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2025 Supreme(Online)(NCLT) 475
NATIONAL COMPANY LAW TRIBUNAL
Sh. Praveen Gupta, Sh. Ashish Verma, JJ
MUKESH CHAND JAIN – Appellant
Versus
SECURITIES AND EXCHANGE BOARD OF INDIA – Respondent
IA(I.B.C) - 534/2023
For the Petitioner:MUKESH CHAND JAIN
The moratorium under the Insolvency and Bankruptcy Code supersedes prior regulatory freezes on accounts, allowing the Corporate Debtor to operate during the Corporate Insolvency Resolution Process.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 14 - SEBI Order - Corporate Debtor's bank account frozen due to alleged violations - Resolution Professional seeks to defreeze account to facilitate Corporate Insolvency Resolution Process (CIRP) - Court emphasizes that SEBI's freeze predates the moratorium under IBC, but must yield to the resolution plan approved by the Adjudicating Authority. (Paras 1, 12, 21)
(B) Moratorium - The moratorium under Section 14 prohibits actions against the corporate debtor, including freezing of accounts, once a resolution plan is approved. (Paras 4, 20)
(C) Claims - Claims not included in the resolution plan are extinguished upon approval, preventing further proceedings. (Paras 19, 20)
Facts of the case:
The Resolution Professional filed an application to defreeze the bank account of Varun Media Pvt. Ltd., which was frozen by SEBI due to alleged market manipulation. The Corporate Debtor was admitted into CIRP, and the RP argued that the freeze obstructs the resolution process.
Findings of Court:
The court found that the freeze on the account cannot continue following the approval of the resolution plan, as it contradicts the objectives of the IBC.
Issues: Whether the SEBI's freeze on the bank account of the Corporate Debtor can continue post-approval of the resolution plan.
Ratio Decidendi: The court ruled that the moratorium under Section 14 of the IBC supersedes SEBI's freeze order, emphasizing the need for the Corporate Debtor to operate effectively during the CIRP.
Result: The court directed SEBI to instruct ICICI Bank to remove the debit freeze on the Corporate Debtor's account.
ORDER
1. This application has been filed by the Resolution Professional i.e. Mukesh Chand Jain under Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as “Code”) r/w Rule 11 of the NCLT Rules, 2016 against the Respondent i.e. Varun Media Pvt. Ltd. to defreeze the bank account of corporate debtor. The Applicant is seeking the following relief in the instant matter: -
a) To allow the present application and direct the Respondent to give instructions to the ICICI Bank to remove the debit freeze in the Bank account of the CD;
b) To give directions simultaneously to the ICICI Bank to remove the debit freeze from the Bank account of CD;
c) To pass any other order as deemed just and proper in the circumstances.
2. This Tribunal, vide its order dated 14.07.2023, passed an order for admission of the CD into CIRP under Section 7 of the Code and appointed Mr. Pradeep Kumar Ray, as the Resolution Professional of the Corporate Debtor. The CoC in its first meeting held on 18.08.2023 approved the appointment of Mr. Mukesh Kumar Jain as Resolution Professional. This tribunal approved the same v.o.d. 15.09.2023.
3. When the newly appointed RP took over the reins of the CD from the erstwhile IRP, he was informed that the bank account of the CD with ICICI bank had been frozen on account of adverse SEBI order no. WTM/AN/ISD/ISD-SEC- 1/24333/2022-23 dated 02.03.2023. The relevant excerpt of the order has been produced hereunder:-
38.4. The banks where Notices are holding bank accounts, individually or jointly, are directed to ensure that till further directions, except for compliance of direction at paragraph 38.2 above, no debits are made in the said bank accounts without the permission of SEBI. The banks are directed to ensure that the directions at paragraph 38.2 and 38.3 are strictly enforced. On production of proof of deposit of amount as mentioned in paragraph 38.2 above, SEBI shall communicate to the banks defreeze the accounts.
4. The erstwhile IRP had also written a letter and email dated 16.09.2023 to SEBI to remove the debit freeze from the Bank account of the Corporate Debtor as the Corporate Debtor is under moratorium due to the admission order passed on 14.07.2023. Section 14 of the IBC talks about moratorium and the same has been reproduced hereunder: Section 14(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:
(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree, or order in any court of law tribunal arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest thereon:
(c) any action to foreclose, recover, or enforce any security interest created by the corporate debtor in respect of its property including action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
Section 14(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
[(2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may
