Plan. Aggrieved by the said findings and dismissal of its application, The RP has preferred the present Appeal before this Appellate Tribunal. Submissions of the Appellant/ RP of Sumeet Industries Ltd. 3. Ld. Counsel for the Appellant submits that the present Appeal has been validly instituted by the Corporate Debtor through its Resolution Professional, Mr. Satyendra Prasad Khorania. The institution and continuation of the present proceedings have been duly authorised by the Monitoring Committee in its 3rd Meeting dated 20.12.2025, wherein a conscious decision was taken authorising the Chairman to sign, file and pursue the present Appeal, engage legal counsel in consultation with the Successful Resolution Applicant and bear litigation expenses through the SRA in accordance with the Approved Resolution Plan. It is further submitted that I.A. No. 47 of 2024 had originally been filed on 05.01.2024, much prior to approval of the Resolution Plan....
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....o Rs. 8,30,25,606/- stood appropriated on 14.12.2022, i.e. prior to commencement of CIRP on 20.12.2022, is entirely false, unsupported and contrary to the documentary record. The Respondent has failed to produce even a single contemporaneous accounting record, ledger entry, debit advice, communication, adjustment memo or financial statement evidencing any such appropriation on 14.12.2022. The bald assertion made by the Respondent is merely an ipse dixit unsupported by legally admissible evidence. In absence of any contemporaneous record establishing actual appropriation prior to commencement of CIRP, the Respondent cannot be permitted to defeat the statutory protection available under Section 14 of the IBC. 6. Ld. Counsel submits that in an attempt to fill the complete evidentiary vacuum surrounding the alleged adjustment, the Respondent has sought to rely upon an Office Note dated 14.12.2022. The said reliance is wholly misconceived and legally unsustainable. The Office Note merely records an internal proposal requiring "further deliberation and decision" and does not evidence any concluded or effectuated adjustment. The document at best reflects an internal discussion and not ....
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.... 8,30,25,606/- constitutes an asset of the Corporate Debtor and immediately upon commencement of CIRP on 20.12.2022 came under the full protection of the moratorium imposed under Section 14 of the IBC. Section 14(1)(c) expressly prohibits any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property during the moratorium period. Reliance is placed upon the judgment of the Hon'ble Supreme Court in Central Transmission Utility of India Ltd. v. Sumit Binani (2026 INSC 284 decided on 23.03.2026), wherein it has been categorically held that no enforcement or appropriation of a security deposit is permissible once the moratorium takes effect, even if such security could otherwise have been invoked prior to CIRP. The Hon'ble Supreme Court further reiterated the principle laid down in Bharti Airtel Ltd. v. Aircel Ltd., (2024) 4 SCC 668, that no form of set-off can be exercised during CIRP except where contractual set- off had already been completed prior to commencement of CIRP. The Respondent's alleged adjustment clearly falls outside this limited exception. The Hon'ble Supreme Court additionally observed that permitting such ....
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....n amount of Rs. 3,03,78,845.60/- relating to the pre-CIRP period. Through the said communication, the Corporate Debtor expressly requested the Respondent to credit the said amount against current outstanding dues. Despite receipt of such objection and despite being fully aware of the legal embargo created by Section 14 of the IBC, the Respondent failed to rectify the wrongful appropriation. 11. Regarding the allegation of Forum shopping raised by the Respondent Ld. Counsel submits that the same is entirely misconceived. The Writ Petition filed before the Hon'ble Gujarat High Court, SCA No. 1425 of 2024, arose from an altogether distinct cause of action and sought entirely different reliefs. The said Writ Petition was necessitated by the second notice issued under Section 56 of the Electricity Act dated 15.01.2024 during CIRP, whereby the Respondent demanded payment of Rs. 17,67,61,531.14/- within fifteen days while simultaneously threatening disconnection of electricity supply. The reliefs sought in the writ proceedings pertained to protection against coercive disconnection and invocation of writ jurisdiction on account of violation of statutory and constitutional safeguards. ....
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....) on 21.10.2023 and thereafter received approval from the Adjudicating Authority on 16.07.2024. It was further submitted that pursuant to the approval of the Resolution Plan, the Successful Resolution Applicant ("SRA") has already taken over the management and control of the Corporate Debtor and the Resolution Plan also appears to have been implemented, as reflected from Paragraph 5 of the Reply filed by the SRA. In such circumstances, the present Appeal is nothing but an attempt to unsettle a concluded CIRP and to deprive DGVCL of its legitimate and settled dues, which is impermissible in law. 16. The Respondent No. 1 raised a bill of Rs. 10,71,63,833.44/- for the month of November, 2022. The Corporate Debtor paid an amount of Rs. 4,45,00,000/- against such bill, leaving an outstanding amount of Rs. 6,25,96,739.44/-. Against such outstanding arrears, on 14.12.2022, the Respondent No. 1 decided to adjust the security deposit amount of Rs. 8,30,25,606/- leaving a balance security deposit of Rs. 2,04,28,866.56/. 17. Corporate Debtor was admitted into the CIRP on 21.12.2022. The Respondent No. 1 bifurcated the billing for the month of December into two pa....
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....d claims and adjustments after approval and implementation of the Plan is contrary to the scheme and object of the IBC. 21. Ld. Counsel submitted that in the present case, the Resolution Professional had filed IA No. 47 of 2024 after approval of the Resolution Plan by the CoC and that too without any authorization or mandate from the CoC. It was further submitted that despite the Adjudicating Authority recording findings against the RP on this aspect, the same has not been challenged in the present Appeal, nor was any rejoinder filed by the RP when the issue regarding lack of authority was specifically raised by DGVCL in its reply. 22. Ld. Counsel further submitted that the RP has not challenged several crucial findings recorded in the Impugned Order. It was pointed out that the Adjudicating Authority has already recorded findings that: (a) the RP had accepted the Energy Bill of December 2022 along with adjustment details and admitted the claim form of DGVCL; (b) the RP had accepted the adjusted amount and continued making monthly payment bills thereafter; (c) the claim of DGVCL had already been considered under the Resolution Plan and approved by the CoC; (d) both the Inform....
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....filed its Claim Form-B on 06.01.2023 only for the net amount of Rs. 3.03 crores after enclosing complete adjustment details and the corresponding bill which reflected the security deposit balance as "Nil". It was submitted that the IRP accepted the said claim without any objection and with complete knowledge of all relevant facts and documents. 25. Ld. Counsel submitted that thereafter the Resolution Plan was approved and DGVCL ultimately received only Rs. 7.24 lakhs against its admitted claim of Rs. 3.03 crores. Therefore, both the adjustment as well as the admitted claim have attained finality and cannot now be reopened after conclusion of the CIRP process. 26. Ld. Counsel further relied upon Paragraph 100 of the judgment in Ebix Singapore v. Committee of Creditors of Educomp Solutions Ltd. wherein the Hon'ble Supreme Court emphasized that sanctity of the insolvency process and procedural certainty are essential to the functioning of the Code. It was submitted that the RP, having accepted DGVCL's adjusted claim, permitted the IM and Resolution Plan to proceed on that basis and allowed the CoC to approve the Plan accordingly, is now estopped from turning around and seeking r....
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....compel reopening of the entire CIRP process. It was therefore argued that the conduct of the RP lacks bona fides and is legally untenable. 30. Ld. Counsel submitted that in light of the aforesaid facts and settled legal position, there exists no statutory, inherent or residuary jurisdiction to interfere with the Impugned Order dated 27.11.2025 passed by the Adjudicating Authority. It was submitted that DGVCL's legitimate dues cannot be defeated by an application which itself was filed without authority and after conclusion of the CIRP process. It was further submitted that security deposit is statutorily recognized and the issue concerning interest had already been dealt with by DGVCL before the Adjudicating Authority by way of affidavit at Pages 223 and 228-229, particularly Paragraphs 12 and 13 thereof, after consideration whereof the contentions of the RP stood rejected. 31. Ld. Counsel further submitted that issuance of the Disconnection Notice dated 14.12.2022 does not in any manner preclude adjustment of the security deposit. It was submitted that the statutory period of fifteen days prescribed under the Electricity Act is relevant only for the purpose of disconnection ....
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....g reversal of the post-CIRP appropriation of the Security Deposit amounting to INR 8,30,25,606/- by Respondent No. 1, Dakshin Gujarat Vij Company Limited ("DGVCL"), and also seeking re-credit of INR 3,78,78,845.48/- which had been appropriated from CIRP-period payments towards pre- CIRP dues. It is submitted that both these amounts formed part of the asset pool of the Corporate Debtor and were specifically reflected in the Information Memorandum. These amounts had also been factored into the Approved Resolution Plan submitted by the SRA. Therefore, the unilateral appropriation of the said amounts by DGVCL has caused direct and irreversible prejudice to the SRA and the stakeholders of the Corporate Debtor. 36. Ld. counsel submits that DGVCL's sole defence was that the adjustment of the Security Deposit had allegedly been carried out vide an Office Note dated 14.12.2022, i.e., seven days prior to commencement of CIRP on 21.12.2022. However, according to the Respondent No. 2, this plea stands completely demolished by DGVCL's own records and documents. 37. It was further submitted that DGVCL's own Form-B receipt dated 06.01.2023 records that the adjustment was processed on 06.01.....
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....r approval of the Resolution Plan to adjudicate disputes arising out of insolvency proceedings. It was further held therein that an application filed by an SRA after Plan approval for recovery of assets adjusted during CIRP in violation of the moratorium is maintainable. The counsel submitted that Section 61(1) of the IBC confers a right of appeal upon "any person aggrieved", which expression is broad and cannot be interpreted narrowly. Thus, both the Corporate Debtor acting through the Monitoring Committee and the SRA were clearly entitled to maintain the present proceedings. Reliance is also placed upon the judgment of the Hon'ble Supreme Court in Central Transmission Utility of India Ltd. v. Sumit Binani decided on 23.03.2026, which has also been relied upon by Appellant. 41. Ld. counsel further submitted that Clauses 9.1.16 and 9.1.17 of the Approved Resolution Plan specifically authorised the Resolution Professional and Monitoring Committee to continue and prosecute all litigations and legal proceedings initiated during CIRP or in furtherance of the Resolution Plan for the benefit of the Corporate Debtor and all stakeholders. Hence, the present Appeal was fully contemplated....
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....he SRA. 45. He further submitted that the present proceedings do not amount to reopening or modification of the Approved Resolution Plan, rather, the present proceedings seek recovery of assets which always belonged to the Corporate Debtor and which were required to vest in the SRA under the Approved Plan. Thus, the judgment of the Hon'ble Supreme Court in Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd. dealing with finality of Resolution Plans has no application to the facts of the present case. He also submitted that DGVCL's argument that its claim was duly reflected in the Information Memorandum and claim process and therefore the matter stood concluded upon approval of the Resolution Plan is fundamentally flawed. It was argued that consideration of DGVCL's claim during CIRP does not authorise DGVCL to unilaterally appropriate amounts in violation of the IBC. It was further submitted that if DGVCL's argument were accepted, there would have been no necessity for inclusion of Clauses 9.1.16 and 9.1.17 in the Approved Resolution Plan. The very inclusion of these clauses demonstrates that all stakeholders consciously intended recovery proceedings and ....
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....otice dated 14.12.2022 demanded the entire gross outstanding amount without deduction of the Security Deposit, thereby demonstrating that no adjustment had actually taken place before commencement of CIRP. According to the Appellant, such adjustment amounts to indirect recovery during moratorium and is therefore prohibited under Section 14 of the IBC. The Appellant has relied upon the electricity bill dated 02.01.2023, the Form-B dated 06.01.2023, the alleged continuation of interest on the Security Deposit till 29.12.2022, and the deduction of TDS upon such interest, to contend that the Security Deposit continued to remain alive even after commencement of CIRP. Reliance has also been placed upon judgments including Central Transmission Utility of India Ltd. v. Sumit Binani and Bharti Airtel Ltd. v. Aircel Ltd. to contend that unilateral appropriation or set-off after commencement of CIRP is impermissible in law. 51. Per contra, the Respondent No.1 has contended that the decision to appropriate the Security Deposit had already been taken on 14.12.2022 itself, i.e., prior to commencement of CIRP, through an internal Office Note. According to the Respondent, the subsequent reflect....
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....622) 275911 Office Note: Dt.: 14 Dec 2022 Sub: Non-Payment of energy bills for the month of Nov-2022 by EHT consumer M/s Sumeet Industries Limited bearing HT Cons No. 11921. In connection to above, M/s Sumeet Industries Limited is EHT consumer of DGVCL, Kadodara Division having contract demand of 13000 KVA bearing HT Cons No. 11921. This office has issued energy bill for the month of Nov-2022 amounting to Rs. 107096739.44 on Dtd 02.12.2022. M/s Sumeet Industries Limited is consistently failing to pay the full amount of its monthly energy bills by the due date, making it liable for disconnection as per applicable rules. The details are as under: S. No. Particulars Amount 1. Energy bill for the month of Nov-2022 billed in Dec-2022 67259893.71 2. Outstanding Arrears 39088298.15 3. Delayed Payment Charge 748547.58 4. Total Arrears of energy bill 107096739.44 As per the consumer ledger, a Security Deposit of Rs. 8,30,25,606/- is available with DGVCL. Referencing Corporate Office Circular No. DGVCL/GM(F&A)/HT-SD-Adjustment/2020-21/06635 dated 30.04.2021, adjustment of the security deposit is permitted ....
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.... matter is put up for deliberation and necessary decision" The Appellant argues that no decision could be taken on that date as the matter required deliberation. We are not in agreement with this argument of the Appellant. It is undisputed that the Executive Engineer (EE) is the competent Authority to order the adjustment of the Security Deposit. He after due consideration, has ordered the adjustment of SD as per norms. This decision of EE cannot be questioned vis-à-vis his authority to take such decision as Competent Authority. The deliberation in administrative parlance is deliberation by the Authority competent to take such decision, accordingly, in this case the Competent Authority (EE) has ordered adjustment of SD towards outstanding dues. This document has been submitted by the competent authority (EE) through an affidavit before the Adjudicating Authority and its veracity has not been under question. The EE has also undertaken to produce the original file having the aforesaid office note before the Adjudicating Authority as and when required. In the functioning of the executive branch once a decision is taken by the competent authority, the decision becomes binding....
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....,45,00,000/, leaving an outstanding amount of Rs. 6,25,96,739.44/-. This amount was adjusted on 14.12.2022 from the security deposit of CD lying with Respondent No.1 amounting to Rs. 8,30,25,606/- leaving a balance security deposit of Rs. 2,04,28,866.56/. 60. The Respondent No. 1 bifurcated the billing for the month of December into two parts, first being the period prior to the initiation of CIRP (01.12.2022 to 20.12.2022) and second period post the initiation of CIRP (20.12.2022 to 31.12.2022). The total bill amount for December 2022 was Rs. 7,86,57,116.68/- out of which Rs. 5,08,07,712/- was for the period prior to the initiation of CIRP (01.12.2022 to 20.12.2022) and Rs. 2,77,81,462.52/- was for the period post the initiation of CIRP (20.12.2022 to 31.12.2022). The Respondent No.1 adjusted the balance security deposit of Rs. 2,04,28,866.56/- against the dues of the period prior to the initiation of CIRP (01.12.2022 to 20.12.2022) of Rs. 5,08,07,712/-, further leaving a balance of Rs. 3,03,78,845.60/- as unpaid dues for the Pre CIRP period and the same remained due and payable to the Respondent No. 1 from the Corporate Deb....
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....after. The material on record further shows that the Information Memorandum and Resolution Plan proceeded on the basis of DGVCL's claim after adjustment of the Security Deposit and the dues of the Corporate Debtor for the remaining dues of December 2022 post CIRP initiation on 20.12.2022. Thereafter, the Information Memorandum was prepared, the resolution process continued. The Resolution Plan was approved by Committee of Creditors (CoC) on 21.10.2023 and ultimately by the Adjudicating Authority on 16.07.2024. The Successful Resolution Applicant has already taken over management of the Corporate Debtor and implementation of the Resolution Plan has commenced. The application I.A. No. 47 of 2024 was filed before the Adjudicating Authority after approval of the Resolution Plan by the CoC, despite the fact that the Appellant/RP was fully aware of the adjustment of the security deposit by the DGVCL and related issues. 63. We further note that the RP had filed the aforesaid I.A. after the approval of the plan by the CoC, pending its consideration of the Adjudicating Authority. The CoC was fully operation in this period but the RP did not seek the approval or the mandate from CoC befor....
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....e, even assuming that the proceedings were maintainable, the Appellant was still required to conclusively establish illegality in the Respondent's actions, which in our considered view has not been done. 67. We also find that the allegations relating to wrongful adjustment of CIRP-period payments amounting to Rs. 3,78,78,845.48/- have not been supported by a clear and conclusive financial reconciliation. The transactions between the parties formed part of a running commercial account involving current charges, arrears, delayed payment charges, security deposit adjustments, and operational dues. It was necessary on the part of Appellant to provide a clear and detailed reconciliation was necessary before any finding of illegal double recovery or unjust enrichment could have been returned against the Respondent. On the other hand, Respondent No.1/DGVCL has furnished their calculations based on two energy bills for November and December, 2022 in a clear and succinct manner based on which their claim was admitted by the RP. The Adjudicating Authority considered these allegations of Appellant found no sufficient ground to grant the relief sought. We do not find the said conclusion to ....
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....f the said judgment does not assist the Appellant in the peculiar facts of the present matter. 72. In Corob India Pvt. Ltd. through its Authorized Signatory v. Birendra Kumar Agrawal and Others, reported in 2024 SCC OnLine NCLAT 1267, this Tribunal considered the legality of unilateral appropriation of deposits during the moratorium period and held such action to be impermissible under the IBC framework. However, the said judgment was rendered in the context of an admitted adjustment made during CIRP and did not involve a disputed factual issue regarding whether the appropriation decision itself had been taken prior to commencement of CIRP. The ratio of the aforesaid judgment is not directly applicable to the present case. 73. The Respondent has relied upon the judgment of the Hon'ble Supreme Court in Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd., reported in (2022) 2 SCC 401, to contend that once a Resolution Plan is approved by the CoC and thereafter attains approval under Section 31 of the IBC, the same cannot ordinarily be reopened or altered. The relevant paragraphs 166 and 167 of the judgment are extracted below: '166. The binding....
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....isavowed by IBC's structure and objective. IBC does not envisage a dichotomy in the binding character of the resolution plan in relation to a resolution applicant between the stage of approval by the CoC and the approval of the adjudicating authority. The binding nature of a resolution plan on a resolution applicant, who is the proponent of the plan which has been accepted by the CoC cannot remain indeterminate at the discretion of the resolution applicant. The negotiations between the resolution applicant and the CoC are brought to an end after the CoC's approval. The only conditionality that remains is the approval of the adjudicating authority, which has a limited jurisdiction to confirm or deny the legal validity of the resolution plan in terms of Section 30(2) IBC. If the requirements of Section 30(2) are satisfied, the adjudicating authority shall confirm the plan approved by the CoC under Section 31(1) IBC.' 74. We note from the above, that the Hon'ble Supreme Court has specifically emphasized that once negotiations between the CoC and the Successful Resolution Applicant conclude and the Resolution Plan is approved by the CoC, the commercial terms underlying the P....