NCLT Amaravati Orders Restoration Of Funds Misappropriated By Suspended Director After CIRP Commencement Date

The National Company Law Tribunal (NCLT), Amaravati Bench , has issued a stern directive in a corporate insolvency matter , underscoring the absolute authority of the Interim Resolution Professional (IRP) once a company enters the Corporate Insolvency Resolution Process (CIRP) . Presided over by Judicial Member Shri Kishore Vemulapalli and Technical Member Shri Umesh Kumar Shukla, the bench ordered the suspended director of Suvarnabhoomi Infra Developers Private Limited to restore ₹63,92,500 to the company’s designated CIRP account.

Case Background

The dispute arose following the admission of Suvarnabhoomi Infra Developers Private Limited into CIRP on January 20, 2026 . Upon this admission, a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016 , took effect, and the management of the firm transitioned from the Board of Directors to the appointed IRP. Despite receiving formal notification of these proceedings via email, WhatsApp, and personal service, the suspended director, Sridhar Bollineni, continued to manage the company's ICICI Bank account, executing transfers totaling ₹63,92,500 shortly after the moratorium began.

Arguments Presented

The IRP argued that the unauthorized bank transactions constituted a direct violation of Sections 14 and 17 of the IBC , which mandate that all management powers vest exclusively in the IRP following CIRP initiation.

Conversely, legal counsel for the respondent argued that the IRP had failed to demonstrate any " fraudulent intent " behind the transfers. Furthermore, the defense contended that the liability for such transactions should rest with the beneficiaries of the funds rather than the suspended director himself. The tribunal ultimately found these arguments insufficient to override the statutory prohibitions of the Code.

Legal Analysis

The tribunal relied heavily on established jurisprudence , specifically citing the decision in Anoop Bhatia vs. Vikas Jeph , which was upheld by the National Company Law Appellate Tribunal (NCLAT) . This precedent establishes that once the moratorium is in place, the suspended management loses all authority to alienate assets . The court clarified that the IRP’s role is to maintain the status quo and preserve the corporate debtor ’s assets for the benefit of all creditors , a duty that cannot be bypassed by the former management.

Key Observations

The tribunal articulated the gravity of the violation through the following observations:

  • "Upon admission of the Corporate Debtor into CIRP, the management of the affairs of the Corporate Debtor vested exclusively with the IRP under Section 17 of the Code and the powers of the Board of Directors stood suspended."
  • "Any operation of the bank account or transfer of funds by the Suspended Board without the authorization of the IRP constitutes a clear violation of Sections 14 and 17 of the Code ."
  • "Once the Order for initiating CIRP of the Corporate Debtor is passed, the moratorium under Section 14 is imposed and the Suspended Directors of the Corporate Debtor shall not transfer/alienate/dispose off the assets of the Corporate Debtor without the due permission from the IRP."

Court's Decision

Finding the respondent in clear contravention of the IBC, the NCLT Amaravati directed the restoration of the full amount of ₹63,92,500 to the designated Central Bank of India CIRP account within two weeks. The court further warned that failure to comply with this order would grant the IRP liberty to pursue further appropriate legal action, reinforcing that the sanctity of the insolvency process must be strictly maintained.