Case Note & Summary
The appeal arose from an order dated 27.11.2025 by the National Company Law Tribunal (NCLT) dismissing an application by Sumeet Industries Limited, a Corporate Debtor, for restoration of a security deposit and refund of amounts allegedly appropriated by Dakshin Gujarat Vij Company Limited (DGVCL) during the Corporate Insolvency Resolution Process (CIRP). The proceedings against Sumeet Industries were initiated by IDBI Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016, leading to the admission of the petition on 20.12.2022. Following the initiation of CIRP, DGVCL issued a disconnection notice for unpaid electricity dues and subsequently adjusted the security deposit against pre-CIRP dues. The Appellant contended that this adjustment violated the moratorium imposed under Section 14 of the Code. The NCLT dismissed the application on grounds that the Resolution Professional had accepted DGVCL's claim after the adjustment and that the application was filed after the approval of the Resolution Plan. The Appellant argued that the adjustment was illegal and sought to reverse it, asserting that the amounts were disclosed in the Information Memorandum and were factored into the Resolution Plan. The Respondent maintained that the adjustment was valid as it occurred prior to the initiation of CIRP and that the appeal was an attempt to unsettle a concluded process. The Appellate Tribunal analyzed the legal principles surrounding the moratorium and the authority of the Resolution Professional, ultimately dismissing the appeal, affirming the NCLT's findings regarding the validity of the adjustments made by DGVCL.
Headnote
A) Insolvency Law - Moratorium - Applicability of Moratorium - Insolvency and Bankruptcy Code, 2016, Section 14 - The court held that the moratorium prohibits any action to recover or enforce security interests created by the Corporate Debtor during the CIRP, thus any adjustment of the security deposit post-CIRP was impermissible. (Paras 8-9). B) Insolvency Law - Adjustment of Security Deposit - Validity of Adjustment - Insolvency and Bankruptcy Code, 2016, Section 14 - The court found that the adjustment of the security deposit prior to the commencement of CIRP was valid, but any subsequent appropriation of payments made during CIRP towards pre-CIRP dues violated the moratorium. (Paras 9-10). C) Insolvency Law - Authority of Resolution Professional - Jurisdiction Post-Approval of Resolution Plan - Insolvency and Bankruptcy Code, 2016, Section 60 - The court held that the Resolution Professional retains authority to pursue recovery of amounts wrongfully adjusted during CIRP, even after the approval of the Resolution Plan. (Paras 3-4).
Issue of Consideration
Whether the adjustment of the security deposit and subsequent payments made during the Corporate Insolvency Resolution Process (CIRP) violated the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016.
Final Decision
The Appellate Tribunal dismissed the appeal, affirming the NCLT's order that the adjustment of the security deposit was valid as it occurred prior to the initiation of CIRP, and that the subsequent payments made during CIRP could not be appropriated towards pre-CIRP dues.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- moratorium
- security deposit
- adjustment of dues
- CIRP
- statutory authority
- resolution plan
