The moratorium under the IBC prevents creditors from adjusting dues against a Corporate Debtor during insolvency proceedings, ensuring equitable treatment of all stakeholders.

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 (‘IBC’ in short) by the Appellant arises out of the Order dated 16.06.2023 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench-IV in IA-117/2022 in CP (IB) No. 3269/MB-IV/2019. By the impugned order, the Adjudicating Authority dismissed the application filed by the Liquidator seeking direction to the present Respondents for refund of an amount of Rs. 90,42,174/- which had been adjusted by them against outstanding tax liability of the Corporate Debtor while moratorium under Section 14 of the IBC was in effect. Aggrieved by this order, the present appeal has been preferred by the Liquidator – Appellant.

2. The chronological sequence of events of the present case which are necessary to be noticed for consideration of the matter by us is as hereunder:

 M/s Kotak Urja Pvt Ltd was admitted into Corporate Insolvency Resolution Process (‘CIRP’ in short) on 18.11.2019. The present Appellant was appointed as the Resolution Professional (‘RP’ in short).

 The RP had informed Respondent about the admission of the Corporate Debtor into CIRP following which the Respondent filed a claim with the RP for an amount of Rs.11.59 cr on 20.01.2020. The said claim was admitted by the RP.

 While moratorium was in force, on 10.02.2021, an amount of Rs.90.42 lakhs received towards tax refund was adjusted by the Respondent against outstanding tax demands.

 The Committee of Creditors (‘CoC’ in short) passed a resolution for liquidation of the Corporate Debtor on 04.01.2021 following which the RP filed an application before the Adjudicating Authority for this purpose on 18.05.2021.

 While the liquidation proceedings were pending before the Adjudicating Authority, the RP sent letters to the Respondent on 03.12.2021 and 07.01.2022 to refund the amount adjusted by them against outstanding income tax dues.

 The RP filed I.A. No. 117/2022 before the Adjudicating Authority praying for issue of directions to the Respondents to refund Rs.90.42 lakhs which had been adjusted against alleged tax liability of the Corporate Debtor.

 The liquidation order was passed on 03.10.2022 and the present RP was appointed as the Liquidator.

 The Respondent filed a claim of Rs.10.69 cr before the Liquidator on 01.02.2023 which was admitted by the Appellant/Liquidator.

 The Adjudicating Authority vide orders dated 16.06.2023 dismissed I.A.No. 117/2022. Aggrieved by the impugned order, the present appeal has been filed.

3. We have heard Ms. Anjali Sharma, Learned Counsel for the Appellant and Shri Sanjay Kumar, Learned Counsel appearing on behalf of the Respondents.

4. Making her submissions, the Learned Counsel for the Appellant contended that the Adjudicating Authority had failed to appreciate the statutory provisions of IBC in the right perspective by not taking notice of the fact that the provisions of IBC do not permit the Corporate Debtor to make any adjustment/set off to pay outstanding dues to creditors when CIRP proceedings are continuing and moratorium is in effect. It was submitted that Section 14 (4) of the IBC provides that the order of moratorium takes effect from the date of such order and subsists till the completion of the CIRP. In the present case, though CIRP period had come to an end on 21.12.2020, the CIRP process kept continuing until the liquidation order was passed on 03.10.2022. Since CIRP was continuing, moratorium also continued and, hence, the Respondent during this per