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Company & Insolvency LawSupreme Court of India

Central Transmission Utility of India Limited v. Sumit Binani & Ors.

Civil Appeal · 2026 INSC 284Decided 23 Mar 2026
C.A. No.-002216-002217 - 2025
Justice Sanjay Kumar · Justice K. Vinod Chandran

Background

A power generation company (KMPCL) had deposited Rs. 108.44 crores in cash with the appellant transmission utility as a security mechanism in lieu of a Letter of Credit, before insolvency proceedings (CIRP) commenced against KMPCL on 3.10.2019. After the CIRP began, the appellant appropriated Rs. 85.13 crores of this deposit towards dues that had accrued before the CIRP started. The Resolution Professional objected, and both the NCLT and NCLAT held that this appropriation of pre-CIRP dues from the security deposit, made after the moratorium under Section 14 of the IBC had kicked in, was impermissible.

Decision Breakdown

The Supreme Court held that the security deposit remained the property of the corporate debtor (KMPCL) until validly adjusted, and it was not a performance guarantee but only security against payment default. Since the moratorium under Section 14 bars recovery or enforcement of pre-CIRP dues outside the IBC's claims process, the appellant, an operational creditor, could not unilaterally appropriate the deposit towards pre-CIRP dues; it was instead required to file its claim before the Resolution Professional, which it had already done and had been partly admitted. The Court distinguished the appellant's reliance on precedents involving secured or dissenting financial creditors, since the appellant held no security interest and was neither a financial nor secured creditor. It affirmed the NCLT/NCLAT direction that the amounts be book-adjusted towards post-CIRP dues, with pre-CIRP dues to be satisfied only through the RP's claims process, and dismissed the appeals.

Lesson Learnt

Once insolvency proceedings begin and the moratorium takes effect, a creditor cannot unilaterally adjust or appropriate a debtor's funds or security deposits to satisfy dues that arose before the insolvency began, all such pre-insolvency claims must go through the formal claims process before the Resolution Professional.

Central Transmission Utility of India Limited v. Sumit Binani & Ors. – Legal Case Shots | LegalAware