Summary
The High Court’s inherent criminal jurisdiction could not permit a supplier to operate its frozen account while retaining money transferred by suspended management contrary to insolvency safeguards. The Court required prior restoration of Rs. 32.50 lakh to the corporate debtor, then allowed account operation. It preserved the supplier’s claims and the pending criminal proceedings, and required the resolution professional to consider critical supplies and the Code’s going-concern objective.
Issues
- Whether Section 482 relief could overlook the moratorium and the resolution professional’s statutory control of corporate assets.
- On what condition the supplier’s frozen bank account could be operated without deciding criminal liability or its payment entitlement.
Provisions considered
- Sections 14, 17 and 23, Insolvency and Bankruptcy Code, 2016Protected the corporate debtor’s bank funds and the resolution professional’s management authority, while recognising the role of critical supplies under Section 14(2A). (¶ 16-25)
- Section 482, Code of Criminal Procedure, 1973Held that securing the ends of justice does not authorise disregard of statutory insolvency restrictions. (¶ 24-25)
- Regulation 32, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Distinguished specified essential supplies from other goods potentially critical under Section 14(2A). (¶ 19-22)
Held
- Setting aside the appellate insolvency order and remanding the appeal did not itself set aside the order admitting the Section 7 application. The moratorium remained relevant; bank-account balances were corporate assets. (¶ 16)
- Management vested in the insolvency professional and the previous board’s powers stood suspended. Financial institutions had to act on the professional’s instructions. The moratorium prohibited unauthorised transfer or disposition of corporate assets subject to statutory exceptions. (¶¶ 18, 23)
- Section 14(2A) can cover critical goods beyond Regulation 32 essential supplies, including raw materials where appropriate. The IRP or RP must make that decision in light of the Code’s objects, its provisions and the facts. (¶ 19-23)
- Section 482 cannot be used to countenance a statutory breach. Permitting account operation without restoring the Rs. 32.50 lakh failed to respect Sections 14 and 17; an indemnity undertaking did not justify the impugned arrangement. (¶ 24-25)
- The supplier could operate its account after first remitting Rs. 32.50 lakh to the corporate debtor. Its entitlement to that or other sums remained open before the appropriate forum, as did all issues arising from the FIR and the pending quashing petition. (¶ 25(i)-(ii))
Result
Appeal allowed; High Court order modified to require prior remittance of Rs. 32.50 lakh before the supplier operates its account. Corporate assets to be managed under the IBC, with critical-supply obligations considered; civil claims and criminal issues preserved; no costs.