2021 (6) TMI 729 - Tri - Insolvency and Bankruptcy

Seeking release of attached Bank Accounts - moratorium was already imposed - seeking restraint from transferring or making payments from the bank account of the Corporate Debtor maintained with it to any third party - HELD THAT - This Bench is of the considered view that in view of the admission of CIRP on 25.09.2019 moratorium is imposed instantaneously the order of Respondent No. 2 directing Respondent No. 1 to freeze the account of the Corporate Debtor vide an order of attachment dated 21.11.2020 is in contravention of the moratorium imposed under section 14 of the Code and interferes with the role of the RP in managing the affairs/business and management of the Corporate Debtor under section 17 18 20 and 23 of the Code. In view of section 25 the RP is duty bound to take immediate control of all the assets of the Corporate Debtor and hence has rightly sought for the defreezing action from the Respondent No. 1 - The Respondent No. 1 further has appeared in the Court and indicated that they have no objection for defreezing the bank account. The order of attachment passed by the Respondent No. 2 i.e. The Assistant Collector Division-19 Commercial Tax Lucknow dated 21.11.2020 is hereby set aside - application allowed.

Summary

Issues:
1. Freezing of bank account of Corporate Debtor.
2. Validity of order of attachment by Respondent No. 2.
3. Compliance with moratorium under section 14 of the Code.
4. Role of Resolution Professional in managing affairs of Corporate Debtor.
5. Failure of Respondent No. 2 to appear before the Tribunal.

Analysis:

Freezing of Bank Account:
The Resolution Professional (RP) filed an application seeking the removal of the "no debit" status on the Corporate Debtor's bank account imposed by Respondent No. 1. The bank account was frozen due to an order of attachment by Respondent No. 2 for outstanding commercial tax dues. The RP argued that the freezing of the account hindered the RP's ability to manage the affairs of the Corporate Debtor as per the Insolvency and Bankruptcy Code (Code). The Respondent No. 1 eventually agreed to defreeze the account.

Validity of Attachment Order:
The Tribunal found that the order of attachment by Respondent No. 2 was issued after the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal held that the attachment order contravened the moratorium imposed under section 14 of the Code, interfering with the RP's role in managing the Corporate Debtor's affairs.

Compliance with Moratorium:
Citing legal precedents, the Tribunal emphasized that the moratorium under section 14 of the Code takes effect immediately upon admission of CIRP. The Tribunal held that any action, such as freezing the bank account, which obstructs the RP's control over the Corporate Debtor's assets during the moratorium period is impermissible.

Role of Resolution Professional:
The Tribunal highlighted the RP's duty to take control of all assets of the Corporate Debtor under section 25 of the Code. It recognized the RP's right to seek defreezing of the bank account to fulfill obligations under the Code. The RP's authority to manage the Corporate Debtor's affairs was upheld by the Tribunal.

Failure of Respondent No. 2 to Appear:
Despite being served notice, Respondent No. 2 failed to appear before the Tribunal. The Tribunal directed Respondent No. 2 to file its claim regarding outstanding commercial tax dues with the RP of the Corporate Debtor.

In conclusion, the Tribunal set aside the attachment order, directed the refund of the debited amount, and ordered the immediate defreezing of the bank account. The application was allowed, and the matter was disposed of based on the Tribunal's order.