Case Note & Summary
The case involved two appeals filed by Manju Sirohi, a Personal Guarantor of M/s Saha Infratech Private Limited, under the Insolvency and Bankruptcy Code, 2016. The appeals arose from orders of the National Company Law Tribunal (NCLT) regarding her bankruptcy proceedings. The Appellant contended that the Respondent, Assets Care & Reconstruction Enterprise Ltd., initiated insolvency proceedings against her due to the failure of the corporate debtor to repay debts. The NCLT had declared her bankrupt on 21.05.2025 and appointed a Bankruptcy Trustee. The Appellant argued that she had made withdrawals from her bank account to sustain herself, claiming these funds were from the sale of personal jewellery, which she asserted were excluded assets under the Code. The Respondent countered that the withdrawals were unauthorized as they occurred after the bankruptcy estate vested in the Trustee. The court analyzed the legal definitions of bankruptcy estate and excluded assets, ultimately rejecting the Appellant's claims. It held that the Appellant's withdrawals were unauthorized and that her claims of hardship did not provide a legal basis for relief. The court also dismissed the recall application, stating that the Appellant had not shown any prejudice from the proceedings. The appeals were found to lack merit and were dismissed without costs.
Headnote
A) Insolvency Law - Unauthorized Withdrawals - Definition of Bankruptcy Estate - Insolvency and Bankruptcy Code, 2016, Sections 154, 155 - The court held that the estate of the bankrupt vests in the Bankruptcy Trustee immediately upon appointment, and any withdrawals made by the bankrupt thereafter are unauthorized. The Appellant's claim of unawareness of the moratorium was rejected as it does not affect the legal vesting of the estate (Paras 24-26). B) Insolvency Law - Excluded Assets - Definition and Limits - Insolvency and Bankruptcy Code, 2016, Section 155(2)(a) - The court determined that the sale proceeds from the Appellant's jewellery exceeded the limit for excluded assets, thus not qualifying for protection under the Code. The Appellant's hardship claim was deemed insufficient to alter the statutory provisions (Paras 27-28). C) Insolvency Law - Recall Applications - Right to Recall - Insolvency and Bankruptcy Code, 2016 - The court found that the recall application was dismissed appropriately as recall is not a matter of right, and the Appellant failed to demonstrate any prejudice from the proceedings (Paras 29-30).
Issue of Consideration
Whether the withdrawals made by the Appellant from her bank account constituted unauthorized withdrawals under the Insolvency and Bankruptcy Code, 2016.
Final Decision
The Appellate Tribunal dismissed both appeals, finding no merit in the Appellant's claims regarding unauthorized withdrawals and hardship. The Tribunal held that the withdrawals were unauthorized and that the Appellant's claims of excluded assets did not meet the statutory requirements. The recall application was also dismissed as the Appellant failed to demonstrate any prejudice.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 61
- Section 95
- Section 126
- Section 154
- Section 155
- Section 128
- Section 79
- Section 178
