Corporate Debtor's Account Payments Post-CIRP Start without IRP Approval is a Moratorium Violation: NCLT [Read Order]
The Liquidator was instructed by the Tribunal to notify IBBI for proceedings under Section 74(1) of the Code, and Respondents were ordered to reimburse sums totaling Rs. 10,01,80,000
![Corporate Debtors Account Payments Post-CIRP Start without IRP Approval is a Moratorium Violation: NCLT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/Corporate-Debtors-Account-Post-CIRP-Start-IRP-Approval-Moratorium-Violation-NCLT-taxscan.jpg "Corporate Debtors Account Payments Post-CIRP Start without IRP Approval is a Moratorium Violation: NCLT [Read Order]")
The National Company Law Tribunal, Mumbai bench has held that after the Corporate Insolvency Resolution Process (CIRP) has begun, any payments made from the Corporate Debtor's account without the Interim Resolution Professional's (IRP) consent are prohibited by Section 14 of the Insolvency and Bankruptcy Code, 2016 (the Code). Read More: NFRA invites Applications for Chairperson and...
The National Company Law Tribunal, Mumbai bench has held that after the Corporate Insolvency Resolution Process (CIRP) has begun, any payments made from the Corporate Debtor's account without the Interim Resolution Professional's (IRP) consent are prohibited by Section 14 of the Insolvency and Bankruptcy Code, 2016 (the Code).
Mr. Ashish Arjunkumar Rathi (Resolution Professional/Applicant) filed the application seeking directions for the refund of certain amounts by the respondents to the Corporate Debtor and punishment for breaching the moratorium and fraudulently transferring its property. The Applicant's prayed to direct Respondents No. 1 and 2, under Section 60(5) of the Code, to immediately refund Rs. 11,01,80,000 to the Corporate Debtor along with interest as deemed fit; to pass orders under Section 74(1) of the Code against Respondents No. 1 and 2 for making payments in breach of the moratorium under Section 14; to direct Respondents No. 3 to 6 to immediately refund the Vendors' Unauthorised Payments to the Corporate Debtor along with interest; and to pass orders under Section 74(2) of the Code against Respondents No. 3 and 6 for receiving unauthorised payments in breach of the moratorium.
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In accordance with Section 7 of the Code, American Express Banking Corporation (a financial creditor) filed a CIRP against Sunil Hitech Engineers Limited (a corporate debtor). The CIRP application was accepted by the NCLT Mumbai Bench on September 7, 2018 (pronounced that day, delivered on September 10, 2018). Through the CIRP Order, the Tribunal designated Mr. Harshad Shamkant Deshpande as the IRP.
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The applicant argued that full managerial authority over a corporate debtor's affairs is transferred to the IRP upon the start of the CIRP, and that the IRP is in charge of conducting the business as a going concern. Following the start of CIRP, Respondents No. 1 and 2 made payments from the Corporate Debtor's account without the IRP's consent. Unauthorized payments totaling Rs. 9,54,50,084 were made between September 10 and September 14, 2018, during the first phase. During the second phase, checks totaling Rs. 6,80,92,628 in illicit payments were made between September 27, 2018, and October 10, 2018. Unauthorized payments of Rs. 16,35,42,712 were made following the appointment of the IRP and the start of the CIRP.
The Tribunal observed that the contention of Respondent Nos. 1 and 2 that the payments were necessary to keep the Corporate Debtor as a going concern in the absence of IRP taking charge on 14.09.2018, had no merit.
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The bench, which was composed of Justice V. G. Bisht (Judicial Member) and Prabhat Kumar (Technical Member), noted that the checks were ante-dated to make it a payment made before the start of CIRP and were only given to Respondent Nos. 3 and 4 after the CIRP had begun. According to the Tribunal, Respondent No. 5 was paid on September 10 and 11, 2018, using RTGS and NEFT rather than checks. Therefore, it may be argued that the payments had already been made before CIRP started. Because they were made in violation of the moratorium, these payments could therefore be revoked.
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According to the Tribunal, Respondent Nos. 3 through 6 have 30 days to return the sums of Rs. 1,07,32,154, Rs. 4,20,67,846, Rs. 3,81,80,000, and Rs. 1,92,00,000, respectively. It instructed the Liquidator to notify IBBI in order to start proceedings under Code section 74(1). The Liquidator was instructed by the Tribunal to notify IBBI for proceedings under Section 74(1) of the Code, and Respondents were ordered to reimburse sums totaling Rs. 10,01,80,000.
To Read the full text of the Order CLICK HERE
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