NCLAT rules Bank of Baroda's appropriation of FD funds after IBC moratorium began must be reversed.
The National Company Law Appellate Tribunal (NCLAT), Delhi, upheld the reversal of Bank of Baroda’s post-commencement appropriation of fixed deposit margin money during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC).
The appellate tribunal confirmed that any financial adjustment during the moratorium violating the automatic stay is void. The funds, treated as security, could not be unilaterally utilized by creditors post-CIRP commencement.
Creditors cannot exercise rights of set-off or appropriation during moratorium without NCLT approval.
This ruling reinforces the sanctity of the moratorium, protecting corporate debtors from unilateral recovery actions. Banks and financial institutions must review their recovery protocols to ensure alignment with IBC timelines and prohibitions.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 14
