2026 Supreme(Online)(NCLT) 3174

NATIONAL COMPANY LAW TRIBUNAL
Shammi Khan, Judicial Member, Sanjeev Sharma, Technical Member
Catalyst Trusteeship Limited – Appellant
Versus
Union of India – Respondent
IA/129(AHM)2025 in CP/33(AHM)2025

In cases of alleged corporate fraud and ongoing investigations into fund diversion, the Adjudicating Authority may refuse to vacate an interim order freezing assets, even if a creditor claims a prior security interest, to ensure the preservation of the corporate estate and the integrity of the investigative process.

Headnote:(A) Companies Act, 2013 - Sections 241, 242, 246, 210, 219 and 339 - Insolvency and Bankruptcy Code, 2016 - Sections 14, 18, 25 - Interim relief - Preservation of assets - Application for vacation/modification of ex-parte ad-interim order - Applicant sought release of lien-marked funds from a reserved account during ongoing investigations into financial irregularities and corporate misconduct - Adjudicating Authority must balance contractual security interests against larger public interest, conservation of corporate assets for restitution, and the integrity of ongoing regulatory investigations. (Paras 1, 19, 21, 27, 42)

(B) Interim Order - Scope and Purpose - Adjudicating Authority, while considering interlocutory relief, is not required to conduct a mini-trial but must prioritize preservation of subject matter, balance of convenience, and irreparable prejudice to public interest. (Paras 27, 41)

Facts of the case:
A debenture trustee filed an application seeking to vacate/modify an ex-parte ad-interim order that froze bank accounts, including a specifically lien-marked Debt Service Reserve Account (DSRA), following an investigation into allegations of fund siphoning, financial mismanagement, and diversion of borrowed funds by the corporate entities. The applicant contended that their security interest over the DSRA was prior in time and contractually established, while the investigative authorities and resolution professional argued that the funds were part of the corporate debtor's assets, and that the broader investigation into missing funds and the trail of transactions required the preservation of all accounts pending further inquiry.

Findings of Court:
The court observed that the funds in question were recorded as assets of the corporate debtor in its financial statements and that the corporate debtor was undergoing insolvency proceedings. The court noted that major discrepancies and unresolved issues regarding the liquidation and diversion of substantial funds within the corporate group remained critical to the ongoing investigation. The court held that releasing the lien-marked assets at an interlocutory stage would potentially prejudice the investigation and the preservation of assets for the larger interest of stakeholders.

Issues: Whether the Adjudicating Authority should vacate an ex-parte freezing order to allow the release of lien-marked funds to a secured creditor during the pendency of a corporate insolvency resolution process and a wide-ranging financial investigation.

Ratio Decidendi: The preservation of assets, especially when there are serious allegations of fraud, fund diversion, and ongoing investigations into the misappropriation of public funds, outweighs the interest of an individual secured creditor seeking immediate enforcement of security, particularly when the creditor has already filed a claim in the insolvency resolution process.

Result: Application dismissed.