Unauthorised Post-CIRP Transactions Held Void Under IBC Moratorium: NCLAT Upholds Refund Direction
- REEDLAW
- Jun 3
- 3 min read
NCLAT held that unauthorised post-CIRP transactions were void under the IBC moratorium and upheld the direction for refund to the Corporate Debtor.
On 30 May 2025, the National Company Law Appellate Tribunal (NCLAT), Principal Bench—comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka—held that any transaction made from the account of a Corporate Debtor after the commencement of CIRP and declaration of moratorium, without prior authorisation from the IRP/RP, is void under Section 14(1)(b) of the IBC, irrespective of its intent or purpose. Such unauthorised payments must be reversed and restored to the Corporate Debtor’s estate.
The National Company Law Appellate Tribunal (NCLAT), in an appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, considered the legality of certain transactions undertaken by the suspended management of M/s Sunil Hitech Engineers Ltd. during the Corporate Insolvency Resolution Process (CIRP). The appeal, filed by the ex-promoter, challenged the order dated 04.02.2025 of the NCLT, Mumbai Bench-I, which had allowed the Resolution Professional’s (RP) application under Section 74(1) of the IBC. The application sought reversal of transactions worth ₹11.01 crore made post-CIRP commencement by the Appellant and the Chief Financial Officer (Respondent No. 6) to certain operational creditors (Respondent Nos. 2 to 5), and held them jointly and severally liable for refund.
The NCLAT examined the factual matrix and statutory provisions in detail. It was undisputed that the CIRP had commenced on 07.09.2018, and the moratorium under Section 14 came into effect from 10.09.2018. The RP submitted that all impugned transactions, comprising nine RTGS payments and three cheque encashments, were executed after the moratorium took effect, and without authorisation from the Interim Resolution Professional (IRP). This was substantiated by an email dated 08.12.2019, wherein the IRP confirmed that only payments approved by the CoC and routed through the designated UCO Bank account were valid. The subject transactions, however, had been made from a different account and without prior knowledge or sanction of the IRP.
The Appellant attempted to justify the payments on the grounds that they were routine and aimed at maintaining the Corporate Debtor as a going concern. He also argued that the cheque instruments were issued prior to the commencement of the moratorium. The Tribunal rejected this line of defence, holding that once the moratorium was in effect, no payments could be made from the Corporate Debtor’s account unless expressly approved by the IRP. The Tribunal emphasised that the IBC’s framework did not permit post-moratorium transactions, regardless of intent or the operational exigencies cited.
Further, the NCLAT addressed the issue of the three cheques, which, although dated before 10.09.2018, were encashed subsequently. It upheld the Adjudicating Authority’s view that these were likely antedated and deliberately encashed after the moratorium commenced. The Tribunal declined to accept the Appellant’s reliance on Pratim Bayal Resolution Professional of Rajpratim Agencies Pvt. Ltd. v. Tata Motors Finance Solutions Limited, REEDLAW 2023 NCLAT Del 10525, instead affirming the principle laid down in SREI Equipment Finance Limited v. Amit Gupta, REEDLAW 2019 NCLAT Del 03553, which prohibits any recovery from the Corporate Debtor’s account after moratorium, even through pre-dated cheques.
The argument regarding differential treatment of similarly placed creditors was also dismissed, with the Tribunal holding that no claim of parity can be entertained where the underlying transaction is unlawful. It clarified that even if some transactions were overlooked, that did not justify allowing similar illegality elsewhere. The RP's duty to act in accordance with the IBC was upheld, and his move to seek reversal and reappropriation of funds into the Corporate Debtor's estate was found justified.
In summation, the NCLAT affirmed the NCLT’s findings and upheld the direction for the Appellant and Respondents 2 to 6 to refund ₹11.01 crore to the Corporate Debtor. It also found no fault with the referral of the matter to the Insolvency and Bankruptcy Board of India (IBBI) and dismissed the appeal, while permitting Respondents 2 to 5 to file claims for the said amounts before the RP or Liquidator in accordance with law.
Ms. Honey Satpal, Mr. Akash Agarwalla, Ms. Pooja Singh, and Mr. Kanishk Khollar, Advocates, represented the Appellant.
Mr. J. Rajesh, Mr. Dhrupad Vaghani, Md. Arsalam Ahmad and Mr. Yashwardhan Aggarwal, Advocates, appeared for the Respondents.
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