Legal prohibitions on fund remittance do not justify returning security deposits made under court orders.

The Respondent (Operational Creditor) initiated proceedings against the Appellant (Corporate Debtor) under Section 9 of the Insolvency and Bankruptcy Code (IBC).

On 06.03.2026, the Adjudicating Authority (NCLT, Ahmedabad) directed the Appellant to deposit the disputed amount of ₹1,24,85,667 in a Fixed Deposit with the Assistant Registrar to safeguard the interests of both parties

The Appellant complied with the deposit within the stipulated timeframe and filed a supporting affidavit on 11.03.2026

In the impugned order dated 13.03.2026, the NCLT observed that Paragraph 8 of the said affidavit contained certain "conditions" regarding U.S. sanctions and the Respondent's presence on the SDN List

Consequently, the NCLT refused to take the affidavit on record, ordered the Assistant Registrar to refund the deposit to the Appellant, and reserved the matter for orders

Whether the Adjudicating Authority was justified in directing the refund of the deposit and returning the affidavit on the grounds that the legal submissions regarding U.S. sanctions in the affidavit constituted "conditions" on the deposit.

The Tribunal exercised its appellate powers under the Insolvency and Bankruptcy Code, 2016.

when a party complies with a judicial direction to deposit funds, the inclusion of legal submissions or cautionary statements regarding the eventual release/remittance of such funds—specifically citing international legal prohibitions or sanctions—does not invalidate the act of deposit or render it "conditional" so as to warrant its rejection

The NCLAT perused Paragraph 8 of the Appellant’s affidavit, which requested that the deposited amount not be released to the Operational Creditor due to U.S. primary sanctions under E.O. 13846 and the lack of OFAC authorization

The Tribunal reasoned that these statements were not conditions attached to the act of depositing the money, but rather legal submissions regarding the release or remittance of the funds to the Operational Creditor

The Tribunal noted that the Appellant had fully complied with the order of 06.03.2026 by depositing the funds on time

Since the Respondent (Operational Creditor) also had no objection to the deposit remaining with the Registry, the NCLT’s decision to return the money and reject the affidavit was found to be erroneous

The NCLAT emphasized that the deposit was intended to safeguard the interests of both parties while the main matter was being adjudicated

The Tribunal held that the deposited amount must remain with the Assistant Registrar and the affidavit dated 11.03.2026 must be taken on record

The Adjudicating Authority was directed to consider the deposit and the affidavit while passing its final decision in the reserved matter, without requiring a re-hearing

The impugned order was modified accordingly, and the appeals were disposed of