Supreme Court Holds That Once A Moratorium Under Section 14 Of IBC Comes Into Effect, Any Security Deposit Made By The Corporate Debtor Cannot Be Set Off Against The Pre-CIRP Dues Of The Corporate Debtor.

The Supreme Court of India, by way of its judgement dated 23.03.2026 in the matter of Central Transmission Utility of India Limited v. Sumit Binani & Ors.¹, held that, once moratorium under Section 14 of IBC is imposed on the Corporate Debtor ("CD"), any security deposit made by the CD cannot be set off against the pre-CIRP dues of the CD.

The court reiterated that pre-CIRP dues cannot be appropriated by setting off amounts from the CD's security deposit with the creditor. In addition, the court also observed that even if the deposit was made by the CD as a security mechanism, it continued to remain as an asset of the CD, unless the same is lawfully appropriated.

Footnote

1. Civil Appeal Nos. 2216-2217 of 2025.

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