NCLAT Clears ICICI Bank of Wrongdoing: Reverses NCLT Order Directing Refund of Loan Payment Received During Moratorium [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has set aside an NCLT order that had directed ICICI Bank to return ₹8.92 lakh received in a loan account after commencement of CIRP. The Tribunal ruled that since the payment was not made by the corporate debtor but by an individual co-applicant, the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, was not attracted.

The appeal was filed by ICICI Bank Ltd. against an order of the National Company Law Tribunal (NCLT), New Delhi, dated 22.12.2023, in a matter concerning Trend Flooring Pvt. Ltd., a corporate debtor under liquidation.

The Corporate Insolvency Resolution Process (CIRP) against Trend Flooring Pvt. Ltd. began on 9 October 2019. During the moratorium period, a payment of ₹8.92 lakh was received by ICICI Bank in settlement of a car loan account that had been jointly taken by the corporate debtor and its director, Mr. Arvind Narayan Singh. The repayment came from a third-party account, specifically from Mr. Amit Narayan Singh, brother of the co-applicant and an additional director in the company.

Following this, the resolution professional (later appointed as liquidator) approached the NCLT, claiming that this repayment during the moratorium constituted a preferential transaction and violated the provisions of the IBC. The NCLT agreed and directed ICICI Bank to refund the ₹8.92 lakh to the corporate debtor's account, labeling it as a preferential payment under Section 43 of the Code.

The Bank argued that the payment did not come from the corporate debtor’s account, nor was it made under the corporate debtor’s direction. It was submitted that the payment came from a third-party account owned by a relative of the co-applicant. Hence, Section 14, which imposes a moratorium against enforcement or recovery from the corporate debtor, was not applicable. The bank had also issued a No Objection Certificate (NOC) for the vehicle in good faith after receipt of the payment.

The Bank further asserted that the transaction could not be labeled as “preferential” under Section 43 since there was no payment by the corporate debtor itself, and therefore no preference extended by the company to one creditor over another.

The NCLAT Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), closely examined the transaction trail. It concluded that the payment was made by a third party from an unrelated account, and not from the assets of the corporate debtor. Therefore, no violation of the moratorium existed.

The Tribunal also ruled that the NCLT erred in labeling the transaction as a preferential one, noting that Section 43 applies only when the corporate debtor itself gives preference to certain creditors over others. In this case, since the money was paid by someone else, no such preference by the debtor occurred.

The NCLAT set aside the NCLT’s direction to refund the amount, bringing relief to ICICI Bank. The Tribunal also acknowledged that there was no wrongful intent or benefit accrued to the bank that would justify the refund order.

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