Set-Off Of Fixed Deposit Against Overdraft Based On Pre-CIRP Contract Does Not Violate Section 14 Of IBC: NCLT Bengaluru

The NCLT (National Company Law Tribunal) Bengaluru bench has ruled that "set-off of a fixed deposit against an overdraft based on a pre-CIRP contract does not violate Section 14 of IBC." The tribunal clarified that if a bank had a contractual right to set off a corporate debtor's fixed deposit against an outstanding overdraft facility, and this right existed prior to the commencement of the Corporate Insolvency Resolution Process (CIRP), then exercising this right during the moratorium period under Section 14 of the IBC is permissible. This recognizes pre-existing contractual rights of creditors, particularly banks, in certain circumstances.