The amount lying in Current Account of Corporate Debtor, even if it was subject to a charge, continues to be an asset of the Corporate Debtor and adjustment or deduction of amounts from the Current Account of the Corporate Debtor during the moratorium period is not justifiable | The moratorium begins operating from the date of the order declaring moratorium under Section 14 of the Code – Mr. Ajay Joshi, RP for Indian Steel Corporation Ltd. Vs. Union Bank of India – NCLT Mumbai Bench

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Hon’ble NCLT Mumbai Bench held that:

(i) A plain reading of Section 14 of the Code makes it abundantly clear that the said provision is designed to give immediate effect to the moratorium and be applicable from the date of order.
(ii) Margin money for the Letter of Credit means a contribution made by the borrower to honour the liability under the Letter of Credit which remains with the Bank so long as the Letter of Credit is alive.
(iii) The fact that a security interest on the current account was created in favour of the Respondent establishes that the funds in the current account of the Corporate Debtor remained as Corporate Debtor’s assets and no trust was formed in favour of the Bank.
(iv) The amount lying in the current account of the Corporate Debtor, even if it was subject to a charge, continues to be an asset of the Corporate Debtor, and adjustment or deduction of amounts from the current account of the Corporate Debtor during the moratorium period is not justifiable.

The amount lying in Current Account of Corporate Debtor, even if it was subject to a charge, continues to be an asset of the Corporate Debtor and adjustment or deduction of amounts from the Current Account of the Corporate Debtor during the moratorium period is not justifiable | The moratorium begins operating from the date of the order declaring moratorium under Section 14 of the Code – Mr. Ajay Joshi, RP for Indian Steel Corporation Ltd. Vs. Union Bank of India – NCLT Mumbai Bench Read Post »