A somewhat similar question arose before the Bombay High Court in the matter of Nahar Builder Ltd v. Housing Development and Infrastructure Ltd. In the said case, a Single Judge directed for release of the amount lying deposited the court in favour of Nahar Builders. In the said case, Nahar Builders had filed an application under Section 9 before the High Court for a direction to the opposite party to furnish security. Pursuant to this, the High Court directed the opposite party to furnish a bank guarantee of ₹ 8 crore. The said security having not been furnished by the opposite party, contempt proceedings came to be filed. Thereafter, the opposite party deposited the amount of ₹8 crores in the court.
In the arbitration proceedings, Nahar Builders was successful and the sum of ₹8 crore along with interest @8% pa from March 23, 2016 was awarded to the company. After the expiry of the statutory period available for challenging the award, Nahar Builders moved an application before the High Court for release of the deposited amount. The opposite party opposed the application on the ground that there was a moratorium in place due to the pendency of insolvency proceedings against it and that the amount deposited with the court being the property of the opposite party, the same cannot be released.
While considering the application, the High Court held that the amount once deposited in the court was placed beyond the reach of either party. Once the money is deposited in the court, no party can automatically claim any right to it without adjudication by a court. Rejecting the contention of the opposite party resting on the moratorium being in vogue, the Court held that the application for release of money cannot be considered as a suit, proceeding or execution within the meaning of Section 14(1)(a) of the Insolvency & Bankruptcy Code, 2016.