The Division bench of the Bombay High Court comprising Justices K.R. Shriram and Kamal Khata, J. was recently hearing an appeal filed by the Judgment Debtor / Corporate Debtor and held that once the appellant deposited a specific amount in the trial court as a condition for the stay of execution of a decree, that amount no longer belonged to or was under the control of the appellant. Therefore, when the CIRP commenced, the appellant was not entitled to or considered the ‘owner’ of that amount.
The High Court noted from various judgments that establish the principle that when a judgment debtor deposits money in court as a condition for a stay of execution of a decree and later undergoes insolvency or corporate insolvency resolution process (CIRP), the deposited money does not remain the asset of the debtor. The High Court clarified that the deposited money is held in trust by the court and is placed beyond the reach of the parties involved. It is safeguarded for the benefit of the judgment creditor, and there is only a postponement of the plaintiff's right to receive the amount due to the ongoing appeal.
Based on this principle, the High Court bench concluded that once the appellant deposited a specific amount in the trial court as a condition for the stay of execution of a decree, that amount no longer belonged to or was under the control of the appellant. Therefore, when the CIRP commenced, the appellant was not entitled to or considered the ‘owner’ of that amount. Consequently, the deposited amount is not affected by the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code (IBC) during the CIRP. As a result, the High Court found no legal impediment in allowing the respondent to withdraw the deposited amount if deemed appropriate.
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