Searching Case Laws & Precedent on Legal Query.....!
Analysing the retrieved Case Laws
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query.....!
Analysing the retrieved Case Laws
Scanned Judgements…!
Initiation of Proceedings for Fraud - The Supreme Court has clarified that proceedings initiated by a bank under Section 19 of the Recovery of Debts and Bankruptcy Act, 1992, or under similar recovery laws, do not automatically constitute proceedings for 'fraud' under IBC. The definition of 'fraud' is crucial, and mere recovery or recovery proceedings do not equate to fraud unless fraud is specifically established. ["2024 Supreme(Online)(NCLAT) 945"]
Section 14 of IBC and Its Applicability - Section 14 provides a moratorium against continuation or initiation of suits or proceedings against a corporate debtor during CIRP. However, proceedings initiated for recovery or fraud under other laws (e.g., SARFAESI, recovery suits) are generally not barred unless they are part of or directly linked to the insolvency process. The Supreme Court has held that proceedings under laws like SARFAESI are subject to the moratorium, but the timing and nature of proceedings (e.g., sale initiation) are relevant. ["2024 Supreme(Online)(NCLAT) 1276"], ["2024 Supreme(Online)(NCLAT) 194"]
Proceedings for Fraud and Section 14 - The Court has distinguished between proceedings against the corporate debtor and those against personal guarantors. Proceedings against personal guarantors, or initiated for fraud, are generally outside the scope of Section 14 moratorium, especially if they are criminal or independent of CIRP. The Court emphasized that Section 14 applies primarily to proceedings against the corporate debtor, not individual or guarantor proceedings. ["2024 Supreme(Online)(Del) 31816"], ["2025 Supreme(Online)(NCLT) 5452"], ["
G. Venkatesh Babu VS State of West Bengal - Crimes
"]Initiation of Insolvency Proceedings in Cases of Fraud - The Supreme Court has observed that initiating insolvency proceedings or proceedings under Section 95 (for personal guarantors) does not automatically imply fraud. However, if proceedings are initiated based on fraudulent conduct, the Court emphasizes the need for proper proof and adherence to principles of natural justice, including audi alteram partem. ["2024 Supreme(Online)(DEL) 32834"]
Power to Recall or Set Aside Orders - Tribunals and courts possess inherent powers to recall or modify orders, especially when procedural errors or violations of principles of natural justice occur. This includes situations where proceedings are initiated for fraud but are found to be improperly initiated or without proper evidence. ["2025 Supreme(Online)(NCLT) 1132"]
Analysis and Conclusion:
The Supreme Court has consistently held that proceedings initiated solely for recovery or recovery of dues under laws like SARFAESI or under Section 19 do not automatically violate Section 14 of IBC unless they are part of or directly linked to the insolvency process. When proceedings are initiated for fraud, they are generally outside the scope of the moratorium provided under Section 14, especially against personal guarantors or in criminal contexts. The Court emphasizes the importance of establishing fraud properly and ensuring procedural fairness. Therefore, if a bank initiates proceedings for fraud without proper proof or in violation of the principles of natural justice, such proceedings could be considered against the spirit of Section 14 of IBC 2016.
References:
In the complex landscape of insolvency law in India, one burning question often arises for businesses and legal practitioners: Cases that Rule if Bank has Initiated Proceedings for Fraud then it is against Section 14 of IBC 2016. This query touches on the heart of the (IBC), particularly the under Section 14, which aims to shield during resolution processes. But does this protection extend to halting bank-initiated fraud proceedings? Let's dive into rulings and related case law to unpack this.
This post provides general insights based on judicial precedents and is not specific legal advice. Consult a qualified lawyer for your circumstances.
imposes a upon admission of a , prohibiting the initiation or continuation of suits, execution of decrees, securitization, or recovery actions against the corporate debtor. This broad shield is designed to protect the corporate debtor's assets and facilitate the resolution process, thereby preventing creditors from taking unilateral actions that could undermine this process 2023 0 Supreme(SC) 737 2017 0 Supreme(All) 921.
The has consistently interpreted this provision expansively, covering even like those under , for 2021 2 Supreme 528 2024 2 Supreme 452. As held, the imposed under prohibits the initiation or continuation of proceedings against the corporate debtor, including those under 2021 2 Supreme 528 2023 0 Supreme(Del) 1791.
However, this applies specifically to the corporate debtor and does not extend to natural persons like directors or guarantors 2022 6 Supreme 421 2023 0 Supreme(SC) 737.
Banks often initiate fraud proceedings or NI Act complaints alongside debt recovery. The key question is whether such actions are barred post-.
In landmark decisions, the clarified that Section 138/141 NI Act proceedings against the corporate debtor cannot proceed during , as they are legal proceedings concerning debts 2021 2 Supreme 528 2021 7 Supreme 29. Yet, proceedings against individuals under Section 141 remain viable, since the does not prevent the initiation of proceedings against individuals (e.g., directors) under , as they remain liable despite the corporate debtor being under 2021 0 Supreme(SC) 1070 2023 0 Supreme(Del) 1688.
Regarding fraud specifically, while Section 14 halts actions against the corporate entity, it doesn't blanket immunity. For instance, in cases involving alleged fraudulent CIRP initiation, courts have noted that fraudulent initiation of CIRP cannot be a ground to bypass alternative remedy of appeal provided in 2019 8 Supreme 741. / can inquire into , but apply, especially for public law disputes 2019 8 Supreme 741.
A related High Court ruling reinforces this: prior judgments cited as were overruled by precedents like P. Mohanraj, holding that upon admission of the ... proceedings under cannot continue against the corporate debtor and its directors after the company has been ordered to be wound up 2024 0 Supreme(Del) 282. Here, complaints against the corporate debtor and directors post-winding up must remain in once the takes over records 2024 0 Supreme(Del) 282.
The isn't absolute. Key exceptions include:
: Protection under Section 14 does not extend to . Banks can proceed against them under the 2020 0 Supreme(AP) 693 2023 0 Supreme(Ker) 800. In one case, a bank initiated IBC proceedings against of a corporate debtor, highlighting that funds routed to defeat such litigations invoke 2022 0 Supreme(Ker) 156.
Directors and Natural Persons: Directors face personal liability under NI Act Section 141, even during 2022 6 Supreme 421 2023 0 Supreme(SC) 737. Courts emphasize the impossibility for the directors to defend themselves in such criminal matters after the has taken over the records 2024 0 Supreme(Del) 282.
Fraud Probes: While corporate actions halt, individual fraud liability persists. Unilateral bank actions like account freezes for alleged diversions to defraud creditors have been struck down if lacking basis, as unilateral act of the 1st respondent-Bank to freeze the current account... cannot stand scrutiny of law 2022 0 Supreme(Ker) 156.
Other precedents provide nuance:
In , commences from CIRP admission, affecting parallel proceedings 2023 1 Supreme 376 2018 0 Supreme(AP) 822.
's inherent powers under Rule 11 don't equate to review but align with CPC principles 2025 Supreme(Online)(NCLT) 4608.
During winding up under , stay NI Act proceedings akin to IBC 2024 0 Supreme(Del) 282.
Distinguishing RBI directions under , post-resolution failure allows SARFAESI actions without violating timelines 2018 0 Supreme(AP) 822.
IBC as a complete code limits High Court interference absent jurisdictional errors, even in fraud claims 2019 8 Supreme 741 2018 0 Supreme(Bom) 1047.
These cases underscore IBC's time-bound framework, prioritizing resolution over fragmented litigation.
For banks: Focus fraud claims on individuals or guarantors; corporate proceedings pause during . Assess if actions qualify as proceedings against the corporate debtor.
For : offers , but personal exposures remain.
For directors: Prepare for separate defenses, as corporate shield doesn't cover you.
Recommendations:- Review case specifics for applicability.- Target directors/guarantors where corporate actions are barred.- Advise on personal guarantor risks during insolvency 2021 2 Supreme 528 2022 6 Supreme 421 2023 0 Supreme(SC) 737 2020 0 Supreme(AP) 693 2023 0 Supreme(Del) 1791 2023 0 Supreme(Del) 1688 2023 0 Supreme(Ker) 800 2017 0 Supreme(All) 921.
rulings affirm that Section 14 generally halts bank-initiated proceedings like NI Act cases against , including those tinged with . However, this doesn't shield directors, guarantors, or allow fraud evasion. As insolvency law evolves, these distinctions protect resolution while holding individuals accountable.
Stay informed on IBC developments—timely action can safeguard assets or enforce claims effectively. References: 2021 2 Supreme 528 2022 6 Supreme 421 2023 0 Supreme(SC) 737 2019 8 Supreme 741 2023 1 Supreme 376 2018 0 Supreme(AP) 822 2020 0 Supreme(AP) 693 2018 0 Supreme(Bom) 1047 2023 0 Supreme(Del) 1791 2023 0 Supreme(Del) 1688 2024 0 Supreme(Del) 282 2022 0 Supreme(Ker) 156 2023 0 Supreme(Ker) 800 2017 0 Supreme(All) 921 2025 Supreme(Online)(NCLT) 4608.
Word of caution: This is for informational purposes; seek professional advice.
#IBCMoratorium, #Section14IBC, #SupremeCourtRulings
The Hon’ble Supreme Court in (2011) 8 SCC 613 – Ramesh Kumar and Anr. Vs. Furu Ram and Anr. had occasion to consider the definition of ‘fraud’. In paragraph 17 and 19, following has been observed: “ 17. Section 17 of the Contract Act, 1872 defines “fraud” thus: “17.‘Fraud’ defined. ... The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, #H....
The proceedings, which were initiated by the Bank in the year 2018 under Section 19, were proceedings for recovery of dues of the Bank. Section 19 of the 1993 Act provides, filing of an Application by Bank or financial institutions to recover any debt from any person. ... The learned Counsel for the Respondent has also relied on another judgment of the Hon’ble Supreme #....
At the outset, this Court notes that Insolvency Proceedings have been initiated against the petitioner herein, in his capacity as a personal guarantor, under Section 95(1) of the IBC, 2016, by Union Bank of India, before NCLT, New Delhi. ... The applicability of interim moratorium under IBC, 2016, on the proceedings initiated by the r....
(supra) cited by the learned Senior Standing Counsel for the Official Liquidator are per incuriam in view of several pronouncements on the subject by the Supreme Court in subsequent cases. ... Code, 2016 [IBC] or for that matter upon admission of the winding up proceedings, has been addressed in P.Mohanraj (supra) and it has been categorically laid down as under: "Whether natural persons are covered by #H....
While dealing with the issue of Section 14, IBC, this Court had the occasion to deal in detail with Section 32A also. The 2nd proviso to Section 32A(1) is a complete answer to the issue in question. The said provision is discussed in detail from Paras 39-43 in P.Mohanraj's case. ... Furthermore, the Hon‟ble Supreme Court has time and again reiterated t....
The applicability of interim moratorium under IBC, 2016, on the proceedings initiated by the respondent-bank under the SARFAESI Act, cannot be excluded merely because the bank has taken possession of the property in question prior to commencement of the proceedings under the IBC, 2016. ... Thus, Supreme Court has held as follows: "xxx....
14. On the issue of limitation, the Respondent’s objection is untenable. The Hon’ble Supreme Court in Syndicate Bank v. ... Date of filing of Application u/s 95 – 14th May 2024 The Hon’ble Supreme Court, in Civil Appeal No. 6894 of 1997 (Syndicate Bank vs. ... (IB)No.151/BB/2024 filed under Section 95(1) of IBC, 2016#HL_END....
Rule 11 is similar to Section 151 CPC, while Rule 154 is similar to Section 152 of CPC. Rule 154 is about correcting clerical error, thus, not connected with the review or recall of order. The judgment in Union Bank of India versus Dinakar T. ... While there is no statutory power of review, the NCLT may exercise its inherent powers under Rule 11 of the NCLT Rules, #HL_S....
But by the order of the National Company Law Tribunal, passed on 7th August, 2017, the company, at the instance of the creditor under the Insolvency and Bankruptcy (Application of Adjudicating Authority) Rules, 2016 slipped into moratorium under Section 14 of the IBC and Sri Savan Godiawala was appointed ... The complainant had the obligation to participate and lodge its claim before the Resolution Professional but the emb....
As in what type of cases such power can be exercised, the Hon’ble NCLAT in Union Bank of India versus Dinakar T. ... 14. Therefore, the Hon’ble High Court only directed the Registrar concerned to process the document as per law. The Registrar was not competent to register the document in view of embargo under Section 14 of the IBC. ... Inherent power to recall its own ....
During the pendency of the arbitral proceedings, IDBI Bank Ltd. initiated insolvency proceedings against the first respondent under the Insolvency and Bankruptcy Code 2016.4 [“IBC”]
Now, the Bank has initiated IBC proceedings against the personal guarantors of Green Gateway Leisure Limited. It is to defeat these litigations that funds were routed through the petitioner-Company. 7. The respondents argued that the diversion of funds was with the intention to defraud the creditors including the 1st respondent-Bank. Therefore, the respondents invoked powers available to them under Section 171 of the Indian Contract Act and disallowed the withdrawal of the am....
In fact the right not to be dispossessed, found in Section 14 (1) (d), will have nothing to do with the rights conferred by a mining lease especially on a government land. Therefore nothing turns on Section 14 of IBC, 2016. Even Section 14 (1) (d), of IBC, 2016, which prohibits, during the period of moratorium, the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor, will not go to the rescue of the co....
Therefore, the moratorium under Section 14 of IBC, 2016 has come into force. The National Company Law Tribunal ordered notice on 13.2.2018 in the said application and it was eventually admitted on 10.10.2018. It is clear from the decision of the Supreme Court in Arcelormittal India Private Limited v. Satish Kumar Gupta and others, decided on 4.10.2018 that the corporate insolvency resolution process commences from the date of admission of the application. Therefore, on and af....
Whereas in the winding up petition pending before the Company Court, ultimate approach and object is to wound up the company. Taking into consideration the statutory scheme of the IBC, 2016, we are of the view that NCLT constitutes a separate and distinct forum and it cannot be attributed to be a subordinate forum to the Company Court as constituted under the Companies Act. Even under the IBC, if efforts to revive the company fails, then the liquidation proceedings get initiated unde....
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