Case Note & Summary
The appeal arose from an order of the High Court of Guwahati dated 04.02.2021, which allowed an interlocutory application by Respondent No.1, JSVM Plywood Industries Ltd., to operate its bank account and lift a lien created based on an FIR lodged by the Appellant, Sandeep Khaitan, the Resolution Professional for National Plywood Industries Ltd. (NPIL). The dispute originated from an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) admitted against NPIL on 26.08.2019, with the Appellant appointed as Interim Resolution Professional and a moratorium imposed under Section 14 IBC. The Appellant alleged that the former Managing Director of NPIL, in conspiracy with Respondent No.1, illegally transferred Rs. 32.50 lakhs to Respondent No.1 without authority, violating the moratorium. The Appellant filed a cyber complaint, an application under Sections 19 and 23(2) IBC for non-cooperation, and an FIR on 27.04.2020, leading ICICI Bank to create a lien on Respondent No.1's account. The NCLT, in orders dated 20.05.2020 and 19.01.2021, found prima facie violations of Section 14 IBC, directed the suspended board to cooperate and refund the amount, and ordered banks to lift liens on corporate debtor accounts for operation by the Resolution Professional. Respondent No.1 challenged the FIR under Section 482 of the Code of Criminal Procedure, 1973, and the High Court granted interim relief by unfreezing the account subject to conditions, including withdrawal of a writ petition and furnishing an indemnity bond. The Supreme Court heard arguments from both sides, with the Appellant contending the High Court's order was erroneous as it overlooked the moratorium violation and prima facie findings of the NCLT. The court's analysis focused on the interplay between insolvency proceedings under IBC and criminal proceedings, assessing whether the High Court properly exercised its inherent powers under Section 482 CrPC. The decision involved evaluating the legality of the transactions during the moratorium and the appropriateness of interim relief in light of the alleged fraud and insolvency law mandates.
Headnote
A) Insolvency Law - Moratorium Under IBC - Section 14 Insolvency and Bankruptcy Code, 2016 - Violation of Moratorium by Corporate Debtor - Appellant alleged former Managing Director transferred Rs. 32.50 lakhs to Respondent No.1 without authority during CIRP - High Court allowed unfreezing of Respondent's bank account subject to conditions - Supreme Court considered whether this was erroneous given prima facie violation of Section 14 IBC (Paras 1-12). B) Criminal Procedure - High Court's Inherent Powers - Section 482 Code of Criminal Procedure, 1973 - Interim Relief in FIR Proceedings - Respondent No.1 filed petition under Section 482 CrPC challenging FIR lodged by Appellant - High Court granted interim relief by lifting lien on bank accounts - Supreme Court examined propriety of such relief in light of alleged fraud and moratorium breach (Paras 7-12). C) Insolvency Law - Resolution Professional's Duties - Sections 19, 23(2) Insolvency and Bankruptcy Code, 2016 - Non-cooperation by Suspended Management - Appellant filed application under Sections 19 and 23(2) IBC alleging non-cooperation - NCLT directed suspended board to cooperate and refund unauthorized withdrawals - Supreme Court noted these directions while assessing High Court's order (Paras 4-6).
Issue of Consideration
Whether the High Court erred in allowing an interlocutory application to unfreeze the bank account of an operational creditor and lift the lien created based on an FIR alleging illegal transactions in violation of the moratorium under the Insolvency and Bankruptcy Code, 2016
Law Points
- Moratorium under Section 14 IBC prohibits transactions by corporate debtor
- Resolution Professional's authority over corporate debtor's assets
- High Court's power under Section 482 CrPC to grant interim relief in criminal proceedings
- Lifting of lien on bank accounts subject to conditions
