Bank Can Classify Corporate Debtor's Account As Fraud During CIRP, Such Classification Is Not Hit By S.14 Of IBC: NCLT Mumbai
The National Company Law Tribunal (NCLT) Mumbai bench of Sh. Prabhat Kumar (Technical Member) and Justice Virendrasingh Bisht (Retd.) (Judicial Member) has held that a bank is empowered to classify the account of the Corporate Debtor as fraud even during the currency of the CIRP and such classification is not hit by section 14 of the IBC. The present application has been...
The National Company Law Tribunal (NCLT) Mumbai bench of Sh. Prabhat Kumar (Technical Member) and Justice Virendrasingh Bisht (Retd.) (Judicial Member) has held that a bank is empowered to classify the account of the Corporate Debtor as fraud even during the currency of the CIRP and such classification is not hit by section 14 of the IBC.
The present application has been filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking to set aside the letter issued by the Respondent by which the corporate debtor's bank account was classified as fraud during moratorium under section 14 of the IBC. The Applicant submitted that the Respondent is part of the Committee of Creditors (CoC) which has approved the Resolution Plan with 100 % voting on 22.04.2024 and would create obstacles in the smooth conclusion of the Corporate Insolvency Resolution Process (CIRP).
The Tribunal held that the bank can classify the account of the Corporate Debtor as fraud even during the currency of the CIRP as such classification does not fall within the scope of section 14 of the IBC. The classification of fraud is an administrative task which is quite distinct from the CIRP process and it does not tantamount to initiating any legal proceedings or enforcing any security interest.
It further held that the role of the Adjudicating Authority is to ensure that the CIRP process is conducted in a fair and transparent manner, not to interfere with the administrative decision taken by the bank classifying the account as fraud under Regulatory Guidelines. Accordingly, the present application was dismissed.
Case Title:UNION BANK OF INDIA VS ROLTA INDIA LIMITED
Case Number:IA(I.B.C)/3028( MB)2025 (NEW IA) IN C.P. (IB)/530(MB)2020
Order Date: 08/07/2025