NCLT Rules Moratorium Doesn't Block Return of Mistaken Fund Transfers
Tribunal Orders Reversal of Funds Erroneously Transferred to Intec India Ltd During Insolvency Process
The National Company Law Tribunal (NCLT) in New Delhi has delivered a significant ruling clarifying the scope of moratoriums under the Insolvency and Bankruptcy Code, 2016. On September 4, 2025, the tribunal, comprising Judicial Member Ms. Jyotsna Sharma and Technical Member Ms. Anu Jagmohan Singh, addressed the issue of funds mistakenly transferred into the account of Intec India Limited, a company undergoing insolvency proceedings.
In the case of Mr. B. A. Chandrasherkara Setty and others versus M/s. Intec India Limited, the tribunal was tasked with deciding whether the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, which restricts activities involving the assets of a corporate debtor, also applied to funds erroneously credited to the debtor’s account. The applicant, MECON Limited, sought the return of Rs. 35,22,923.62 and Rs. 14,39,566.33 that were mistakenly sent to Intec India's Yes Bank account instead of the intended recipient, Intec Infonet Private Limited.
The tribunal, after reviewing submissions from both sides, concluded that the moratorium does not extend to funds that are not assets of the corporate debtor but are held in trust for another party. The members observed that the legislative intent behind the moratorium is not to impose a blanket ban on all operations of the debtor's bank accounts, especially in cases involving funds belonging to outsiders. The tribunal stated that such funds should be returned either to the rightful beneficiary or to the original transferor, MECON Ltd.
The ruling directed the Resolution Professional managing Intec India's insolvency to facilitate the reversal of the funds to MECON Ltd. or the intended beneficiary. It also instructed relevant bank officers to cooperate in the retransfer process.
This judgment reaffirms the principle that moratorium provisions are designed to protect the assets of the debtor that are rightfully theirs and not to unjustly retain funds belonging to others due to an administrative error.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Section 14 - Moratorium on the corporate debtor's bank account does not extend to funds erroneously transferred into the account, as such funds are not assets of the corporate debtor but are held in trust for the rightful beneficiary.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Section 14
