Darshan Developers & Anr vs Vaishali Patrikar

IN THE MATTER OF: 1. Darshan Developers Through its Proprietor Mr. Pravin Satra 101A, Sagar Complex CHS Ltd., MG Road, Vile Parle (East), Mumbai - 400 057 ...Appellant No.1

2. Mr. Pravin Viram Satra 101A, Sagar Complex CHS Ltd., MG Road, Vile Parle (East), Mumbai - 400 057 ...Appellant No.2

Versus

Vaishali Patrikar Resolution Professional of Satra Properties (India) Limited ...Respondent No.1

Present: For Appellant : Mr. Dhruva Gandhi & Mr. Afreen Thanevala, Mr. Vansh Kabra, Advocates

For Respondent : Mr. Divyanshu Rai, Ms. Taruna, Mr. Shubh Gautam, Mr. Vishal Sharma, A. Gulati, Mr. Vaishali Patrikar for R-1.

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The instant Appeal is being filed under Section 61 of the Insolvency

and Bankruptcy Code, 2016 ("Code") against the order dated 2nd January 2024 ("Impugned Order") passed in I.A. No. 3921 of 2022 ("Application") in

C.P. (IB) No. 1632/MB/2019 by the National Company Law Tribunal,

Mumbai Bench ("the Adjudicating Authority"). By the Impugned Order, the

Adjudicating Authority has allowed the Application filed by the Respondent.

Through the Impugned Order, the Adjudicating Authority has directed that

the Appellants herein shall be jointly and severally liable to refund an amount

of ₹91,00,000/- to Satra Properties (India) Limited ("Corporate Debtor").

2. Appellant's prayer is to set aside and quash the Impugned Order dated

2nd January 2024 and further, hold and declare that the Appellants are

neither jointly nor severally liable to pay the sum of ₹91,00,000/- or any part

thereof to the Respondent.

Submissions on behalf of the Appellants

3. Appellant No. 1 is M/s Darshan Developers, a sole proprietorship

concern, carrying on its business through its Sole Proprietor, Mr. Pravin

Viram Satra ("Appellant No. 2"). Appellant No. 1 is engaged in the business of

real estate, construction and development of residential and commercial

properties. A Company Petition bearing No. 1632 of 2019 ("Company Petition")

was filed by one Vistra ITCL (India) Limited against Satra Properties (India)

Limited (the "Corporate Debtor") before the National Company Law Tribunal,

Mumbai ("Adjudicating Authority"), for initiation of Corporate Insolvency

Resolution Process ("CIRP") of the Corporate Debtor under the provisions of

the Code. The Corporate Debtor was admitted into CIRP vide Order dated 3rd

August, 2020 passed by the Adjudicating Authority. It is thus from 3rd August,

2020 that a moratorium under Section 14 of the Code came to be in force.

Company Appeal (AT) (Insolvency) No. 535 of 2024 2 of 22 The Respondent is the Resolution Professional of the Corporate Debtor vide

an Order dated 22nd September, 2022, passed by the Adjudicating Authority.

The Respondent-Resolution Professional filed an Interlocutory Application I.A.

No. 3921 of 2022 ("Application") in the Company Petition inter alia against the

present Appellants, before the Adjudicating Authority, seeking a direction

against the present Appellants to remit an amount of ₹91,00,000 (Rupees

Ninety One Lakhs Only) back to the account of the Corporate Debtor, despite

that monies have become due and were intended to be disbursed by the

Corporate Debtor prior to the initiation of CIRP. The Appellants claimed to

have duly filed their Reply dated 6th May 2023 ("Reply") on 5th June, 2023

before the Adjudicating Authority and served a copy to the Respondent on 5th

June, 2023. Despite the same, the Adjudicating Authority did not consider or

delve upon the assertions of the Appellants in the Reply at all.

4. The Adjudicating Authority passed an Order dated 2nd January, 2024

("Impugned Order") in the Application in the Company Petition, whereby the

Adjudicating Authority allowed the Application filed by the Respondent and

per the order Appellants were directed to refund the amount of ₹91,00,000 to

the account of Satra Properties (India) Limited ("Corporate Debtor"). The

Appellants contends that the Adjudicating Authority failed to take into

consideration that the payments in question were made by the Corporate

Debtor to the Appellant No. 1 prior to the initiation of the Corporate Insolvency

Resolution Process ("CIRP") and were part of a pre-existing understanding

among the Appellants, the Corporate Debtor and M/s Shreeniwas Developers.

Company Appeal (AT) (Insolvency) No. 535 of 2024 3 of 22 It brings to our notice the following sequence of events to bring home the

arguments which are narrated as follows:

11.08.2025 A Joint Venture Agreement dated 11th August, 2005 was entered into and executed between M/s Shreeniwas Developers through its Partner, Mr. Pravin Viram Satra ("Appellant No. 2") and Satra Properties (India) Limited (the "Corporate Debtor").

03.04.2020 Supplemental Deed executed between M/s Shreeniwas Developers and Corporate Debtor.

25.07.2011 Deed of Confirmation executed between M/s Shreeniwas Developers and Corporate Debtor.

17.12.2019 Memorandum of Understanding executed between Shreeniwas Developers and the Corporate Debtor.

31.07.2020 Corporate Debtor issued two cheques dated 31.07.2020 to Appellant No. 1 amounting to ₹91,00,000/-.

03.08.2020 Corporate Debtor admitted into CIRP; moratorium came into effect under Section 14 of the Insolvency and Bankruptcy Code, 2016 ("IBC").

14.09.2018 Bank statement of the Corporate Debtor of accounts - maintained at RBL Bank and IndusInd Bank. 12.11.2020 Ledger accounts of the Corporate Debtor of RBL Bank and

IndusInd Bank respectively reflecting the balance and payments made to the Appellant No. 1.

23.08.2021 Email addressed by the erstwhile Resolution Professional of the Corporate Debtor to Appellant No. 2 (in the capacity of a partner of Shreeniwas Developers) forwarding the ledger account of the Corporate Debtor wherein the entries reflect that the amounts by the Corporate Debtor were paid to Appellant No. 1 on behalf of Shreeniwas Developers on 31.07.2020

05.06.2023 Affidavit-in-Reply dated 06.05.2023 on behalf of the Appellants filed before the Id. Adjudicating Authority and served upon the Respondent.

02.01.2024 The Impugned Order was passed by the Adjudicating Authority without taking into account any of the defences

5. Appellant claims that the date of cheque is deemed to be the date of

payment and thus the payments were pre-moratorium. Appellant claims that

Company Appeal (AT) (Insolvency) No. 535 of 2024 4 of 22 the two cheques in question, bearing Nos. 791035 and 37 respectively,

amounting to ₹41,00,000/- and ₹50,00,000/- respectively, cumulatively

amounting to ₹91,00,000, were issued by the Corporate Debtor to the

Appellants on 31st July, 2020, prior to the initiation of the CIRP on 3rd August,

2020. While the payments were honoured by the bank on 6th August, 2020,

the issuance of cheques predates the commencement of the moratorium.

Therefore, the payments took place squarely prior to the moratorium period

and are not in violation of Section 14 of the IBC. The Appellants seek to rely

on the settled principle that the date of the cheque is deemed to be the date

of payment. The date of issuance of the cheque is to be considered the date of

payment, provided the cheque is honoured upon presentation. This principle

has been consistently upheld by the Hon'ble Supreme Court in CIT, Bombay

Vs. Ogale Glass Works Ltd. AIR 1954 SC 429 and K. Saraswathy Vs. P.S.S.

Somasundaram Chettiar (1989) 4 SCC 527. Pertinently, vide Order dated

10th October, 2023, in Pratim Bayal, Resolution Professional of Rajpratim

Agencies Private Limited Vs. Tata Motors Finance Solutions Limited

Company Appeal (AT) (Insolvency) No. 1309 of 2023 & L.A. No. 4631 of

2023, this Hon'ble Tribunal has upheld that once the cheque is issued, the

payment is deemed to have been made as per the date of the cheque and

upheld the Order of the Hon'ble NCLT, Kolkata Bench, rejecting the

application filed by the Resolution Professional therein seeking refund of the

amounts on this very ground. In the aforementioned decision, this Hon'ble

Tribunal did not deem it fit to go into the question of whether there was

sufficient balance in the account of the Corporate Debtor to determine that

Company Appeal (AT) (Insolvency) No. 535 of 2024 5 of 22 the date of issuance of the cheque (prior to the moratorium period) would be

considered the date of payment from the account of the Corporate Debtor. The

facts and circumstances of the aforementioned decision squarely apply to the

present proceedings. The Respondent has attempted to carve out a fictious

exception to what is now a settled position in law. The Respondent contends

that the date of payment cannot relate back to the date of the cheque if the

funds in the account were insufficient on the date of the cheque. In the event

of dishonour of the cheque, no payment will be said to have been made; it is

immaterial whether the dishonour takes place on the date of the cheque or

thereafter. A creditor would never have access to information on whether the

account of the issuer of a cheque would have sufficient balance. Therefore, if

there is any increase in the balance of the Corporate Debtor between the date

of the cheque and date of clearance, it is completely immaterial.

6. Adjudicating Authority failed to consider this well-settled principle,

thereby passing an ex-facie arbitrary, erroneous and unreasoned Order that

the payments made were in violation of the moratorium under Section 14 of

the IBC.

7. Appellant also claims that the transactions were made in the ordinary

course of business and there has been violation of natural justice. The

Appellants submit that the payments in question were made pursuant to an

existing internal understanding between Appellant No. 1 and M/s Shreeniwas

Developers in respect of the transaction with the Corporate Debtor. The ledger

accounts of the Corporate Debtor, which were forwarded by the erstwhile

Company Appeal (AT) (Insolvency) No. 535 of 2024 6 of 22 Resolution Professional of the Corporate Debtor vide his email dated 23rd

August 2021 addressed to Appellant No. 2, clearly reflect that payments were

made to Appellant No. 1 on behalf of M/s Shreeniwas Developers on 31st July,

2020. Further the Impugned Order passed by the Adjudicating Authority is

contrary to the principles of natural justice, as it failed to consider the

submissions made by the Appellants. The Appellants had duly filed and

served their Reply to the IA upon the Respondent, however the same were not

dwelled upon.

Submissions on behalf of the Respondent

8. Broadly, the Appellants have contended that even though both the

cheques were deposited and encashed during the CIRP period, it would not

amount to violation of Section 14 of the Code as the date of issuance of

cheques is prior to the CIRP commencement date. The Appellant is relying

upon the doctrine of relation back. However, the Respondent contends that

as on the date of issuance of cheques, sufficient funds were not available in

the Corporate Debtor's bank account, as such doctrine of relation back is

inapplicable, and the cheques encashed by the Appellant during CIRP period

are in violation of Section 14 of the Code.

9. At the outset, it is pertinent to take note of the following facts which are

undisputed between the parties:

(a) Corporate Debtor issued two cheques cheque bearing No. 37

drawn on RBL Bank for a sum of ₹50,00,000/- and another cheque

bearing No. 791035 drawn on IndusInd Bank for a sum of ₹41,00,000/-

to the Appellant No. 1. Both these cheques were issued on 31.07.2020.

Company Appeal (AT) (Insolvency) No. 535 of 2024 7 of 22 This is without prejudice to the contention raised by the Answering

Respondent in the paragraphs below that there was no basis or

agreement or any understanding between the parties as alleged by the

Appellants, for issuance of such cheques.

(b) CIRP was initiated against the Corporate Debtor vide order dated

03.08.2020 passed in C.P. (IB) No. 1632/MB/2019. Accordingly,

moratorium in terms of Section 14 of the Code commenced on

03.08.2020.

(c) Appellants deposited both the cheques on 04.08.2020 in the

respective bank accounts of the Corporate Debtor.

(d) Both cheques were encashed on 06.08.2020 i.e., during the CIRP

period.

10. The Respondent contends that these funds, credited after the

commencement of CIRP, were improperly utilized to honour the cheques,

violating the moratorium under Section 14 of the Code. Respondent contends

that the encashment of cheques during moratorium violates Section 14 of the

code. Section 14(1)(c) of the Code prohibits any recovery or enforcement of a

payment obligation from the assets of the Corporate Debtor during the CIRP

period. Reliance is placed upon SREI Equipment Finance Ltd. v. Amit

Gupta, Company Appeal (AT) (Ins.) No. 298 of 2019 wherein this Appellate

Tribunal observed that any payment made after the commencement of CIRP,

irrespective of the instrument's date, contravenes Section 14 of the Code. It is

Company Appeal (AT) (Insolvency) No. 535 of 2024 8 of 22 submitted that the utilization of funds credited post-moratorium to honour

cheques issued prior to the CIRP commencement date constitutes dissipation

of the Corporate Debtor's assets and undermines the interests of its creditors.

11. The Appellants' reliance on the doctrine of relation back, as expounded

in CIT v. Ogale Glass Works Ltd., AIR 1954 SC 429 and K. Saraswathy v.

P.S.S. Somasundaram Chettiar, (1989) 4 SCC 527, is misplaced. In Ogale

Glass Works Ltd., the Hon'ble Supreme Court held that payment by cheque

relates back to the date of issuance, provided the cheque is honoured upon

presentation. As such, this principle is subject to the availability of funds on

the date of issuance, which is not the case here. Similarly, in K. Saraswathy

(supra) the Court held that the sufficiency of funds at the time of cheque

issuance is critical. If funds are inadequate, the payment cannot relate back

to the cheque's date, defeating the Appellants' arguments. The judgment

emphasized that the doctrine applies only when the drawer has sufficient

funds in their account on the date of issuance and when there is no

intervening statutory restriction on honouring the cheque.

12. The Appellate Tribunal in Pratim Bayal, RP v. Tata Motors Finance

Solution, Company Appeal (AT) (Ins.) No. 1309 of 2023 also clarified that

the principle of relation back is inapplicable in cases where insufficient funds

exist at the time of issuance, as is evident in the present case.

13. Respondent also brings to our attention the fraudulent intent and

misrepresentation by the Appellants. The Appellants have failed to

substantiate their claim of an internal understanding or any valid agreement

Company Appeal (AT) (Insolvency) No. 535 of 2024 9 of 22 warranting the payment by cheques of ₹91,00,000/-. The cheques were

issued in anticipation of funds credited post-moratorium, indicating malafide

intent to circumvent the moratorium provisions and favour certain creditors

over others.

14. Appellant's contention that the Impugned Order is contrary to the

principles of natural justice is false. A bare perusal of the Impugned Order

indicates that the submissions of the Appellants were considered as well as

recorded by the Ld. Adjudicating Authority.

Appraisal

15. We've heard the councils of both sides and perused the materials placed

on record.

16. The main issue before us is whether the encashment of cheques during

the CIRP period constitutes a violation of Section 14 of the Code and also

whether the doctrine of "relation back" can apply when sufficient funds were

unavailable in the Corporate Debtor's accounts on the date of issuance of the

cheques.

17. First, we dwell on the issue whether payments made by cheque prior to

CIRP initiation constitute violation of Section 14 moratorium? The Appellants

contend that the two cheques dated 31st July 2020, totalling ₹91,00,000/-

(Cheque No. 791035 for ₹41,00,000 and Cheque No. 37 for ₹50,00,000), were

issued prior to the initiation of the CIRP on 3rd August 2020.

Company Appeal (AT) (Insolvency) No. 535 of 2024 10 of 22

18. The case of the Appellants is that even though both the cheques were

encashed during the CIRP period (i.e., on 06.08.2020), however, since the date

of issuance of cheques is prior to the CIRP commencement date it would not

amount to violation of Section 14 of the Code. Appellant's argument is

premised on the doctrine of relation back the date of payment (i.e.,

06.08.2020) would relate back to the date of issuance of cheques (i.e.,

31.07.2020). As such, Appellants contend encashment of cheques dated prior

to the commencement of CIRP does not violate moratorium period under

Section 14 of the Code. To support their contention, Appellants have heavily

relied upon the judgments passed in Pratim Bayal, RP v. Tata Motors

Finance Solution, Company Appeal (AT) (Insolvency) No. 1309 of 2023,

CIT Bombay v. Ogale Glass Works Ltd. AIR 1954 SC 429, and K.

Saraswathy v. P.S.S. Somasundaram Chettiar, (1989) 4 SCC 527.

19. It is claimed by the Appellants that this principle has been upheld by

the Ogale Glass Works Ltd (supra) and K. Saraswathy (supra). The Appellants

further highlight the recent NCLAT decision in Pratim Bayal (supra), which

rejected an attempt to treat payment as post-moratorium on the basis of

insufficient funds. Accordingly, since the cheques were issued pre-

moratorium, the payments must be regarded as pre-moratorium, not violating

Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC).

20. Rebutting these Arguments, the Respondent argues that the doctrine of

relation back relied upon by the Appellant is not applicable because on the

date of issuance of the cheques (31st July 2020), the Corporate Debtor's bank

Company Appeal (AT) (Insolvency) No. 535 of 2024 11 of 22 accounts had insufficient funds (RBL Bank: ₹8,398; IndusInd Bank:

₹9,151.56). The funds to cover the cheques were credited only on 4th August

2020, after CIRP commencement and imposition of moratorium under Section

14. The cheques were deposited and encashed during the CIRP period

(encashment on 6th August 2020), which constitutes a clear violation of the

moratorium.

21. It is instructive to note the account details before coming to any

conclusions and we note that the bank account statements of the Corporate

Debtor held with RBL Bank indicates the following transaction entries during

the period 31.07.2020 to 06.08.2020:

(a) Corporate Debtor's RBL bank account reflects a credit balance of ₹8,398/- as on 01.03.2020 and, at the end of 01.08.2020, an amount of ₹8,221/- is shown. There is no transaction on 31.07.2020; credit balance remained ₹8,398/- as on that date.

(b) On 04.08.2020, an amount of ₹50,00,000/- was credited in the bank account of the Corporate Debtor by M&M Legal Ventures. Total balance as on 04.08.2020 was ₹50,08,221/-.

(c) More importantly, on 06.08.2020, cheque bearing No. 37 for an exact amount of ₹50,00,000/- was encashed by Appellant No. 1. The credit balance at the end of 06.08.2020 was ₹8,221/-.

22. Similarly, it is evident from the transaction entries reflected in the

IndusInd Bank account of the Corporate Debtor that there was insufficient

funds as on 31.07.2020. The following entries are relevant:

a. On 31.07.2020, at the end of the day, credit balance was ₹9,151.56/-. During the day on 31.07.2020, an amount of

Company Appeal (AT) (Insolvency) No. 535 of 2024 12 of 22 ₹88,00,000/- was received by RTGS transaction in the bank account of the Corporate Debtor, however, payments of ₹88,00,000/- (in four tranches) were made and the amount was debited from the Corporate Debtor's account on 31.07.2020 itself.

b. Another payment of ₹11,00,000/- was received via RTGS transaction in the bank account of the Corporate Debtor on 31.07.2020, and the said amount was debited on 31.07.2020 itself.

Resultantly, credit balance at the end of 31.07.2020 was ₹9,151.56/.

c. On 04.08.2020, the Corporate Debtor received an amount of ₹41,00,000/- from Bruhad Mumbai Gujarati Samaj Bhavan (Tender). Credit balance being ₹41,03,960.56/-.

d. More importantly, on 06.08.2020, cheque bearing No. 791035 for an exact sum of ₹41,00,000/- was encashed by the Appellants. Credit balance being ₹3,960.56/-.

23. Thus, we find that both the cheques dated 31.07.2020 were cleared on

06.08.2020 out of the proceeds credited in the bank account of the Corporate

Debtor on 04.08.2020 which is post commencement of CIRP on 03.08.2020.

Moreover, the Corporate Debtor's bank account did not have any funds

available to honour the cheques as on 31.07.2020 and the cheques were

issued in anticipation of funds being made available in the Corporate Debtor's

account in future.

24. Appellants heavily rely upon the judgments in Pratim Bayal, RP

(supra), CIT Bombay v. Ogale Glass Works Ltd. (supra) and K. Saraswathy

v. P.S.S. Somasundaram Chettiar (supra), but none of these judgments were

dealing with the fact of insufficiency of funds in the bank account of the

Company Appeal (AT) (Insolvency) No. 535 of 2024 13 of 22 drawer as on the relevant date of issuance of cheques. Respondent brings to

our notice that in all the judgments cited by the appellant, there was an

underlying debt, but in the present case there is no debt associated, therefore

they are distinguishable.

25. The Respondent relies on SREI Equipment Finance Ltd. v. Amit

Gupta (Company Appeal AT (Ins) No. 298 of 2019), establishing that any

payments made post-CIRP commencement contravene Section 14 regardless

of instrument date. The Respondent contends that the Appellants'

interpretation encourages circumvention of moratorium and dissipation of

Corporate Debtor's assets. Going strictly by the principle of relation back one

can conclude that the date of issuance of a cheque is to be considered the

date of payment. But in the facts and circumstances of the case we need to

examine the applicability of the Doctrine of Relation Back in the Context of

Insufficient Funds. Even though the Appellants maintain that the date of

cheque issuance is determinative of payment date irrespective of whether the

cheque is cleared during the moratorium period. They cite Supreme Court

rulings in Ogale Glass Works Ltd. and K. Saraswathy, which hold that a

cheque payment dates back to the cheque's date if honoured. They also argue

that once a cheque is issued, the payer cannot later assert breach based on

insufficient funds known only after issuance, as creditors typically lack such

information. The Appellants emphasize that the recent NCLAT ruling in

Pratim Bayal reiterates this established principle without requiring

assessment of sufficiency of funds on the issue date. On the other hand, the

Respondent contends that the relation back doctrine is conditional on

Company Appeal (AT) (Insolvency) No. 535 of 2024 14 of 22 sufficient funds being present on the cheque date, which is absent here.

Judgments such as Ogale Glass Works Ltd. explicitly hinge on availability of

funds at issuance. The Respondent further underscores the binding NCLAT

decision in Pratim Bayal, which clarified the doctrine cannot apply where

insufficient funds exist, as in this case.

26. Respondent has relied upon the judgment of this Appellate Tribunal in

Sunil Gutte Vs. Avil Menezes & Ors. (Judgment dated 30th May, 2025 in

Company Appeal (AT) (Insolvency) No. 515/2025. Respondent claims that

in paragraph 27 of this judgment, it has observed "..Since the encashments of

the cheques were post-moratorium, the Adjudicating Authority had concluded

that the cheques were deliberately ante-dated only to conjure the impression

that they were handed over before commencement of CIRP" and in this case no

such finding of facts has been arrived at by the Adjudicating Authority in the

facts of the present case. The Adjudicating Authority has not returned the

finding that the cheques were deliberately anti-dated, as they were done in

the case of Sunil Gutte. Therefore, since there was a finding in Sunil Gutte

that cheques were deliberately anti-dated, the general law as applicable was

found to be not of any assistance. The decision in Sunil Gutte cannot be cited

as a precedent for a situation where cheques have not been deliberately anti-

dated, only to conjure an impression that they were handed over before the

commencement of CIRP. In fact, this finding has been returned because the

Appellate Tribunal was conscious of the fact that, but for such a finding, the

general law would have been applicable, and the date of payment would

Company Appeal (AT) (Insolvency) No. 535 of 2024 15 of 22 precede the date of commencement of the moratorium on 10th September,

2018.

27. Such an argument has no legs to stand as in the same judgement it is

noted that:

"27. We now proceed to dwell on the tenability of the three cheque payments which were integral to the impugned transactions. We have already taken notice that two cheques were issued on 06.09.2018 which was a day before commencement of CIRP and also before moratorium became effective on 10.09.2018. The third one was dated 08.09.2018 which also pre-dated moratorium which took effect on 10.09.2018. However, all the three cheques were encashed subsequent to declaration of moratorium. Since the encashment of the cheques were post-moratorium, the Adjudicating Authority had concluded that the cheques were deliberately ante- dated only to conjure the impression that they were handed over before commencement of CIRP. We also find that the Adjudicating Authority arrived at this conclusion since nothing was explained by the Appellant as to why these cheques though issued prior to CIRP commencement date were kept on hold by Respondent Nos. 2 to 5 and encashed after the commencement of CIRP.

28. Assailing the above finding of the Adjudicating authority, the Appellant has relied on the judgment of this Tribunal in Pratim Bayal of Rajpratim Agencies Pvt. Ltd. Vs Tata Motors Finance Solutions Ltd. in CA (AT) (Ins.) No. 1309 of 2013 to contend that the date on which the cheque is handed over is the relevant date and the payment shall be treated to have been made on that date. It is also the case of the Appellant that the onus to explain why these cheques were encashed after moratorium is not on them but on the recipients. It has not escaped our attention that the Adjudicating Authority in the impugned order has already distinguished the facts of the present case with the Pratim Bayal judgment supra and held it to be inapplicable. We are inclined to

Company Appeal (AT) (Insolvency) No. 535 of 2024 16 of 22 agree with the Adjudicating Authority that this judgment does not apply to the present case since the Appellant has not provided any substantive evidence on record to show that the cheques were handed over on the same date as was recorded on the cheque.

29. We also find force in the contention of the Respondent that since the cheques were encashed after 10.09.2018 by which date the moratorium had become effective, it amounted to breach of moratorium. In support of their contention, the Respondent has relied on judgment of this Tribunal in SREI Equipment Finance Ltd. Vs Amit Gupta in CA (AT) (Ins.) No. 298 of 2019 wherein it has been held that even if the cheque dates back to the date of handover it cannot be encashed after moratorium kicking in. We now look at the relevant portion of the said judgement which reads as under:

"6. Clause (b) of Section 14(1) prohibits transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein. As per Clause (c) of Section 14(1) any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under SARFAESI Act, 2002 is also prohibited. Clause (d) of subsection (1) of Section 14 prohibits the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.

7. From the simple reading of the provisions it is evident that after initiation of Corporate Insolvency Resolution Process once moratorium starts no person can recover any amount from the account of the Corporate Debtor. It is true that the cheque dates back to the date of handover but it cannot be encashed after the moratorium starts, in view of the specific provisions, to recover the amount from the Corporate Debtor as referred above."

30. We find no reasons to disagree that after commencement of CIRP once moratorium kicks in, no person can unilaterally recover any amount from the account of the Corporate Debtor. No action violating moratorium can be countenanced. Even for argument's sake, if we agree that in the present case, the date depicted on the three cheques co-relates with the date of cheque handing over, nonetheless, in view of the specific statutory provision of moratorium which precludes any such recovery, the cheques

Company Appeal (AT) (Insolvency) No. 535 of 2024 17 of 22 cannot be encashed after moratorium starts. Since no such arrangement is envisaged in the IBC and yet the amounts have been encashed, the RP in seeking recovery of the same is found to have acted well within the boundaries of the IBC. The recourse open to the Respondent Nos 2 to 5 is to file their claim before the RP/Liquidator in respect of such dues."

In this case also there is no evidence provided by the appellant that the

cheques were handed over to Darshan Developers - Appellant No. 1, prior to

initiation of the CIRP and furthermore we note that there was no balance in

the account of the CD on the date of issue of the cheques. Once CIRP begins

cheques cannot be encashed as moratorium has already kicked in. Therefore,

in the facts and circumstances of the case we note that this judgement fully

supports the case of the Respondent.

28. A perusal of the transactions in the bank accounts reveal that both the

cheques were encashed on 06.08.2020 out of the proceeds credited in the

bank account of the Corporate Debtor on 04.08.2020. Since Corporate

Debtor's relevant bank account did not have funds available to honour the

cheques on 31.07.2020, the cheques though dated 31.07.2020 are clearly

issued in anticipation of receipt of funds in future and were never intended

for payment prior to 04.08.2020. It is also noteworthy that the two cheques

were issued while the orders were reserved under C.P. (IB) No.

1632/MB/2019 by the Adjudicating Authority. In the facts and

circumstances of the case, Adjudicating Authority had directed the Appellants

to jointly and severally refund an amount of ₹91,00,000/- to the Corporate

Company Appeal (AT) (Insolvency) No. 535 of 2024 18 of 22 Debtor i.e., Satra Properties (India) Private Limited and cannot find any

infirmity in that order.

29. Thus, we find that in the facts and circumstances of the case of absence

of sufficient funds, the fact that the payment date cannot be backdated, and

cheques honoured during CIRP violate the moratorium, we can conclude that

doctrine of relation back is not applicable in this case.

30. Lastly, we also look into another argument raised by the Appellant that

there was an existence of pre-existing understanding or agreement regarding

payments. We dwell into this issue whether it can support the case of the

Appellants. The Appellants assert that the payments represented fulfilment of

obligations pursuant to a pre-existing understanding between Appellants, the

Corporate Debtor, and M/s. Shreeniwas Developers. They claim documentary

evidence including a Joint Venture Agreement dated 11th August 2015, a

Supplemental Deed dated 3rd April 2020, a Deed of Confirmation dated 25th

July 2011, and a Memorandum of Understanding dated 17th December 2019.

Appellant also relies upon ledger accounts forwarded by the erstwhile

Resolution Professional which reflect payments made by the Corporate Debtor

on behalf of Ms. Shreeniwas Developers to Appellant No. 1 on 31st July 2020,

thus evidencing bona fide transactions in the ordinary course of business.

However, the Respondent refutes the existence of any valid internal

understanding or agreement that justifies the payments. They allege

misrepresentation and fraudulent intent by the Appellants, asserting that the

cheques were issued in anticipation of post-moratorium credits, indicating a

Company Appeal (AT) (Insolvency) No. 535 of 2024 19 of 22 deliberate attempt to circumvent the CIRP moratorium and favour certain

creditors over others. The Respondent submits that no credible documentary

proof validates the claimed internal arrangement, rendering the payments

void under the moratorium. We don't find the arguments of the Respondent

not to be believed, particularly in the background when the judgement was

reserved in the Section 7 proceedings and no funds were available in the CD's

account.

31. Finally, we dwell look into the arguments of alleged violation of natural

justice by the Adjudicating Authority and note that the Appellants contend

that the Impugned Order of the Adjudicating Authority is contrary to

principles of natural justice as it failed to consider their detailed submissions

and replies to the IA. They assert that the order is arbitrary, erroneous, and

unreasoned, neglecting critical facts, figures, and documents submitted in

their defence. However, it was strongly rebutted by the Respondent and it was

brought to our notice that the Adjudicating Authority duly considered and

recorded all arguments made by the Appellants in the Impugned Order. The

Respondent maintains that no violation of natural justice occurred, as the

Appellants had ample opportunity to present their case, which was fairly

adjudicated. This argument is also not convincing. Therefore, we don't find

that Adjudicating Authority has violated any principles of natural justice.

32. We find some of the observations of the Adjudicating Authority are

revealing and are extracted as below:

Company Appeal (AT) (Insolvency) No. 535 of 2024 20 of 22 "4.5. We are also conscious of the fact that no money was due and payable to Respondent No. 1 (Darshan Developers) by the Corporate Debtor, and the payment in question was made merely as an accommodation to Respondent No. 1 on a returnable basis. 4.6. In view of the foregoing discussion, we have no hesitation in directing Respondent Nos. 1 and 2 to jointly and severally refund an amount of ₹91,00,000/- to the Corporate Debtor within seven days. Since the Applicant has not made any prayer under Section 66 of the Insolvency and Bankruptcy Code, 2016, pursuant to which Respondents Nos. 3 to 7, as the case may be, could be proceeded against, we are not inclined to pass any order against Respondents Nos. 3 to 7 at this stage. However, the Applicant shall be at liberty to file an appropriate application seeking contribution from Respondents Nos. 3 to 7 to the assets of the Corporate Debtor in terms of Section 66 of the Code."

33. Section 14(1)(b) of the Code clearly prohibits such a transaction in

moratorium. Relevant portion is extracted herein:

"14. Moratorium-

1(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein."

Under the circumstances the Corporate Debtor's issuance of cheques cannot

be considered as in ordinary course of business and particularly in the

backdrop that Section 7 proceedings were going on and judgment was

reserved, it invites suspicion.

Conclusions

34. Thus, we note that the findings of the Adjudicating Authority are

categoric and in the facts and circumstances of the case, we conclude that

impugned order doesn't have any infirmity.

Company Appeal (AT) (Insolvency) No. 535 of 2024 21 of 22 Orders

35. Accordingly, we dismiss the appeal. All IAs disposed of. The parties to

bear their own cost.

[Justice N Seshasayee] Member (Judicial)

[Arun Baroka] Member (Technical) New Delhi.

November 27, 2025.

pawan

Company Appeal (AT) (Insolvency) No. 535 of 2024 22 of 22