NCLT Rules Moratorium Won't Prevent Reversal of Erroneous Bank Transfers

NCLT Rules Moratorium Won't Prevent Reversal of Erroneous Bank Transfers

Introduction

The National Company Law Tribunal (NCLT), New Delhi Bench, has held that the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) doesn't prevent the reversal of funds mistakenly transferred to a corporate debtor's account. The tribunal directed the bank to recredit the funds to the rightful beneficiary or the transferor.

Factual Background

The applicant mistakenly transferred funds to the corporate debtor's account through RTGS. The applicant sent an email to the bank officials seeking reversal of the funds, and the bank's Assistant General Manager (Finance) wrote an email to the corporate debtor's bank requesting reversal of the funds. However, the amount was not reversed due to the imposition of the moratorium.

Procedural Background

The applicant filed a petition before the NCLT, requesting the tribunal to lift the moratorium only for the reversal of the mistakenly transferred funds. The respondent argued that the moratorium can only be lifted if the CIRP stands concluded or liquidation proceedings are initiated.

Issues

1. Moratorium and Mistaken Transfers: Whether the moratorium under Section 14 of the IBC prevents the reversal of funds mistakenly transferred to a corporate debtor's account.

2. Ownership of Mistakenly Transferred Funds: Whether the mistakenly transferred funds can be considered as assets of the corporate debtor.

Contentions of the Parties

Applicant's Contention: The applicant argued that the funds were mistakenly transferred and that public money was involved. The applicant requested the tribunal to lift the moratorium to allow reversal of the funds.

Respondent's Contention: The respondent submitted that the moratorium can only be lifted in specific circumstances, and the present situation does not allow lifting of the moratorium.

Reasoning & Analysis

The bench comprising Jyotsna Sharma (Member-Judicial) and Anu Jagmohan Singh (Member-Technical) observed that the amount was wrongfully credited into the account of the corporate debtor and could not be considered as an asset of the corporate debtor. The tribunal held that the moratorium cannot be said to have any effect on money that belongs to an outsider and not to the financial creditor or any other stakeholder. The tribunal directed that the funds should immediately be recredited to the account of the rightful beneficiary or the transferor.

Implications

The NCLT's decision clarifies that the moratorium under the IBC does not prevent the reversal of funds mistakenly transferred to a corporate debtor's account. The decision ensures that the corporate debtor or any other person cannot claim the amount inadvertently credited to the respondent's account.

Conclusion

The NCLT's decision in this case highlights the importance of correcting mistakes and ensuring that funds are returned to their rightful owners. The decision provides clarity on the scope of the moratorium under the IBC and its application to mistakenly transferred funds.

In this case the applicant was represented by Mr. Joydip Bhattacharya and Ms. Ipsita Biswal, Advocates.