NCLAT (2025.07.31) in Axis Bank Ltd. Vs Asset Reconstruction Company (India) Ltd. and Ors. [(2025) ibclaw.in 564 NCLAT, Company Appeal (AT) (Insolvency) No. 1975, 1977, 1978 & 1979 of 2024 with Company Appeal (AT) (Insolvency) No. 2003. 2005, 2006 & 2192 of 2024] held that;
The effect and consequences of the interim order dated 07.03.2023 passed by this Tribunal, staying the operation of the admission order dated 22.02.2023 shall be that the order dated 22.02.2023 shall be treated to have been kept in abeyance, but shall not be treated to have been quashed.
On passing of the interim order dated 07.03.2023, staying the admission order dated 22.02.2023, the status quo prevailing prior to passing of the order dated 22.02.2023, shall not be revived.
On passing of the interim order dated 07.03.2023, staying the admission order, the moratorium, which commenced on 22.02.2023, shall be kept in abeyance, but shall not be treated to be quashed, however, the nature of proceedings, i.e. proceedings in rem shall continue to be the same, even after the stay order dated 07.03.2023.
Excerpts of the Order;
# 22. From the submissions made by the Counsel for the parties and materials on record, following are the questions which need to be answered in these Appeals:
(I) What is the effect and consequences of the interim order dated 07.03.2023 passed by this Tribunal staying the operation of the order of admission dated 22.02.2023?
(II) Whether status quo prevailing prior to passing of the order dated 22.02.2023 shall be restored in view of the interim order dated 07.03.2023?
(III) What is the effect on the Moratorium which commenced on 22.02.2023 by admitting Section 7 application, on passing of an interim order dated 07.03.2023?
(IV) Whether application IA No.126 of 2024 filed by ARCIL praying for reversal of the amount withdrawn by Axis Bank and other lenders during the stay period was barred by principle of res judicata, issue estoppel and merger?
(V) Whether on principle of restitution, the lenders who have withdrawn the money from the account of the Corporate Debtor during period of interim stay which came to end on 10.08.2023 when Appeal was dismissed, were obliged to reverse the amount in the account of Corporate Debtor?
(VI) Whether findings and observations made by the Adjudicating Authority in paragraph 78 against the Resolution Professional deserves to be set aside?
(VII) Whether order of the Adjudicating Authority dated 01.10.2024 rejecting prayer (g) in IA No.126 of 2024 filed by ARCIL deserves to be dismissed and Axis Bank and other lenders who have withdrawn the amount from the account of the Corporate Debtor were liable to refund the amount with interest?
# 70. In view of the foregoing discussions and conclusions, we answer Question Nos.(I), (II) and (III) in following manner:
101. We thus answer Question No. IV in following manner:
Application I.A.126/2024 filed by ARCIL praying for reversal of the amount withdrawn by Axis Bank and other lenders during the stay period was not barred by principle of Res Judicata, Issue Estoppel or Merger.
# 110. We thus answer Question No. V in following manner:
On Principle of Restitution, the lenders who have withdrawn the money from the account of the corporate debtor during period of interim stay which came to be end on 10.08.2023, are obliged to reverse the amount in the account of the corporate debtor.
# 114. What virtually IRP was claiming was in the above prayer was to declare that insolvency commencement date as 10.08.2023. The above prayer was only to keep away the period upto 10.08.2023 from CIRP to give a clean chit to the lenders. In the entire application there was no objection raised by the IRP regarding withdrawal made by the lenders from the account of the corporate debtor although promoters and ARCIL were making prayers for reversal of the amount to the account of the corporate debtor which was withdrawn by lenders. RP neither made any prayer nor took that stand in the application. IRP even though was recommended by IndusInd Bank one of the lenders who initiated Section 7 proceeding, after appointment of the IRP, he has to act in the interest of the corporate debtor and in accordance with the IBC Code and the CIRP Regulations. We are of the view that adjudicating authority has rightly rejected the application I.A. filed by the RP. In paragraph 78.6, adjudicating authority has made following observations:
“78.6 Thus, in view of the same and also the clear precedence set out in Ashok Kumar Tyagi (supra) which was passed prior to the stay granted in the present matter, the RP ought not to have handed over the management and control of the Corporate Debtor back to the suspended directors without appropriate instructions/ directions from this Tribunal.”
# 115. We do not find any ground to interfere with the observations made by the adjudicating authority in paragraph 78. Question No. VI is answered in following manner:
Finding and observation made by adjudicating authority in paragraph 78, do not deserve to be set aside.
Question No. (VII)
# 116. As noted above ARCIL has also filed Comp. App. (AT) (Ins.) No. 2192/2024 challenging the order of the adjudicating authority to the limited extent that is by which adjudicating authority has rejected Prayer (g) made in I.A. No.126/2024. Prayer (g) made in the application by ARCIL is that ‘pass an order directing the R-2 to R-6 to pay interest at an appropriate rate/percentage as deemed appropriate by this Tribunal on the respective principal amount withdrawn/received by them in contravention of moratorium’.
# 117. Learned counsel for the appellant submits that when the amount was withdrawn by Axis Bank and other lenders from the account of the corporate debtor and appropriated, the lenders are liable to reverse the amount along with the interest. Interest is part of compensation, to which corporate debtor is entitled due to illegal withdrawal by Axis Bank. It is submitted that adjudicating authority has erroneously rejected the Prayer (g) in the application filed by ARCIL.
# 118. Learned counsel for ARCIL relied on Doctrine of Restitution and unjust enrichment, illegal appropriation and detention of money warrants for restitution of money interest. The lenders have refuted the submissions, on behalf of the appellant it is contended that account of the corporate debtor was a current account in which no interest is payable. It is submitted that allegation of any unjust enrichment by lender is unfounded. Amount which was withdrawn by Axis Bank and distributed to the other lenders was in accordance with the contract with the corporate debtor and lenders were only exercising their contractual rights. In paragraph 82, adjudicating authority gave following reasons for not allowing Prayer (g):
“82. As regards prayer ‘g’, it is seen that since there was no direct transaction from the Corporate Debtor to the financial creditors as also to the extent of amount appropriated, the Corporate Debtor’s liability of interest would be reduced. Accordingly, a direction to pay interest on the appropriated amount would not be justified and hence not granted.”
# 119. We are of the view that adjudicating authority has rightly exercised its discretion in not allowing Prayer (g) of the I.A.126/2024 and further it has been contended that account of the corporate debtor was the current account.
# 120. We, thus do not find any substantial ground to interfere with the order passed by the adjudicating authority rejecting Prayer (g) of the application. We answer Question No. VII to the following effect:
Order of the adjudicating authority dated 01.10.2024 rejecting Prayer (g) in I.A.126/2024 needs no interference.
# 121. In view of the foregoing discussions and our conclusion, we do not find any merit in any of the appeals. All the appeals are dismissed. As directed by the impugned order dated 01.10.2024, the appellants to remit the amount back to the corporate debtor along with accrued interest as per order dated 29.10.2024, (para 14) passed in these appeals, forthwith.
All pending IAs are closed.
Parties shall bear their own costs.
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