NCLT Kolkata (2026.03.27) in Shri Santanu T Ray, RP vs Axis Bank Limited [I.A. (IBC) 1521(KB) of 2025 In C.P. (IBC) 254(KB) of 2019] held that;-
A conjoint reading of the above provisions makes it clear that the Resolution Professional is duty bound to take control and custody of all assets of the Corporate Debtor and the banks are equally obligated to facilitate such control.
The overriding effect of Section 238 of the Code leaves no manner of doubt that any action taken by any authority, including statutory authorities, which is inconsistent with the provisions of the Code, cannot be sustained.
In that view of the matter, the procedural requirement as envisaged under the aforesaid Circular cannot be applied retrospectively so as to defeat or delay the relief sought in the present application, particularly when the issue pertains to custody and control of the assets of the Corporate Debtor during subsistence of CIRP.
Moreover, the statutory mandate under Section 25(2)(a) of the Code, coupled with the overriding effect under Section 238, continues to govern the field and obligates the Resolution Professional to take immediate control and custody of the assets of the Corporate Debtor.
Accordingly, notwithstanding the said Circular, we are of the considered view that the asset in question, i.e., the term deposit, is liable to be brought under the control and custody of the Resolution Professional for the purposes of CIRP.
Excerpts of the Order;
# 1. I.A. (IBC) 1521(KB) of 2025
1.1 The instant application has been preferred by Mr. Santanu Ray, RP, seeking orders upon Axis Bank to de-attach term deposit of the Corporate Debtor held with them so that the RP could take control and custody of the said deposit as required under Section 25(2)(a) praying for the following reliefs:-
a. Allow the present application;
b. The Respondent - Axis Bank Limited, Nagpur branch be directed to de-attach a term deposit held in the name of the Corporate Debtor in account number 911040013677029 having a balance of Rs.26,67,757/- comprising of principal and accrued interest as on 31.12.2023;
c. The Respondent be directed to handover control and custody of the term deposit to the RP in terms of Section 25(2)(a);
d. The Respondent be directed to act on the instructions of the Applicant in relation to the term deposit accounts and furnish all information relating to the corporate debtor available with them to the Applicant in terms of Section 17(1)(d);
e. No encumbrance or 3rd party rights to be created during pendency of this application;
f. The amount lying in the term deposit not to be appropriated towards dues of any creditor of the corporate debtor during pendency of this application;
g. Costs;
h. Ad-interim orders;
i. Issue such other necessary orders as may be deemed fit in the matter.
2. Background of the Case
2.1 The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Adjudicating Authority vide order dated 13.12.2019 passed in Company Petition (IB) No. 219/IB/2019 under Section 7 of the Insolvency and Bankruptcy Code, 2016. Pursuant thereto, the Applicant herein was appointed as the Interim Resolution Professional (IRP), which appointment was duly communicated on 26.12.2019.
2.2 In compliance with the provisions of the Code, the Applicant made a public announcement in Form-A on 27.12.2019 in widely circulated newspapers, inviting claims from creditors. Upon receipt and verification of claims, the Committee of Creditors (CoC) was constituted and the first CoC meeting was convened on 27.01.2020, wherein the Applicant was confirmed as the Resolution Professional with 100% voting share. The said appointment was taken on record by this Adjudicating Authority vide order dated 06.02.2020.
2.3 During the pendency of the CIRP, the suspended director of the Corporate Debtor preferred an appeal under Section 61 of the Code before the Hon’ble NCLAT challenging the admission order dated 13.12.2019. The Hon’ble NCLAT, vide interim order dated 07.02.2020, inter alia, directed that the CoC shall not approve any resolution plan during pendency of the appeal.
2.4 It is pertinent to note that prior to the said interim order, the CoC had already been constituted by the Applicant in accordance with the CIRP Regulations and a report certifying the same had been filed before this Adjudicating Authority.
2.5 The appeal preferred by the suspended director came to be dismissed by the Hon’ble NCLAT vide order dated 04.10.2021, thereby vacating the interim restrictions. In view of the time lost during pendency of the appeal, the CoC resolved to seek exclusion of the said period, and this Adjudicating Authority vide order dated 16.12.2021 was pleased to allow exclusion of 615 days from the CIRP period.
2.6 Thereafter, efforts were undertaken for revival of the Corporate Debtor by issuance of Form-G inviting Expression of Interest (EOI). However, no EOI was received within the stipulated period. Consequently, in the 7th CoC meeting, the members deliberated upon initiation of liquidation proceedings. The resolution for liquidation was approved with 83.58% voting share.
2.7 In pursuance thereof, the Applicant filed an application seeking initiation of liquidation. However, during the pendency of the said application, the suspended director challenged the NCLAT order before the Hon’ble Supreme Court by way of Civil Appeal No. 1031 of 2022, and the Hon’ble Supreme Court vide order dated 04.03.2022 stayed further proceedings before this Adjudicating Authority.
2.8 The said Civil Appeal came to be finally dismissed by the Hon’ble Supreme Court vide judgment dated 22.10.2024, thereby affirming the CIRP initiation and bringing finality to the proceedings.
2.9 Subsequent thereto, the CoC, being of the view that revival of the Corporate Debtor was still feasible, resolved to withdraw the liquidation application and to undertake fresh steps for resolution. Accordingly, an application was filed seeking withdrawal of liquidation proceedings, exclusion of further period, and extension of CIRP, which was allowed by this Adjudicating Authority vide order dated 27.02.2025.
2.10 Pursuant thereto, fresh Form-G was issued on 24.03.2025 inviting resolution plans. Two prospective resolution applicants submitted their plans within the prescribed timeline. Considering the time required for evaluation and negotiations, further extension of CIRP period was granted by this Adjudicating Authority vide order dated 10.06.2025.
2.11 The CIRP is presently ongoing, and the CoC is in the process of considering the resolution plans, with further time having been sought for completion of the process.
# 3. Fact in a nutshell -:
3.1 While conducting the CIRP and upon scrutiny of the financial records and bank statements of the Corporate Debtor, the Resolution Professional discovered that the Corporate Debtor is maintaining a term deposit bearing account no. 911040013677029 with Axis Bank, Nagpur branch, originally created on 09.03.2011.
3.2 The said term deposit presently holds a sum of Rs.26,67,757/- as on 31.12.2023, inclusive of principal and accrued interest, and constitutes a valuable asset of the Corporate Debtor forming part of the insolvency estate.
3.3 It is the statutory duty of the Resolution Professional under Section 25(2)(a) of the Code to take control and custody of all assets of the Corporate Debtor. Further, under Section 17(1)(d), the financial institutions maintaining accounts of the Corporate Debtor are obligated to act upon the instructions of the Resolution Professional and provide complete access and information in relation to such accounts.
3.4 However, upon inquiry with the Respondent Bank, the Applicant was informed that a lien has been marked on the said term deposit by the Income Tax Department on 27.09.2023 and subsequently by the Enforcement Directorate on 24.10.2024.
3.5 The Applicant submits that the imposition of such lien during the subsistence of CIRP is in clear violation of the moratorium imposed under Section 14 of the Code, which expressly prohibits any action to foreclose, recover or enforce any security interest or to create any encumbrance over the assets of the Corporate Debtor.
3.6 It is further submitted that the Income Tax Department has already filed its claim before the Resolution Professional, which has been duly admitted. Therefore, any attempt to secure its dues by way of lien over the assets of the Corporate Debtor dehors the mechanism provided under the Code is impermissible in law.
3.7 The Applicant has addressed several communications and emails to the Respondent Bank requesting removal of the lien and release of the term deposit in favour of the Resolution Professional. However, no effective steps have been taken by the Respondent to comply with the provisions of the Code.
3.8 The Applicant submits that in view of Section 238 of the Code, the provisions of the Code have overriding effect over all other laws, and therefore, any action by statutory authorities resulting in encumbrance over the assets of the Corporate Debtor during moratorium cannot be sustained.
3.9 In the aforesaid circumstances, the present application has been preferred seeking necessary directions against the Respondent Bank to remove the lien, hand over control and custody of the term deposit to the Resolution Professional, and ensure that the said asset remains available for resolution of the Corporate Debtor in accordance with the provisions of the Code.
# 4. Analysis and Findings -:
4.1 We have gone through the case file carefully and perused the pleadings of the parties and documents placed on record by the parties and heard the arguments put forth by learned Counsels for the parties; and after hearing the learned counsels for the parties, we shall now proceed to consider the present petition on its merits, specifically within the ambit of points involved in the instant application.
4.2 The present application has been filed by the Resolution Professional seeking directions against the Respondent Bank for removal of lien marked on the term deposit of the Corporate Debtor and for handing over control and custody of said asset to the Resolution Professional.
4.3 It is not in dispute that the Corporate Debtor is undergoing Corporate Insolvency Resolution Process (CIRP) and that moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 is in force. It is also not in dispute that the term deposit in question constitutes an asset of the Corporate Debtor.
4.4 The short question which arises for consideration is whether the lien created by the Income Tax Department and Enforcement Directorate during the subsistence of CIRP can be sustained in view of the statutory moratorium.
4.5 Before proceeding further, it is apposite to refer to Section 25(2)(a) of the Insolvency and Bankruptcy Code, 2016, which reads as under:
“25.Duties of resolution professional.—
….
(2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:—
(a) take immediate custody and control of all the assets of the corporate debtor including the business records of the corporate debtor;”
4.6 Section 17(1)(d) of the Insolvency and Bankruptcy Code, 2016, which reads as under:
“17. Management of affairs of corporate debtor by interim resolution professional. –
(1) From the date of appointment of the interim resolution professional, -
….
(d) the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional.”
4.7 Further, Section 17(1)(d) mandates that financial institutions shall act on the instructions of the Resolution Professional in relation to the accounts of the Corporate Debtor and furnish all necessary information.
4.8 A conjoint reading of the above provisions makes it clear that the Resolution Professional is duty bound to take control and custody of all assets of the Corporate Debtor and the banks are equally obligated to facilitate such control.
4.9 In the present case, the lien on the term deposit has been created by statutory authorities during the CIRP period. Such an act directly falls foul of the moratorium imposed under Section 14 of the Code.
4.10 The Hon’ble Supreme Court in Pr. Commissioner of Income Tax v. Monnet Ispat and Energy Ltd [(2018) ibclaw.in 30 SC]
“Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-Tax Act. We may also refer in this Connection to (2000) 5 SCC 694 and its progeny, making it clear that income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons. We are of the view that the High Court of Delhi, is, therefore, correct in law.”
4.11 The Hon’ble NCLAT in Directorate of Enforcement v. Manoj Kumar Agarwal [(2021) ibclaw.in 182 NCLAT] has categorically held as follows-:
“41. Alternatively, even if for any reason it was to be held that Section 14 of IBC would not help, it appears to us that Section 238 of IBC would still apply. Although it is argued that PMLA is a special statute and has an overriding effect still Section 238 of IBC is also a special statute and which is subsequent statute. IBC has specific object, which is to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of value of assets of such persons and to promote entrepreneurship, availability of credit and balance the interest of all stakeholders including alteration in the order of priority of payment of Government dues.
Section 238 of IBC reads as under:
“238. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”
If this Section is perused, the provisions of this Code would have effect notwithstanding anything inconsistent therewith contained “in any other law” for the time being in force. Section 238 of IBC does not give overriding effect merely to Section 14. The other provisions also are material, and will have effect if there is anything inconsistent therewith contained in any other law for the time being in force. Thus if the Authorities under PMLA on the basis of the attachment or seizure done or possession taken under the said Act resist handing over the properties of the Corporate Debtor to the IRP/RP/Liquidator the consequence of which will be hindrance for them to keep the Corporate Debtor a going concern till resolution takes place or liquidation proceedings are completed, the obstructions will have to be removed.”
4.12 In the present case, the Income Tax Department has already filed its claim before the Resolution Professional and the same has been admitted. Therefore, any attempt to secure its dues by creating lien over the assets of the Corporate Debtor dehors the IBC framework is not permissible.
4.13 The overriding effect of Section 238 of the Code leaves no manner of doubt that any action taken by any authority, including statutory authorities, which is inconsistent with the provisions of the Code, cannot be sustained.
4.14 The Respondent Bank, being a financial institution, is statutorily obligated under Section 17(1)(d) to act on the instructions of the Resolution Professional. Failure to remove the lien and handover custody of the asset is in violation of the provisions of the Code.
4.15 At this juncture, we also take note of the Circular No.IBBI/CIRP/87/2025 dated 04.11.2025 issued by the Insolvency and Bankruptcy Board of India (IBBI), wherein it has been advised that in cases where assets of the Corporate Debtor are attached by the Enforcement Directorate under the provisions of the Prevention of Money Laundering Act, 2002, the Insolvency Professional may approach the Special Court under Section 8(7) or 8(8) of the PMLA for restitution of such assets.
4.16 The said Circular further provides for furnishing of an undertaking by the Insolvency Professional before the Special Court to facilitate restitution of such attached assets.
4.17 While we are mindful of the aforesaid Circular and the procedure contemplated therein, it is pertinent to note that the present Interlocutory Application was registered on 24.09.2025 and was reserved for orders on 03.11.2025, i.e., prior to the issuance of the said Circular dated 04.11.2025.
4.18 In that view of the matter, the procedural requirement as envisaged under the aforesaid Circular cannot be applied retrospectively so as to defeat or delay the relief sought in the present application, particularly when the issue pertains to custody and control of the assets of the Corporate Debtor during subsistence of CIRP.
4.19 Moreover, the statutory mandate under Section 25(2)(a) of the Code, coupled with the overriding effect under Section 238, continues to govern the field and obligates the Resolution Professional to take immediate control and custody of the assets of the Corporate Debtor.
4.20 Accordingly, notwithstanding the said Circular, we are of the considered view that the asset in question, i.e., the term deposit, is liable to be brought under the control and custody of the Resolution Professional for the purposes of CIRP.
4.21 In view of the foregoing discussion and in light of the judicial pronouncements referred hereinabove, the present application is allowed.
4.22 Accordingly, the following directions are issued:
i. The Respondent, Axis Bank Limited, Nagpur Branch, is hereby directed to remove/de-attach the lien marked on the term deposit bearing account no. 911040013677029 held in the name of the Corporate Debtor;
ii. The Respondent shall handover control and custody of the said term deposit, having a balance of Rs.26,67,757/- (as on 31.12.2023), to the Resolution Professional forthwith in terms of Section 25(2)(a) of the Insolvency and Bankruptcy Code, 2016;
iii. The Respondent shall act strictly in accordance with the instructions of the Resolution Professional and furnish all requisite information relating to the account in compliance with Section 17(1)(d) of the Code;
iv. It is directed that no encumbrance or third-party rights shall be created over the said term deposit during the subsistence of CIRP;
v. The amount lying in the term deposit shall not be appropriated towards dues of any creditor and shall form part of the assets of the Corporate Debtor;
vi. The above directions shall be complied with within a period of two weeks from the date of receipt of this order.
4.23 The instant I.A. (IBC) 1521(KB) of 2025 is allowed in terms of the above.
4.24 I.A. (IBC) 1521(KB) of 2025 in C.P. (IB) 254(KB) of 2019 is disposed off accordingly.
4.25 The Registry is directed to send copies of the Order forthwith to all the parties and their representative for information and for taking necessary steps.
4.26 Certified copies of this order, if applied for with the Registry of this Adjudicating Authority, be supplied to the parties upon compliance with all requisite formalities.
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