Principal Bench directs Moving Pixels Pvt. Ltd. to remit Rs. 1.01 crore received during CIRP moratorium, reinforcing Section 14 of Insolvency and Bankruptcy Code, 2016
In a significant ruling delivered on August 24, 2026, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has upheld the sanctity of the moratorium period under the Insolvency and Bankruptcy Code (IBC), 2016. The tribunal ordered Moving Pixels Pvt. Ltd., the appellant, to remit Rs. 1,01,04,908, which was transferred from the corporate debtor, NDS Art World Pvt. Ltd., during the moratorium period, along with 18% interest as per the Interest Act, 1978.
The judgment arose from an application filed by the Resolution Professional (RP) of NDS Art World Pvt. Ltd., Jitendra Kothari, alleging wrongful transfers of funds to the appellant during the Corporate Insolvency Resolution Process (CIRP) period without the RP’s knowledge. The CIRP for the corporate debtor was initiated on July 25, 2023, with a moratorium declared from that date, prohibiting any transactions involving the debtor’s assets.
The RP contended that although the transactions related to services rendered prior to the CIRP, the payments were made during the moratorium, thereby violating Section 14(1)(b) of the IBC. The appellant argued that it was unaware of the CIRP initiation and contended against the obligation to return the funds. The tribunal rejected this plea, holding that public knowledge of the moratorium is presumed following the mandatory public announcement and NCLT’s website publication under Sections 13 and 15 of the IBC. Ignorance of law or facts was held not to be a valid defense.
The tribunal scrutinized bank statements and documentary evidence, including invoices related to an event organized at Ashoka Hotel, Mumbai, which was funded by the Bharatiya Janata Party (BJP). The evidence revealed that Rs. 1 crore was credited to the corporate debtor's account by BJP on July 27, 2023, during the moratorium period, and Rs. 80 lakhs were subsequently transferred to the appellant’s account. The tribunal observed that the transfer was unauthorized and violated the moratorium.
Furthermore, the tribunal dismissed the appellant’s claim that the funds were held in trust by the corporate debtor as unsupported by evidence and inconsistent with the provisions of the IBC. The tribunal also clarified that the remedy for violation of the moratorium lies under Section 14(1)(b), especially since Section 74, which previously dealt with penalties, has been omitted effective April 6, 2026, by the Insolvency and Bankruptcy Code (Amendment) Act, 2026.
This judgment reinforces the role of the Resolution Professional as the custodian of the corporate debtor’s assets during the CIRP and emphasizes strict adherence to the moratorium provisions to prevent unauthorized alienation of assets. The NCLAT dismissed the company appeal, upholding the NCLT’s order for immediate refund of the amount along with interest.
Bottom Line:
Transactions made during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016, are prohibited, and any such transfer of funds must be remitted back to the corporate debtor along with interest, as per the tribunal's directions.
Statutory provision(s):
Section 14(1)(b) of Insolvency and Bankruptcy Code, 2016, Section 60(5) of Insolvency and Bankruptcy Code, 2016, Section 3 of the Interest Act, 1978, Sections 13 and 15 of Insolvency and Bankruptcy Code, 2016
