This case examines Siti Networks Ltd.'s request to withdraw funds deposited in court as part of an ongoing appellate proceeding after entering the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). The High Court discussed whether funds deposited in court for appeal security remain under the debtor’s ownership during CIRP, subject to the moratorium under Section 14 of IBC.

1. Background and Parties Involved

   • Appellant: Siti Networks Ltd. (formerly Siticable Network Ltd.), a corporate debtor under CIRP since February 22, 2023.
   • Respondent: Rajiv Suri, the original plaintiff awarded damages in prior litigation.
   • The original suit awarded Rajiv Suri Rs. 15,00,000 in damages, along with interest, leading Siti Networks to appeal and deposit Rs. 20,00,000 as security.

2. CIRP Initiation and Moratorium Impact

   • Siti Networks entered CIRP, initiating the IBC-mandated moratorium, halting claims or execution against the company’s assets. An appointed Resolution Professional managed the company’s assets under creditors' oversight.

3. Supreme Court's Intervention

   • The Supreme Court allowed the withdrawal of a related special leave petition and revoked an ICICI Bank guarantee. This influenced Siti Networks' stance in withdrawing the appeal and associated funds deposited in court.

4. Respondent's Argument

   • Rajiv Suri opposed the withdrawal, arguing the funds in court were not an asset of Siti Networks and thus outside IBC’s moratorium provisions.

5. Court's Findings and Analysis

   • The court found that funds deposited in court are indeed corporate debtor assets and remain within the IBC’s purview.
   • The moratorium under Section 14 applies to these funds, preventing their use outside CIRP protocols.

Ratio Decidendi

The court ruled that judicial deposits made by a corporate debtor, even as security in litigation, are assets of the debtor and thus subject to IBC’s moratorium. The moratorium bars the withdrawal or execution of such funds outside CIRP or liquidation proceedings, preserving the debtor's estate for equitable distribution among creditors.

Acts and Sections Discussed

• Insolvency and Bankruptcy Code, 2016
  • Section 3(8): Definition of "corporate debtor."
  • Section 14: Moratorium, prohibiting asset disposal and enforcement against corporate debtor assets.
  • Section 18: Duties of the Resolution Professional, including taking custody of the debtor’s assets.
  • Section 53: Priority distribution of assets in liquidation.
• Civil Procedure Code, 1908
  • The general framework governing judicial deposits and asset rights in appeals.

Subjects:

Corporate Insolvency, Moratorium, Judicial Deposits

Insolvency, Bankruptcy, Corporate Debtor, Judicial Deposit, Moratorium, Asset Distribution