NCLAT Rules: Payment to Wrong Bank Account Does Not Discharge Liabilities

The Hon’ble National Company Law Appellate Tribunal (NCLAT), Principal Bench Delhi, addressed a critical issue concerning the implications of cyber fraud on the discharge of liabilities under the Insolvency and Bankruptcy Code, 2016 (IBC). In a landmark ruling, the Tribunal held that payments made to a wrong bank account due to cyber fraud cannot amount to the discharge of liabilities.

Case Overview

The case in question, Optinova AB v. Bio-Med Health Care Products Private Ltd., involved an appeal against an order of the National Company Law Tribunal (NCLT), which had rejected a Section 9 application under the IBC filed by the Operational Creditor. The appellant, Optinova AB, contended that despite multiple reminders and an admission of liability, the dues owed by the Corporate Debtor, Bio-Med Health Care Products, remained unpaid.

Contentions of the Parties

• Appellant’s Arguments: The appellant argued that the Corporate Debtor had admitted its liability but failed to clear the dues. They contended that the cyber fraud perpetrated by a third party should not constitute a pre-existing dispute between the parties under the IBC framework.
• Respondent’s Arguments: The respondent argued that the cyber fraud, which involved the redirection of payments to a wrong bank account, necessitated filing a police complaint. They suggested that the fraud could not have occurred without the involvement of the appellant’s employees, implying potential complicity.

Tribunal’s Observations

The Tribunal, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), examined whether the cyber fraud could be considered a pre-existing dispute under the IBC. Key observations included:

• Nature of the Fraud: The Tribunal noted that both parties acknowledged the occurrence of cyber fraud. However, the complaint was filed against unknown persons, not the appellant. This indicated that the fraud was committed by an external third party.
• Discharge of Liabilities: It was emphasized that the appellant could not be held responsible for the payment being made to the wrong bank account. Therefore, such payments could not be considered as the discharge of liabilities owed by the respondent.

Decision of the Tribunal

The Tribunal concluded that the cyber fraud did not constitute a pre-existing dispute between the appellant and respondent under the statutory construct of the IBC. Consequently, the appeal was allowed, overturning the NCLT’s rejection of the Section 9 application.

Legal Implications

This ruling underscores the principle that cyber fraud, when committed by unknown third parties, does not create a pre-existing dispute that can be used to reject insolvency applications under the IBC. It clarifies that liabilities remain undischarged if payments are erroneously made to incorrect accounts due to external fraud.

Case Details

• Case Title: Optinova AB v. Bio-Med Health Care Products Private Ltd.
• Case No.: Company Appeal (AT) (Insolvency) No.1359 of 2022
• Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)
• Advocates for Appellant: Aditya Dewan, Praveen Agarwal, Tarang Agarwal, Mrigank Kumar
• Advocate for Respondent: Nikhil Verma, M. Agarwal

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