In Brief
KSK Mahanadi Power Company entered into transmission service agreements with Central Transmission Utility, depositing Rs 108.44 crore as a security mechanism in lieu of a letter of credit. When the company entered insolvency proceedings in October 2019, the transmission utility appropriated Rs 85.13 crore of the deposit toward pre-insolvency dues. The Supreme Court upheld lower tribunal rulings that the moratorium under the Insolvency Code prohibits such appropriation of security deposits toward pre-insolvency debts. The deposit remains the company's asset and can only be adjusted against post-insolvency dues, ensuring equal treatment of all creditors during the restructuring process.
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