The National Company Law Appellate Tribunal (NCLAT) is diving into a high-stakes question: should a moratorium on actions against a debt-laden company stand firm even when the original insolvency order faces a judicial freeze?
The case in the spotlight centers on Siti Networks Limited, which got swept into the Corporate Insolvency Resolution Process (CIRP) on February 22, 2023, by the National Company Law Tribunal (NCLT) in Mumbai. But things took a sharp turn in March when the NCLAT hit pause on that insolvency admission order. New management quickly stepped in and reassured Siti Networks’ financial creditors about the leadership change.
The drama intensified when the Supreme Court declined to intervene against the NCLAT’s stay order. Axis Bank, a key financial creditor, had already acted unilaterally, adjusting amounts from the company’s bank account to offset debt. This sparked outrage among other lenders, claiming equal rights over the company’s funds. Joint Lenders Meetings (JLM) only deepened the discord, as Axis Bank was accused of disrupting the pari passu arrangement.
The story took another twist when Axis Bank distributed funds to some creditors, prompting the NCLAT to issue a directive in June 2023, freezing any further withdrawals. By August, NCLAT dismissed an appeal contesting Siti Networks’ admission into CIRP, officially installing an Interim Resolution Professional (IRP) to manage the company. But this only sparked more confusion: what was the true start date of the insolvency process—February 22 or August 10?
NCLT intervened on October 1, 2023, ruling that the process began in February and demanded all disputed transactions from the months in question be unwound, ordering Axis Bank to return the funds it had seized. This decision essentially kept the moratorium in play, even during the NCLAT’s earlier stay.
Axis Bank, unwilling to let the matter rest, challenged this directive alongside other aggrieved creditors. Responding on October 29, NCLAT mandated that all disputed sums be placed in an interest-bearing account to safeguard Siti Networks’ financial integrity.
The unfolding legal saga will have its next chapter on December 3, when NCLAT convenes to decide the future of this moratorium puzzle. Until then, financial giants like Axis Bank remain on edge, their funds locked away in a limbo of interest-bearing suspense.
