Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + Tri Insolvency and Bankruptcy - 2020 (10) TMI Tri This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (10) TMI 271 - Tri - Insolvency and BankruptcyCIRP Process - priority of payment of dues - Whether it is permissible under the provisions of IBC for the Corporate Debtor to repay the debts of one of the many financial creditors in preference to other financial creditors after initiation of CIRP and invocation of moratorium u/s 14 of the Code? HELD THAT:- The main reason for prohibition of various actions is to provide for a calm period to the Corporate Debtor during which a resolution can be arrived at. Such calm period ensures keeping the corporate debtor's assets together during the insolvency resolution process so that the corporate debtor may continue as a going concern while the creditors take a view on the resolution of default and cannot resort to individual enforcement action which may frustrate the objectives of the CIRP and the Code - It is pertinent to emphasize here that Clause (b) of Section 14(1) clearly and categorically prohibits any transfer or alienation of assets, legal rights or beneficial interest therein by the Corporate Debtor to any person. Cash in hand and in bank accounts are liquid assets of the Corporate Debtor. Therefore any preferential payment to any creditor during the period of CIRP will squarely fall within this prohibition. It is not permissible under the provisions of IBC for the Corporate Debtor to repay the debts of one of the many financial creditors in preference to other financial creditors after initiation of CIRP and invocation of moratorium u/s 14 of the Code - the question answered in negative - application dismissed.
|