Ansal Properties and Infrastructure Limited vs Mr. Rajesh Ramani - Given the aforesaid legal position, we do not think that the provisions of statutory set-off in terms of Order VIII Rule 6 of CPC or insolvency set-off as permitted by Regulation 29 of the Liquidation Regulations can be applied to the Corporate Insolvency Resolution Process.

 NCLT ND (2025.07.15) in Ansal Properties and Infrastructure Limited vs Mr. Rajesh Ramani [(2026) ibclaw.in 1034 NCLAT, Company Appeal (AT) (IA-118/2024 In (IB)-113(ND)/2021] held that; 

• Given the aforesaid legal position, we do not think that the provisions of statutory set-off in terms of Order VIII Rule 6 of CPC or insolvency set-off as permitted by Regulation 29 of the Liquidation Regulations can be applied to the Corporate Insolvency Resolution Process.

• The aforesaid rule would be, however, subject to two exceptions or situations. The first, if at all it can be called an exception, is where a party is entitled to contractual set-off, on the date which is effective before or on the date the Corporate Insolvency Resolution Process is put into motion or commences.

• The Corporate Insolvency Resolution Process does not preclude application of contractual set-off. During the moratorium period with initiation of the Corporate Insolvency Resolution Process, recovery, legal proceedings etc. cannot be initiated, enforced or remain in abeyance. Besides the moratorium effect, the terms of the contract remain binding and are not altered or modified.

• The Resolution Professional takes the debtor’s property subject to all clogs and fetters affecting it in the hands of the debtor.

• The second exception will be in the case of ‘equitable set-off’ when the claim and counter claim in the form of set-off are linked and connected on account of one or more transactions that can be treated as one. The set-off should be genuine and clearly established on facts and in law, so as to make it inequitable and unfair that the debtor be asked to pay money, without adjustment sought that is fully justified and legal.

• The amount to be adjusted should be a quantifiable and unquestionable monetary claim, as the Corporate Insolvency Resolution Process is a time-bound summary procedure. It is not a civil suit where disputed questions of law andf acts are adjudicated after recording evidence. Set-off of this nature does not require legal proceedings.

• Further, set-off of money is to be given against money alone. It will not apply to assets. Lastly, being an equitable right, it can be denied when grant of relief will defeat equity and justice.

• Thus, while accepting contractual and transactional set-off on the conditions specified, we have struck a balance with the doctrines of pari passu and anti-deprivation, which we believe is just and fair. Insolvency set-off in terms of Regulation 29 of the Liquidation Regulations is statutory.

Excerpts of the Order; 

# 1. This application has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) read with Rule 11 of NCLT Rules, 2016 by the Applicant seeking urgent directions in the nature of (a) reversal of illegal set-off allowed by the Respondent; and (b) direction to IBBI for initiation of disciplinary proceedings against the Respondent for acting in contravention to the provisions of the Insolvency and Bankruptcy Code, 2016, at the behest of a shareholder of the Corporate Debtor.

A. Submissions of the Applicant:

# 2. The Applicant herein is one of the leading Real Estate and Infrastructure Development Company in the country, having vast experience in the real estate industry. The Applicant is a shareholder of the Corporate Debtor holding 15.81% shares of the Corporate Debtor. The Corporate Debtor, Ansal Urban Condominiums Private Limited, was incorporated by Ansal Landmark Township Private Limited, which is a Joint Venture Company formed between the Ansal group and the Landmark group. The Corporate Debtor was incorporated for the purpose of the development of real estate project, namely, Sushant Aquapolis, situated at Ghaziabad. Therefore, the Corporate Debtor has two groups of shareholders i.e., the Landmark group through Ansal Landmark (Karnal) Township Private Limited (“ALKTPL”) and the Ansal Group, including the Applicant herein.

# 3. On 10.03.2022, the Corporate Insolvency Resolution Process (“CIRP”) in relation to the affairs of the Corporate Debtor was commenced by an order passed by this Adjudicating Authority in (IB)-113(ND)/2021 and the Respondent herein was appointed as the Interim Resolution Professional of the Corporate Debtor and later confirmed as the Resolution Professional of the Corporate Debtor.

# 4. The primary grievance of the Applicant herein is that the Respondent has acted for the benefit of and at the behest of Landmark group inasmuch as the Respondent has acted contrary to the provisions of the IBC and has given preferential treatment to ALKTPL. The said action on the part of the Respondent is not only in violation of the provisions of the IBC but are also detrimental to the stakeholders of the Corporate Debtor, including the Applicant. During the CIRP, the Respondent had engaged APT and Co LLP to conduct a Transaction and Forensic Audit of the Corporate Debtor. APT and Co LLP submitted its report on 15.02.2023 (“the Audit Report”).

# 5. The Applicant’s case is that the Respondent/Resolution Professional relied upon the report dated 15.02.2023 submitted by APT and Co. LLP and allowed the set-off amounting to Rs.34,54,53,125/-. In support of its contentions, the Applicant referred to Page 64 of the Audit Report, which reads as under:-

“Transaction with Ansal Landmark (Karnal) Townships Private Limited (ALKTPL)

I. ALKTPL has a receivable balance (debit balance) of Rs. 47,31,62,114/- as on 10th March, 2022 as per the books of accounts of AUCPL. The amount of Rs. 47.92 Crores was transferred on 31st July, 2015 to ALKTPL by AUCPL to be utilized as consideration for acquiring 10 acres of contiguous land parcel. Thereafter, it has been communicated by ALKTPL that the said contiguous land parcels were not available and therefore acquisition contemplated under the debenture subscription agreement had become Impossible.

II. Further a letter dated 21st March, 2022 has been shared by RP in which ALKTPL have asked to reconcile their balance as on 10th March, 2022 on the ground that Dalmia Family Office Trust (DFOT) (formerly known as Mridu Hari DalmiaParivar Trust) had paid Rs. 34,54,53,125 to AUCPL on behalf of ALKTPL and when DFOT was unable to recover the amount from AUCPL, DFOT initiated arbitration proceedings against ALKTPL and was able to secure an award dated 25.02.2022, in their favour. The said Award has held ALKTPL liable to make good said payments to DFOT. Therefore, in books of accounts for FY 21-22, ALKTPL, will be debiting the same directly to AUCPL, rather than through DFOT.

III. Dalmia Family Office Trust (DFOT) (formerly known as Mridu Hari DalmiaParivar Trust) is having a payable balance (credit balance) of Rs. 34,54,53,125 as on 10th March, 2022. The amount has been utilised by AUCPL for payment of interest on debentures and same is reflected as a loan in books of accounts.

IV. After considering the above facts, the net receivable balance (debit balance) of ALKTPL is Rs. 12,77,08,989 as on 10th March, 2022.”

# 6. The Applicant submitted that the Respondent reconciled and allowed set-off of the account of ALKTPL. The Applicant contended that the Respondent reduced the receivable balance from ALKTPL by Rs. 34,54,53,125/- on the basis of the letter received from ALKTPL, bypassing the provision of the Code without verifying the existence and authenticity of the Arbitration Award.

# 7. The Respondent ought to have considered the fact that Mr. Gaurav Dalmia is one of the Directors of ALKTPL, and his father Mr. Mridul Hari Dalmia is the Trustee of DFOT, which shows that ALKTPL and DFOT are related parties and the arbitration proceedings were conducted between two related parties owned and controlled by one family. Therefore, the Respondent could not have allowed the set off, which resulted in the reduction of the corpus of the Corporate Debtor. In this regard, the Applicant relied upon the judgment of the Hon’ble NCLAT passed in “Vijay Kumar V. Iyer Vs Bharti Airtel Ltd & Ors.”, in Company Appeal (AT) (Ins.) No. 530 of 2019 wherein it was held that when a moratorium is in force, any dues owed to the Corporate Debtor cannot be set off and directed reversal of the transaction.

B. Submissions of the Respondent:

# 8. The Respondent filed a reply affidavit denying the allegations made by the Applicant in the application. The Respondent at the outset submitted that the Applicant has no locus to file the present application. The Applicant has filed the present application as a counterblast to the applications (i.e. IA-3414/2023 and IA-3423/2023) filed by the Respondent, Resolution Professional pertaining to PUFE transactions.

# 9. It is submitted that the Applicant, i.e., Ansal Properties and Infrastructure Limited, is the erstwhile Developer, license holder and promoter of the Corporate Debtor and currently holds 15.81% shareholding in the Corporate Debtor. In this Application, the Applicant has disputed the set-off of Rs. 34,54,53,125/- between the Corporate Debtor and one of its shareholders, Ansal Landmark (Karnal) Township Pvt. Ltd. (“ALKTPL”). The Applicant alleges differential and preferential treatment by the Respondent in favour of ALKTPL. Consequently, the Applicant has prayed for directions to be issued to the Insolvency and Bankruptcy Board of India (“IBBI”) to initiate disciplinary proceedings against the Respondent.

# 10. It is further contended by the Respondent that the pleadings in I.A. No. 882 of 2023, filed by one Katra Realtors Pvt. Ltd. (in short “Katra”), an entity controlled by the Applicant, and the pleadings in the present application are identical.

# 11. This Adjudicating Authority vide order dated 24.01.2024 dismissed I.A. No. 882 of 2023 and the said order was upheld by the Hon’ble NCLAT vide order dated 04.03.2024 in Company Appeal (AT) (Ins.) No.382 of 2024.

# 12. The Respondent contended that the Resolution Professional of the Corporate Debtor did not get any co-operation from the shareholders of the Corporate Debtor for effecting the handover of the affairs of the Corporate Debtor after initiation of the CIRP, since the Corporate Debtor had no Directors.

# 13. The Resolution Professional filed I.A. No. 3304 of 2022 under Section 19(2) of the Code seeking directions to the Applicant and Katra Realtors Pvt. Ltd. (shareholders of the Corporate Debtor) to extend co-operation and provide all the relevant documents to the Respondent. This Adjudicating Authority vide order dated 19.12.2023 disposed of the I.A. No. 3304 of 2022 and directed the Applicant and Katra to extend necessary co-operation and provide all the relevant data and documents records to the Respondent. However, both the Applicant and Katra Realtors Pvt. Ltd. failed to provide any information, relevant data, and documents, etc.

# 14. The Respondent/Resolution Professional, upon perusal of the available records of the Corporate Debtor came across a Memorandum of Understanding (MoU) dated 24.07.2015 executed by the Corporate Debtor and Ansal Landmark (Kamal) Township Pvt. Ltd. (“ALKTPL”) (in short “July MoU”), the MoU dated 31.12.2015 (“December MoU”) executed by the Corporate Debtor and Dalmia Family Office Trust (“DFOT”) along with the Arbitral Award dated 25.02.2022 between ALKTPL and DFOT (“Arbitral Award”), along with a letter dated 01.03.2022 issued by ALKTPL to the Corporate Debtor.

# 15. It came to light that, under the 2015 MoU, the Corporate Debtor transferred a sum of INR 47.92 Crores to ALKTPL for acquiring land on behalf of the Corporate Debtor. Thereafter, ALKTPL, through DFOT, advanced a sum of INR 34,54,53,125/- to the Corporate Debtor under the December MoU. Subsequently, a dispute arose inter-se between DFOT and ALKTPL under the December MoU which apparently led to the arbitration proceeding and passing of an Arbitral Award. The Arbitral Award records that the dispute arose when ALKTPL failed to repay the sum of INR 34,54,53,125/- advanced by DFOT to the Corporate Debtor, on behalf of ALKTPL. This Arbitral Award, according to the Respondent, has not been challenged by ALKTPL and has attained finality.

# 16. Further, vide letter dated 18.03.2022 and 21.03.2022, the DFOT and ALKTPL, respectively, informed the Respondent-Resolution Professional that the parties have acted in accordance with the Arbitral Award and made appropriate entries in their books of account. These transactions have taken place prior to the commencement of the CIRP of the Corporate Debtor as indicated in the letter dated 01.03.2022 issued by ALKTPL to the Corporate Debtor.

# 17. Subsequently, in July 2022, the Respondent, on the advice of the CoC, engaged the services of APT & Co LLP for conducting a transaction and forensic audit of the accounts of the Corporate Debtor. The transaction and Forensic Audit Report (“Audit Report”) was finalized on 15.02.2023 and shared with the Respondent, Resolution Professional.

# 18. Notably, the Audit Report does not contain any adverse observation in relation to the transaction amongst the Corporate Debtor, ALKTPL and DFOT.

# 19. The accounts of the Corporate Debtor prior to the commencement of the CIRP were subjected to the statutory audit in compliance with applicable law and were finalized on 06.06.2023, which was not objected to by the CoC, which includes about 660 home buyers.

C. Analysis and Findings:

# 20. We have heard the submissions of Mr. Abhishek Anand, Ld. Counsel appearing on behalf of the Applicant as well as Mr. Sameer, Rohtagi, Ld. Counsel appearing on behalf of the Respondent/Resolution Professional, and perused the records.

# 21. Before analysing the case, it is pertinent to refer to the following aspects:

A. This application was listed on 03.04.2025, seeking clarification from the parties, and the following order was passed:

“IA-118/2024:-

This application has been listed seeking clarification with respect to the reversal of illegal set off of Rs. 34,54,53,125/-.

We have heard the submissions of Mr. Abhishek Anand, Learned Counsel appearing for the Applicant as well as Mr. Shivanshu Kumar, Learned Counsel appearing for the Resolution Professional. Mr. Rajesh Ramnani, the Resolution Professional has appeared in person virtually.

Learned Counsel for the parties seek to place on record an affidavit with respect to the status of the case, within two weeks. Mr. Anand, Learned Counsel also submitted that CIRP has been initiated against the Applicant in this application i.e. Ansal Properties and Infrastructure Limited, in CP No. IB-558/ND/2024 vide order dated 22.02.2025 passed by Court IV and Mr. Navneet Kumar Gupta, has been appointed as the IRP and he sought one time file a copy of the said order. Time granted.

List the matter on 06.05.2025.”

# 22. In compliance of the order dated 03.04.2025, the Applicant/Ansal Properties and Infrastructure Limited and Respondent/Resolution Professional filed respective affidavits clarifying the issues raised by this Adjudicating Authority. The Applicant has placed on record a copy of the CIRP Order dated 25.02.2025 of Ansal Properties and Infrastructure Limited.

# 23. Mr. Abhishek Anand, Ld. Counsel appearing on behalf of the Applicant submitted that the Applicant is a shareholder having 15.81% shares of the Corporate Debtor. The Applicant in this application is agreed with the action of the Respondent/Resolution Professional in reversal of the set-off of Rs.34,54,53,125/- allowed by the Respondent/Resolution Professional in derogation to the provisions of the Insolvency and Bankruptcy Code, 2016 and also seeking a direction to the IBBI for initiation of disciplinary proceedings against the Respondent/ Resolution Professional for having acted in contravention to the provisions of the IBC, 2016.

# 24. The Ld. Counsel for the Applicant submitted that the Resolution Professional carried out a transaction cum Forensic Audit Report of the Corporate Debtor. One of the shareholders of the Corporate Debtor i.e. Ansal Landmark (Karnal) Township Private Limited, (“ALKTPL”) addressed letter dated 21.03.2022 to the Respondent asking for reconciliation and set-off of the account of ALKTPL on the ground that another entity, namely Dalmia Family Office Trust (“DFOT”), had paid certain sums to the Corporate Debtor, purportedly on behalf of ALKTPL and the said entity had initiated arbitration proceedings against ALKTPL wherein an Award was passed. On the basis of the Arbitral Award, ALKTPL will be debiting the said amount directly to the Corporate Debtor.

# 25. It is submitted by the Applicant that the Respondent/Resolution Professional, without verifying the contents of the letter in an independent and neutral manner, accepted the request for reconciliation by ALKTPL and reduced the receivable balance from ALKTPL after the commencement of CIRP of the Corporate Debtor. It is further submitted that the said reconciliation/set-off has been illegally allowed by the Respondent/Resolution Professional during the moratorium period. Therefore, the action on the part of the Respondent/Resolution Professional is arbitrary and motivated by factors other than the resolution of the Insolvency of the Corporate Debtor. It is contended that the Respondent/Resolution Professional reconciled the accounts of ALKTPL even though no claim was filed by ALKTPL.

# 26. Further, it is seen from the books of accounts of the Corporate Debtor that ALKTPL obtained an unsecured loan of Rs. 47,31,62,114/- from the Corporate Debtor. Further, the Respondent thereafter represented to the auditors that after the initiation of CIRP, ALKTPL had addressed a letter to the Respondent asking for reconciliation on the ground that another entity, namely Dalmia Family Office Trust, had paid certain sums to the Corporate Debtor, purportedly on behalf of ALKTPL, and the said entity had initiated arbitration proceedings against ALKTPL and based on the award passed therein, ALKTPL will be debiting the amount directly to AUCPL. The Respondent/Resolution Professional, based on this letter, has reduced the receivable balance from ALKTPL.

# 27. Mr. Sameer, Rohtagi, Ld. Counsel appearing on behalf of the Respondent/Resolution Professional submitted that the present application is not maintainable and the Applicant has no locus to file the present application, inasmuch as the Applicant is a minor shareholder holding 15.82% of the share capital of the Corporate Debtor. The Applicant is trying to delay the process and indirectly challenging the resolution plan approved by the CoC.

# 28. Ld. Counsel for the Respondent further submitted that the Applicant had knowledge of the forensic audit report dated 15.02.2023 at least since June 2023, when the Respondent filed PUFE applications (i.e., IA-3414/2023 and IA-3423/2023). The Applicant, after the lapse of more than 7 months, has filed the present application, which is barred by delay and laches.

# 29. It is contended on behalf of the Respondent/Resolution Professional that the Applicant seeks to reopen the issues raised in I.A. No. 882/2023. It is submitted that I.A. No. 882/2023 was filed by one Katra Realtors Private Limited (in short “Katra”), an entity controlled by the Applicant and the pleadings in the said application are identical to the present application. Further I.A. No. 882 of 2023 was dismissed by this Adjudicating Authority vide order dated 24.01.2024 and the said order was upheld by the Hon’ble NCLAT vide order dated 04.03.2024 in Company Appeal (AT) (Ins.) No.382 of 2024.Therefore, the Applicant is prevented from raising the same issue and allegations again. Further, the present application is barred by delay and laches since the Applicant seeks to indirectly challenge the resolution plan approved by the CoC for which the Applicant Company has no locus.

# 30. From the perusal of the pleadings and the arguments advanced by the Ld. Counsel appearing for both parties, the following issues arise for determination:

• (i) Whether the set-off allowed by the Resolution Professional is during the moratorium period and therefore, illegal and contrary to the provisions contained in Section 14 of the Code.

• (ii) Whether the Resolution Professional is correct in law in allowing the set-off based on the letter dated 21.03.2022 and the transaction and the transaction and Forensic Audit Report dated 15.02.2023.

• (iii) Whether the Applicant is precluded from filing the present application in view of the dismissal of IA-882/2023.

# 31. The Issue Nos. 1 and 2 are linked to each other and are answered as under:

# 32. It is an admitted position that the CIRP of the Corporate Debtor was commenced by an order dated 10.03.2022 passed by this Adjudicating Authority in C.P. (IB) No.113/2021, and hence, the moratorium under Section 14 of the Code, 2016, was kicked in with effect from 10.03.2022. The Transaction and Forensic Audit of the Corporate Debtor conducted by APT and Co LLP was submitted on 15.02.2023. The Respondent/Resolution Professional received a letter dated 21.03.2022 from ALKTPL requesting the Respondent/Resolution Professional to reconcile and allow set-off of the account of ALKTPL.

# 33. It is also an admitted case of the Respondent/Resolution Professional that basing on the audit report dated 15.02.2023 and letter dated 21.03.2022, Respondent/Resolution Professional has reconciled and allowed the set-off of the account of ALKTPL of Rs. 34,54,53,125/-. Thus, it is amply clear that the Respondent/Resolution Professional allowed the set-off much after the commencement of CIRP and during the moratorium period. However, the records show that the transactions in question took place much before the initiation of the CIRP and the Arbitral Award was passed on 25.02.2022, which is also before the commencement of CIRP and coming into force of the moratorium under Section 14 of the Code.

# 34. The Respondent/Resolution Professional, while carrying out its duties under Section 25(2), came across the Arbitral Award dated 25.02.2022, which was passed in arbitration proceedings between ALKTPL and DFOT. The Respondent/Resolution Professional also came across certain other Memorandum of Understanding involved in the CIRP of the Corporate Debtor. The Respondent/Resolution Professional also came across letters dated 01.03.2022, 18.03.2022 and 21.03.2022 and on the basis of the said letters and other documents, the Respondent/Resolution Professional came to know about the transaction in question. It is thus evident that the transaction in question took place in the year of 2015 and the Respondent/Resolution Professional granted set-off on the basis of the said transaction and therefore, it cannot be said that the set-off was hit by Section 14 moratorium.

# 35. The Respondent has relied upon a judgment passed by the Hon’ble Supreme Court of India in Civil Appeal No. 3088 and 3089 of 2020 in the matter of “Bharti Airtel vs. Vijaykumar V. Iyer and Ors.”. While dealing with an issue of set-off, the Hon’ble Supreme Court of India has examined the different concepts of set-off including insolvency set-off. The relevant paragraphs of the judgment are extracted below:

• “30. Given the aforesaid legal position, we do not think that the provisions of statutory set-off in terms of Order VIII Rule 6 of CPC or insolvency set-off as permitted by Regulation 29 of the Liquidation Regulations can be applied to the Corporate Insolvency Resolution Process. The aforesaid rule would be, however, subject to two exceptions or situations. The first, if at all it can be called an exception, is where a party is entitled to contractual set-off, on the date which is effective before or on the date the Corporate Insolvency Resolution Process is put into motion or commences. The reason is simple. The Corporate Insolvency Resolution Process does not preclude application of contractual set-off. During the moratorium period with initiation of the Corporate Insolvency Resolution Process, recovery, legal proceedings etc. cannot be initiated, enforced or remain in abeyance. Besides the moratorium effect, the terms of the contract remain binding and are not altered or modified.

• 31. The foundation of contractual set-off is based on the same ground as in the case of equitable set-off, which is impeachment of title, albeit contractual set-off is a result of mutual agreement that permits set-off and adjustment. Therefore, if a debtor’s title to sue is impeached before the Corporate Insolvency Resolution Process is set into motion, so should the title of the Resolution Professional, who in terms of Section 25 of the IBC has the duty to preserve and protect assets of the corporate debtor, including continuing the business operations of the corporate debtor. The Resolution Professional takes the debtor’s property subject to all clogs and fetters affecting it in the hands of the debtor.

• 32. The second exception will be in the case of ‘equitable set-off’ when the claim and counter claim in the form of set-off are linked and connected on account of one or more transactions that can be treated as one. The set-off should be genuine and clearly established on facts and in law, so as to make it inequitable and unfair that the debtor be asked to pay money, without adjustment sought that is fully justified and legal. The amount to be adjusted should be a quantifiable and unquestionable monetary claim, as the Corporate Insolvency Resolution Process is a time-bound summary procedure. It is not a civil suit where disputed questions of law and facts are adjudicated after recording evidence. Set-off of this nature does not require legal proceedings. Further, set-off of money is to be given against money alone. It will not apply to assets. Lastly, being an equitable right, it can be denied when grant of relief will defeat equity and justice.

• 33. We would in fact borrow the term ‘transactional set-off’46 instead of equitable set-off, when we describe the second exception. The reason is that the second exception refers to an ascertained amount, which is a requirement for legal set-off under Order VIII Rule 6 of CPC and at the same time relies on equitable right when the statute is silent and there is no reason to deny set-off under the common law. It is an equitable right because the transactions are close and connected, harbingering the claim and the counterclaim. It would be manifestly unjust to bifurcate the connected transactions to accept and enforce the claim of one party without adjusting the amount due to the second party. This, in our opinion, does not contradict the eclipse by way of moratorium, because the transactions are treated as singular and one. When transactions are closely connected, a claim for transactional set-off during the moratorium period on a claim by the Resolution Professional, is by way of a defence to protect the legitimate expectation and respect legal certainty.

• 34. Thus, while accepting contractual and transactional set-off on the conditions specified, we have struck a balance with the doctrines of pari passu and anti-deprivation, which we believe is just and fair. Insolvency set-off in terms of Regulation 29 of the Liquidation Regulations is statutory.”

# 36. From the perusal of the Judgment of the Hon’ble Supreme Court of India, it is clear that the set-off can be allowed by the Resolution Professional during the moratorium period in the CIRP of the Corporate Debtor.

# 37. From the submissions made by the Learned Counsel representing the Respondent/Resolution Professional, it emerges that the Applicant’s plea for reversal of set-off is premised on the assertion that such set-off was effected by the Resolution Professional during the course of the Corporate Insolvency Resolution Process (“CIRP”). This allegation is entirely unfounded and devoid of merit. No set-off was permitted by the Respondent in respect of any transaction during the CIRP. The Respondent merely discharged an administrative duty of compiling the accounts of the Corporate Debtor, strictly based on existing records pertaining to transactions finalized prior to the commencement of the CIRP.

# 38. It is pertinent to note that the last audited financial statements of the Corporate Debtor date back to the financial year 2014–15. At the initiation of the CIRP, owing to the absence of any provisional balance sheet, the Respondent was not in a position to formulate valuation reports as mandated under Regulation 27 of the CIRP Regulations. In such circumstances, the only viable course available to the Resolution Professional was the reconstruction of the Corporate Debtor’s accounts.

# 39. On the basis of the above analysis, we do not find any irregularity or deficiency in the actions or decisions of the Respondent/Resolution Professional. Accordingly, we are of the view that the course of action adopted by the Respondent/Resolution Professional in the discharge of its statutory duties under Section 25(2) of the Insolvency and Bankruptcy Code, 2016 is well within the legal parameters conferred under the Code.

# 40. In view of the foregoing analysis, Issue Nos. 1 and 2 are answered in the negative.

# 41. It is a matter of record that Interlocutory Application No. 882 of 2023 was filed by Katra Realtors Private Limited, an entity under the effective control of the Applicant, with pleadings that are materially identical to those in the present application. This Adjudicating Authority, by order dated 24.01.2024, dismissed the said application, and the dismissal was subsequently affirmed by the Hon’ble National Company Law Appellate Tribunal (NCLAT) by its order dated 04.03.2024 in Company Appeal (AT) (Insolvency) No. 382 of 2024. In view of the above, the Applicant is precluded from re-agitating the same allegations and issues which have already been conclusively determined.

# 42. In view of the above discussion, Issue No. 3 is answered accordingly.

# 43. In view of the above, this Adjudicating Authority deems it unnecessary to address the present applications, as they do not align with the spirit of the IBC. Furthermore, it appears that the Applicant has filed the application with the intention of disrupting and derailing the CIRP of the Corporate Debtor.

# 44. We are of the considered view that if the present applications are allowed, then this Adjudicating Authority will continue to receive further similar applications, and the case will remain unresolved. Additionally, it will create obstacles for the Successful Resolution Applicant in executing the Resolution Plan.

# 45. We also expect that the Applicant along with Respondent/Resolution Professional, will make their best efforts to uphold the essence of the Code and, in the interest of justice, expedite the process of CIRP.

# 46. It is ordered as follows:

i. In view of the reasons mentioned above, the IA-118/2024 stand dismissed.

ii. The Registry is directed to send a copy of this order to the IBBI for their record.

iii. A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities. No order as to costs.

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Central Transmission Utility of India Ltd. Vs. Sumit Binani and Ors. - The deposit made even if treated as a guarantee for the default in dues remains the property of the CD till it is adjusted towards the defaulted dues and if so adjusted after the moratorium kicks in towards pre-CIRP dues, the adjustment would be rendered illegal. The deposit made is not a debt due to KMPCL, the CD.

 SCI (2026.03.23) in Central Transmission Utility of India Ltd. Vs. Sumit Binani and Ors. [(2026) ibclaw.in 142 SC, Civil Appeal Nos. 2216-2217 of 2025] held that;

• The decision in Bharti Airtel Ltd.3 five different meanings were ascribed to set-off viz., (a) statutory or legal set-off; (b) common law set-off; (c) equitable set-off; (d) contractual set-off; and (e) insolvency set-off,

•  Looking at the IBC, it was found that statutory set-off in terms of Order VIII Rule 6 of CPC or insolvency set-off as permitted by Regulation 29 of the Liquidation Regulations cannot be applied to CIRP. The exception being only of the contractual set-off being permitted before or on the date CIRP is put in motion or commenced, since pre-moratorium the terms of the contract are binding and are not altered or modified.

• “Set-off of the dues payable by the Corporate Debtor for a period prior to the commencement of the CIRP cannot be made and is not permitted in law from the dues payable to the Corporate Debtor post the commencement of the CIRP”

• Section 14(2)(b) speaks of a ‘contract of guarantee to a Corporate Debtor’, which can be enforced to make payment dues to the CD and not from the CD.

• Jaypee Kensington6 is with respect to ‘the entitlement of a dissenting financial creditor who is also a secured creditor to receive the amount payable by allowing enforcement of a security interest to the extent of the value receivable by him and in the order of priority available to him’.

• The deposit made even if treated as a guarantee for the default in dues remains the property of the CD till it is adjusted towards the defaulted dues and if so adjusted after the moratorium kicks in towards pre-CIRP dues, the adjustment would be rendered illegal. The deposit made is not a debt due to KMPCL, the CD.

Excerpts of the Order;

# 1. The appellant provides an established transmission system for use to power generation units and consumers with whom Transmission Service Agreements (TSA) are entered into. The power generation units along with its users or their nominated purchase entities entered into a Bulk TSA with the appellant’s predecessor Power Grid Corporation of India Limited (PGCIL), one of which units; the KSK Mahanadi Power Company Limited (KMPCL) ended up in an insolvency proceeding. KMPCL had also entered into a TSA with the appellant and Power Purchase Agreements with end users. The 2nd respondent is the creditor who initiated the Corporate Insolvency Resolution Process (CIRP) which was admitted by the National Company Law Tribunal (NCLT) on 03.10.2019. The 1st respondent is the Resolution Professional (RP) appointed for the generation unit, the Corporate Debtor (‘CD’-‘KMPCL’ referred to alternatively, post and pre CIRP respectively). The appeal is concerned with a cash deposit of Rs.108.44 crores, KMPCL made with the appellant prior to the CIRP but apportioned and disbursed against the bills raised before and after the CIRP; the controversy in this appeal relates specifically to Rs.85.13 crores which undisputedly are pre-CIRP dues.

# 2. On the appellant invoking the Payment Security Mechanism (PSM) as against Rs.108.44 crores and issuance of a regulation notice dated 03.06.2020 obligating the reinstatement of the PSM, the RP filed I.A. No.487 of 2020 before NCLT, the Adjudicating Authority, inter alia resisting the appropriation of Rs.108.44 crores and seeking its adjustment towards post-CIRP dues. We have to immediately notice that out of Rs.108.44 crores, Rs.23.31 crores were adjusted against post-CIRP dues being the bills raised, one of 04.10.2019 and three of 06.11.2019. Hence essentially the adjustment of the pre-CIRP dues was of Rs.85.13 crores; whether this amount can be apportioned or not against the pre-CIRP dues as claimed by the appellant is the only issue arising before us, despite other issues too having been dealt by the NCLT regarding what transpired in the interregnum after the CIRP commenced on 03.10.2019.

# 3. The NCLT found that there were various agreements entered into between the parties and the CD had outstanding dues to be paid to the appellant and in terms of the directions of the Central Electricity Regulatory Commission (CERC), the KMPCL had made payment of Rs.100 crores and was supposed to maintain its dues below Rs.122 crores in a 45 day period. The deposit of Rs.108.44 crores in cash was in lieu of a Letter of Credit (LoC) stipulated in the TSA which deposit was made as ordered by the CERC on a request made by the KMPCL. The PGCIL, the predecessor of the appellant herein, being an Operational Creditor had already submitted a claim before the RP towards operational debt including the dues and admitting the deposit of Rs.108.44 crores made as a security mechanism in lieu of LoC. The appropriation of such deposit available with the operational creditor on 28.03.2020 after the initiation of CIRP on 03.10.2019 towards pre-CIRP dues was found impermissible and contrary to the provisions of IBC specifically the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 20161. The invocation of PSM as against Rs.108.44 crores was found to be contrary to law with a consequent direction to the appellant herein to adjust the appropriated security amounts towards post-CIRP dues, finding that sub-section (2A) of Section 14 permits such appropriation only to post-CIRP dues.

# 4. On appeal by the appellant herein, the National Company Law Appellate Tribunal (NCLAT) noticed the provisions of the IBC, specifically Section 5(12) to find the Insolvency Commencement Date in the present case to be 03.10.2019 from which date Section 14 moratorium kicks in. Section 238 of the IBC gives the provisions of the IBC a precedence over the provisions of any other law or any instrument having effect by virtue of such law. It was categorically found that the present case is a security deposit which till an adjustment is duly made remains the property of the entity who made the deposit, herein KMPCL who is now the CD. The security deposit was also not in the nature of a performance guarantee, and it was held merely as a security against default in payment. The scheme of IBC provides that such a moratorium applies till the completion of the CIRP. However, payments for maintaining supply of goods and services arising during the moratorium period; to keep the CD as an ongoing concern, was permissible while the recovery of pre-CIRP dues has to concede to the procedure envisaged in the IBC. The creditor has to file the claim before the RP, which has been done in the present case by the appellant and orders passed admitting the claim to an extent. Finding the adjustment made as against pre- CIRP dues by the appellant, from the security deposit, to be violative of the scheme of the IBC, the impugned order of the NCLT was affirmed.

# 5. Sri. Shyam Divan, learned Senior Counsel and Ms. Ranjitha Ramachandran learned Counsel ably assisting, contended that adjustment or set-off are permissible even under the scheme of IBC. The facts and circumstances would clearly indicate that the deposit made was in lieu of LoC which could have been invoked despite the initiation of CIRP. It is asserted that security deposit was made at the request of KMPCL on the orders of the CERC, an application having been moved at their instance before the CERC which stood withdrawn noticing the deposit made in lieu of LoC. We were taken through the terms of the agreement and the Billing Collection and Disbursement Procedure under the CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 20102 providing for the LoC and the default clauses enabling enforcement of dues, upon which the defaulter is obliged to recoup the security to the extent enforced.

# 6. The argument of adjustment or set off is urged on the ground that the title to the money deposited is already impeached as on the issuance of a bill which stood defaulted for which reliance is placed on Bharti Airtel Ltd. v. Aircel Ltd. & Dishnet Wireless Ltd. (Resolution Professional) [(2024) ibclaw.in 02 SC]3. The definition of ‘security interest’ under Section 3(31), the prohibition under clause (c) of Section 14(1) and the exception thereat provided by clause (d) of Section 14(3) are specifically relied on to contend that an LoC could have been enforced after the commencement date which in turn would translate as the debt to the entity who provided the LoC; which in effect was the appropriation made of the amounts deposited in lieu of LoC. Reliance is placed on Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co.4 and Standard Chartered Bank v. Heavy Engineering Corporation Limited5 to put forth the nature of a Bank Guarantee (BG)/LoC. It is an independent contract between the bank and the beneficiary, unconditional and irrevocable, making it obligatory on the bank to honour it without reference to any disputes between the parties to a contract in pursuance of which the BG/LoC is issued unless there is a ground raised of fraud or irretrievable harm or injury. Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd. [(2021) ibclaw.in 63 SC]6, Vistra ITCL (India) Ltd. v. Dinkar Venkatasubramanian [(2023) ibclaw.in 62 SC]7 and DBS Bank Limited Singapore v. Ruchi Soya Industries Ltd. [(2024) ibclaw.in 01 SC]8 are also relied on.

# 7. It is pointed out that the appellant is only a nodal agency and the apportionment is made based on the bills issued by the transmission licensees to whom the appellant disbursed the entire amounts, deposited as security. The appellant if asked to deposit the same with the RP, necessarily it would result in an illegal enrichment to the Successful Resolution Applicant (SRA) which is not the intention of the IBC. The amount disbursed to the transmission licensees in any way are reimbursed by the ultimate power user, which can be proceeded with either by the RP or the SRA. The priority of a security creditor as delineated in Jaypee Kensington6 has not been reckoned by the impugned orders.

# 8. Sri. Navin Pahwa learned Senior Counsel appearing for the respondent commences his argument pointing out Section 62 which restricts an appeal to the Supreme Court on a question of law which is totally absent in the present case. It is pointed out that the prescription as available from the TSA is of a provision of LoC, BG or any other mode of security. The deposit made cannot be said to be in lieu of LoC nor can it be equated with a LoC or BG which claim in any event was not raised before the NCLT or NCLAT.

# 9. The appellant had submitted a claim of Rs.356.41 crores initially before the RP which was admitted to the extent of Rs.96.75 crores. There was no challenge taken by the appellant to the limited admission of debt due, by the RP. The NCLT had approved the resolution plan based on the decision of the Committee of Creditors (CoC) on 13.02.2025 which also has attained finality and stands implemented commencing from 06.03.2025. The appellant cannot take the contention of a third-party surety as excluded under Section 14(3)(b) which is a surety to the CD and not for the CD. The reliance placed on Bharti Airtel Ltd.3 is assailed on a reading of the very same decision. There is no claim of set-off arising hereunder neither on the basis of the contract nor on the grounds of equity. Again, a claim in Form B was submitted by the appellant first for 356.41 crores on 03.01.2020 and then for an amount of Rs. 1.71 crores on 09.07.2021and on the third instance, for Rs. 3.76 crores on 12.10.2020. At no point in either of these claims Rs.108.44 crores deposit was claimed as a security. Reliance is placed on Section 29 of the IBC to point out that the ingredients of the Information Memorandum (IM) cannot be interfered with.

# 10. The RP also placed before us the balance sheets of the CD and the IM which clearly indicates Rs.108.44 crores having been shown as a deposit and the asset of the CD as on the ‘insolvency commencement date’. It is also pointed out that despite the permissible default period having expired, the appellant had not chosen to invoke the PSM and appropriate the amounts immediately after the default period, which would have been before the ‘insolvency commencement date’. Even after the commencement of the proceedings when a claim was raised, the deposit was never shown as a security interest and despite the claims raised having not been fully accepted, still without challenging any of the admitted amounts, the appropriation was made with respect to the pre-CIRP dues which stands vitiated as per the scheme of IBC.

# 11. Shorn of the details, the brief facts to be noticed are that the KMPCL entered into a Bulk Power Transmission Agreement (BPTA) with PGCIL (later substituted by the appellant) for obtaining long term access to the Inter-State Transmission System. Pursuant to the same, the TSA was executed with the appellant and consequential Power Purchase Agreements were also executed, with which we are not concerned. The PGCIL issued termination notice dated 01.08.2018 on account of the LoC not being opened. The KMPCL then moved an application before the CERC pointing out that Rs.22 crores in cash has been deposited with PGCIL towards PSM and that Rs.108.44 crores relatable to the entire capacity would be deposited by September 2018. A stay of the termination notice dated 01.08.2018 was sought responding to which PGCIL submitted that the outstanding dues for September and October 2018 were undertaken to be paid and in pursuance to that, the regulation of power supply notice issued by PGCIL was kept on hold. However, this was subject to furnishing the requisite LoC failing which termination was the only option. It was also prayed before the CERC that KMPCL may be directed to file an affidavit that the complete outstanding dues are paid within 60 days from the date of default. The CERC granted an interim relief directing PGCIL not to take any coercive measures in terms of notice dated 01.08.2018 subject to the petitioner depositing Rs.108 crores or opening an LoC on or before 20.09.2018 as PSM. Though no LoC was furnished as per the undertaking before the CERC, the deposit of Rs.108.44 crores was made based on which the CERC closed the petition filed by KMPCL on 08.02.2019. The appellant had also withdrawn the notice of regulation.

# 12. As for the terms and conditions applicable to the present dispute, the agreement for long-term access as disclosed in Exhibit P1 provided for detailed instructions with respect to payment of transmission charges in addition to the opening of LoC for 105% of the estimated average monthly billing and irrevocable BG equivalent to two months estimated average monthly billing. The security mechanism was to be initially valid for three years and then renewed from time to time; review was also made possible every six months, based on the change in estimated average transmission charges. The default in payment of monthly charges enabled PGCIL to encash or adjust the BG immediately upon which the same had to be replenished or recouped by the long-term transmission customers before the next billing cycle. The furnishing of LoC is in accordance with Billing, Collection and Disbursement (BCD) Procedure under the Regulations of 2010 produced as Annexure A4. Specifically, Clause 3.7 empowers the CTU to proceed under the Regulations of 2010, if any bill raised is outstanding beyond 30 days after the due date or in case the required LoC or any other agreed PSM is not maintained by CERC; in this case the deposit made of Rs.108.44 crores.

# 13. The dates relevant to the controversy is that the KMPCL had defaulted payments of Bill No. 91106950 dated 04.07.2019 for an amount of Rs.69,83,47,035/-, Bill No.91107010 dated 29.07.2019 for Rs.11,73,70,009/-, Bill No.91107026 dated 09.08.2019 for Rs.8,50,92,594/-, two Bills dated 13.08.2019 bearing Nos. 91107063 & 91107088 respectively of Rs.8,08,72,823/- & Rs.30,41,35,771/- Bill No. 91107161 dated 04.09.2019 for Rs.8,66,76,521/- and Bill No.91107268 dated 06.09.2019 of Rs.5,81,89,205/-; which are pre-CIRP dues. On 03.10.2019, NCLT, the Adjudicating Authority passed an order initiating CIRP against the CD which is the ‘Insolvency Commencement Date’. And post- CIRP, Bill No. 91107297 dated 04.10.2019 of Rs. 8,39,30,713 and three bills dated 06.11.2019 of respectively Rs.57,33,798/- Rs.28,31,79,190/- & Rs.6,15,95,268/- were raised. There was a regulation notice issued later to that by the appellant which is not germane to the present controversy. The appellant had raised claims under Form ‘B’ thrice on 03.01.2020, 09.07.2021 and 12.10.2020, a portion of which was admitted by the RP; which limited acceptance was not challenged. The bone of contention is the appropriation made of Rs.108.44 crores by the appellant on 28.03.2020 in satisfaction of the above referred bills of both pre-CIRP and post-CIRP dues. The NCLT and the NCLAT having directed the adjustment of the entire amounts furnished under the PSM as against the post-CIRP dues; limits the controversy to the adjustment of Rs.85.13 crores as against the pre-CIRP dues.

# 14. The claim of set-off raised by the appellant is primarily based on the decision in Bharti Airtel Ltd3, the facts and law declared in which will have to be looked into at the outset. Therein two groups termed as ‘Airtel entities’ and ‘Aircel entities’ entered into eight spectrum purchase agreements by which the former agreed to purchase the right to use the spectrum allocated to the later. The agreements were contingent on the approval of the Department of Telecom (DoT) to whom the Aircel entities were obligated to submit BG of approximately Rs.453.73 crores. Since, Aircel entities did not have the means to furnish the BG, Airtel agreed to submit the BG on behalf of Aircel to DoT and the consideration of the spectrum agreements were reduced based on the furnishing of BG, which further obligated Airtel to pay a definite sum, on cancellation of the BG. Aircel finally succeeded before the Telecom Disputes Settlement and Appellate Tribunal (for short, the Tribunal) and eventually the BG furnished by Airtel on behalf of Aircel to the DoT was cancelled. Airtel entities, as per the understanding, paid certain amounts to Aircel but after setting off the amounts due to it as interconnect usage charges. The payment after set-off was made on 10.01.2019 prior to which CIRP was initiated against Aircel entities by orders dated 12.03.2018 and 19.03.2018. The RP appointed for Aircel entities protested to the adjustment of an amount of Rs.112.87 crores which the Airtel entities objected to and claimed as set-off. The NCLT allowed the claim while the NCLAT reversed it and found the set-off to be violative of the basic principles and protection afforded under the insolvency law to the CD, finding set-off to be antithetical to the very objective of the IBC.

# 15. The meaning of set-off, various types and principles involved were elaborately considered in Bharti Airtel Ltd.3 It was held that, “Set-off in a generic sense recognises the right of a debtor to adjust the smaller claim owed to him against the larger claim payable to his creditor” (sic para 15). Immediately, we have to notice that therein amounts were due from Airtel to Aircel and vice versa based on which the set-off was attempted; part of which alone was eventually held justified, denying such set-off on the additional amounts due on cancellation. Herein, there were no debts due to the CD from which a set-off could have been made by the appellant of the dues arising on default of payment of monthly bills. Bills were raised by the CTUIL, the appellant herein which were remaining due as on the insolvency commencement date, The amount of Rs.108.44 crores is deposited with the appellant in lieu of a LoC, which is a security for due payment of the bills raised by the appellant during the validity period of the TSA. As long as the TSA continued if the bills are paid regularly, KMPCL could not have sought for refund of the money so deposited. On the other hand, in the event of default, the appellant had the authority to apportion the due amounts to the extent of satisfaction of such amounts due on the bills raised. The amounts apportioned also related to pre-CIRP and post- CIRP bills. The mutual dues, arising from a distinct contract, found in Bharti Airtel Ltd.3 justifying a set-off does not arise in this case. On the contrary the deposit herein made in lieu of LoC is similar to the additional amounts due on cancellation of BG, from Airtel to Aircel as found in Bharti Airtel Ltd.3; remaining with one as the asset of the other not subjected to any set-off contractually, equitably, statutorily or in common law.

# 16. Coming back to the decision in Bharti Airtel Ltd.3 five different meanings were ascribed to set-off viz., (a) statutory or legal set-off; (b) common law set-off; (c) equitable set-off; (d) contractual set-off; and (e) insolvency set-off, of which, common law and equitable set-off were found to have always flown together. Looking at the IBC, it was found that statutory set-off in terms of Order VIII Rule 6 of CPC or insolvency set-off as permitted by Regulation 29 of the Liquidation Regulations cannot be applied to CIRP. The exception being only of the contractual set-off being permitted before or on the date CIRP is put in motion or commenced, since pre-moratorium the terms of the contract are binding and are not altered or modified. It was categorically held in para 39 that: “Set-off of the dues payable by the Corporate Debtor for a period prior to the commencement of the CIRP cannot be made and is not permitted in law from the dues payable to the Corporate Debtor post the commencement of the CIRP” (sic para 39).

# 17. Bharti Airtel Ltd.3 categorically found that the plea of set-off based on Section 30(2)(b) is fallacious since 

• (i) it does not make Chapter III Part II ie: Section 36(4)(e) or Regulation 29 of the Liquidation Regulations applicable to CIRP under Chapter II Part II IBC, 

• (ii) sub clause (ii) of Section 30(2)(b) deals with amounts payable to creditors and not by the creditors to CD, 

• (iii) the provision has application when the resolution plan is considered for approval and 

• (iv) the specific legislative mandate of IBC, all of which does not recognize the principle of insolvency set-off in CIRP. 

The set-off of Rs.64 crores which was due and payable by Aircel entities under the operational services agreement as allowed by the RP was found to be perfectly justified since it was on the aspect of mutual dealings and also equity. The adjustment of interconnect charges were under a separate and distinct agreement, distinct from the purchase of the right to use the spectrum which was found to be entirely different and unconnected transaction. Hence, when the telephone service providers used each other’s facilities, the adjustment of set-off were made on the basis of the contractual set-off, justified also on the ground of equitable set-off. The adjustment insofar as the amounts payable by Airtel entities to the CD, on return/cancellation of BGs, post commencement of CIRP was not amenable to a set-off, was the clear finding.

# 18. As we noticed, in the present case the amounts were deposited as security for due payment of the bills raised. The payment of a bill was to be made within 30 days and there is an extended time of another 30 days within which the default can be satisfied. As far as the pre-CIRP dues, the bills were issued on 04.07.2019, 29.07.2019, 09.08.2019, 13.08.2019, 04.09.2019 and the last on 06.09.2019, all prior to the commencement date; 03.10.2019. If the due amounts were apportioned prior to the commencement date then there could be no dispute raised. Pertinently, after the commencement of the insolvency proceedings, a claim was submitted in Form B on 03.01.2020 for Rs.356.41 crores of which Rs.96.70 crores was admitted by the RP. The claim submitted included in Part A, Rs. 354,37,76,489/- and in Part B, Rs. 2,04,05,539/- which are stated to be the claim amount as on date and the future monthly transmission charges estimated on the average of last three months billing was asserted to be Rs. 57.40 crores. Part A of the claim was also described as arising from the unpaid invoices raised towards transmission charges as per Bulk TSA & CEC Regulations, the invoices having been produced therein as Annexure-2. Part B arose from the unpaid invoices raised on the strength respectively of the agreements dated 16.12.2010 and 05.02.2014 as also the MOU dated 20.10.2016; the breakup relating to each of such agreements and the MoU, given at Column No. 7 with invoices produced as Annexures 6, 8 &10. Obviously, the claim raised included the bills pending as due and defaulted till the date of filing of Form B. The amounts now apportioned to pre-CIRP dues hence was claimed before the RP. Form B was again filed twice on 09.07.2021 and 12.10.2020, after the apportionment on 18.03.2020.

# 19. In fact the second Form B filed explained the downward revision from Rs. 356,41,82,028/- to Rs. 1,71,94,716/- as due to three reasons the second of which was as below:

• 2. Subsequent to raising of the above adjustment bill, the LC amount of Rs.108.44 Cr (submitted on 24.08.2018, 28.08.2018 & 18.09.2018 as per Record of Proceeding of CERC dated 30.08.2018) available in cash with CTU even prior to CIRP date, was also adjusted against the outstanding dues on FIFO basis during Mar’20 as per BCD procedure of CERC Sharing Regulation 2010 and the same was communicated to KSK vide our mail dated 28.03.2020.

On the filing of Form B which included the pre-CIRP dues, the claims were admitted to an extent which order of the RP was not challenged by the appellant, Subsequently the apportionment was made unilaterally of pre-CIRP dues from the deposit clearly violating the moratorium.

# 20. Himadri Chemicals Industries Ltd.4 dealt with injunctions restraining encashment of BG and LoC which were held to be permissible only in two exceptional cases of, fraud or irretrievable harm or injury. Standard Chartered Bank5 found that when a beneficiary seeks enforcement of a BG, it is obligatory, unconditional and irrevocable. The dispute between the parties to a contract, pursuant to which the BG was issued, cannot result in the bank refusing encashment especially since on issuance of the BG, it is an independent contract between the bank and the beneficiary. In the present case, we cannot but notice that there is no BG or LoC issued. Though, the deposit is said to be in lieu of an LoC, the fact remains that even if it was an LoC after the ‘insolvency commencement date’ as per Section 5(12) of the IBC, there could not have been an encashment through or enforcement of the LoC by reason of the moratorium under Section 14 of the IBC. Section 14(2)(b) speaks of a ‘contract of guarantee to a Corporate Debtor’, which can be enforced to make payment dues to the CD and not from the CD.

# 21. Jaypee Kensington6 is with respect to ‘the entitlement of a dissenting financial creditor who is also a secured creditor to receive the amount payable by allowing enforcement of a security interest to the extent of the value receivable by him and in the order of priority available to him’. The appellant herein is neither a financial creditor nor can be deemed to be a secured creditor. Vistra ITCL7 dealt with a pledge of shares held by the CD in another company to the financier for disbursing loan to two other entities, the end benefit of which inured to the CD itself. It was found that pledge is distinguishable from a guarantee insofar as it limits the liability of the CD to the value of the pledged shares. The appellant therein was held to be neither a financial creditor nor an operational creditor and in its status as a secured creditor, being denied of the benefits available to a financial or an operational creditor in terms of Sections 52 and 53, the appellant was allowed to retain the security interest on the pledge of shares made by the CD.

# 22. DBS Bank Limited Singapore8, clarified that Jaypee Kensington6 only held that the dissenting financial creditor, if the occasion arises, is entitled to receive the extent of value in money equal to the security interest held by him. The security interest gets converted from the asset to the value of the asset, which is to be paid in the form of money. It is pertinent that the specific finding was with respect to a dissenting financial creditor in whom was created a security interest of the immovable properties of the CD. In the present case, there is no security interest created through pledge or otherwise by the CD to the appellant. The deposit made even if treated as a guarantee for the default in dues remains the property of the CD till it is adjusted towards the defaulted dues and if so adjusted after the moratorium kicks in towards pre-CIRP dues, the adjustment would be rendered illegal. The deposit made is not a debt due to KMPCL, the CD.

# 23. The NCLT approved the Resolution Plan and the same is implemented, which was not challenged by the appellant as was argued by the learned Senior Counsel for the respondent. The very claim of set-off was not raised before the NCLT or the NCLAT and there was no contention raised by the appellant that they had the status of a secured creditor. The appellant has the status of an operational creditor and the apportionment of the defaulted bills remained defaulted for long till 18.03.2020, long after the commencement of the CIRP. The apportionment was objected to by the RP by filing an appropriate application before the NCLT which has resulted in the present proceedings.

# 24. We have also been shown the IM as prepared by the RP which discloses Rs.108.44 crores in the balance sheet under the assets and liabilities of the CD as an asset and later, after information as to its apportionment, as a disputed issue pending before the NCLT. The Resolution Plans were submitted out of which one has turned successful, reckoning Rs.108.44 crores as an asset of the CD. The appellant ought not to have apportioned the claim once the CIRP proceedings commenced. As has been found in Bharti Airtel Ltd.3 set-off would mitigate against the pari passu principle which is apparent from the scheme of the IBC.

# 25. The NCLT and the NCLAT has rightly found the apportionment made by the appellant to be violative of the provisions of the IBC and in derogation of the moratorium under Section 14. The direction of the NCLT is also to apportion the entire amounts to the post-CIRP dues, a portion of which by the apportionment itself is to post-CIRP dues. An argument was raised on behalf of the appellant that the amounts apportioned have been disbursed to the ISTS licensees in payment of their defaulted bills and hence, the appellant would be liable to make good the amounts from its own funds. We have no reason to accept the above contention since even the ISTS licensees would be hit by the moratorium under Section 14. On the directions issued by the NCLT as confirmed by the NCLAT, book adjustments alone would have to be carried out, especially since the CD is a running concern. The pre-CIRP dues, whether it be to the appellant or the ISTS licensees, will have to be subjected to the RPs decision first made, on submission of Form B dated 03.01.2020. The CD is continuing its operations during the CIRP period and book adjustments would reverse the apportionment made to pre-CIRP dues so as to satisfy the post-CIRP dues, the pre-CIRP dues being satisfied through the claim allowed by the RP with respect to that. This would apply equally to the appellant and the ISTS licensees.

# 26. We hence, affirm the impugned orders and reject the appeals.

# 27. Pending applications, if any, shall stand disposed of.

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