Case Note & Summary
The National Company Law Appellate Tribunal (NCLAT) dismissed two appeals filed by Indian Bank challenging orders dated 19.12.2024 passed by the National Company Law Tribunal (NCLT), Mumbai Bench, Court-II. The NCLT had dismissed Indian Bank's application (I.A. No. 2481/2023) seeking to retain an Income Tax refund of ₹4,65,58,425.87 received during the Corporate Insolvency Resolution Process (CIRP) of Topsgroup Services and Solutions Ltd., and allowed the liquidator's application (I.A. No. 2074/2023) for recovery of the said amount. The CIRP commenced on 19.02.2021 on a petition by Punjab National Bank (International) Limited. Indian Bank filed its claim in Form C for ₹38,85,25,615 on 09.03.2021. During CIRP, on 08.06.2021, an Income Tax refund of ₹4,65,58,425.87 was credited to the current account maintained by Indian Bank, which the bank detained claiming a right of set-off. The liquidator sought recovery of the amount, and the bank opposed it. The NCLAT held that after the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, no set-off can be claimed by a creditor, and the refund is an asset of the corporate debtor to be distributed under Section 53 IBC. The appeals were dismissed, upholding the NCLT orders.
Headnote
A) Insolvency Law - Moratorium - Set-off - Section 14, Insolvency and Bankruptcy Code, 2016 - The issue was whether a bank could retain an Income Tax refund received during CIRP as a set-off against the corporate debtor's debt. The NCLAT held that after the moratorium under Section 14 IBC, no set-off can be claimed by a creditor, and the refund is an asset of the corporate debtor to be distributed under Section 53 IBC. The bank's application for set-off was dismissed, and the liquidator's application for recovery was allowed. (Paras 1-13) B) Insolvency Law - Liquidation - Recovery of Assets - Section 36, Insolvency and Bankruptcy Code, 2016 - The liquidator is entitled to recover all assets of the corporate debtor, including Income Tax refunds received by a bank during CIRP. The bank cannot claim any right over such refunds after the moratorium. (Paras 2-10)
Issue of Consideration
Whether the Indian Bank was entitled to retain the Income Tax refund received during CIRP as a set-off against the corporate debtor's dues, and whether the liquidator could recover the said amount.
Final Decision
Both appeals dismissed. The NCLT orders dated 19.12.2024 are upheld. Indian Bank's application for set-off is dismissed, and the liquidator's application for recovery of the Income Tax refund is allowed.
Law Points
- Set-off not permissible after moratorium under IBC
- Income Tax refund is asset of corporate debtor
- Liquidator entitled to recover assets
- Section 14 IBC moratorium bars set-off
- Section 53 IBC distribution waterfall
