The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that money received from the sale of personal jewellery does not automatically qualify as an “excluded asset” under the Insolvency and Bankruptcy Code, 2016 (IBC). Once the money forms part of the bankrupt’s estate and vests in the bankruptcy trustee, the bankrupt cannot withdraw it by claiming financial hardship or lack of knowledge of the proceedings.
The bench of Justice Mohammad Faiz Alam Khan (Judicial Member) and Naresh Salecha (Technical Member) upheld the direction requiring her to return ₹19,17,500 withdrawn from her bank account after she had been declared bankrupt and upheld the rejection of her application seeking recall of that direction.
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Assets Care & Reconstruction Enterprise Ltd., acting as trustee of ACRE-100-TRUST, had initiated proceedings under Section 95(1) of the IBC against Sirohi following the corporate debtor’s failure to repay its debt.
Anup Kumar was appointed as the resolution professional on April 10, 2023. According to the bankruptcy trustee’s submissions recorded in the judgment, the personal insolvency resolution process commenced on January 18, 2024. Following non-submission of a repayment plan, the National Company Law Tribunal (NCLT) passed an order on July 2, 2024, directing the financial creditor to file an application against the personal guarantor.
The creditor subsequently applied for initiation of bankruptcy proceedings under Section 123 of the Code. On May 21, 2025, the NCLT declared Sirohi bankrupt and appointed Kumar as the bankruptcy trustee.
A public announcement followed on May 30, 2025, inviting claims from creditors. The trustee reported aggregate claims of approximately ₹970.53 crore, of which approximately ₹55.06 crore was admitted and the remaining approximately ₹915.47 crore was admitted as contingent claims.
The dispute arose when the bankruptcy trustee examined Sirohi’s bank statements and found withdrawals made after the bankruptcy order.
The trustee sought directions requiring her to disclose her complete financial position, furnish information concerning after-acquired property, cooperate with the bankruptcy process, and return ₹19,17,500 withdrawn between June 16 and July 24, 2025.
The withdrawals included two substantial self-withdrawals of ₹9.95 lakh and ₹9 lakh, followed by several ATM withdrawals.
On August 3, 2026, the NCLT allowed the trustee’s application and directed Sirohi to return the amount. Her application seeking recall of that order was dismissed on August 20, 2026. She challenged both orders before the NCLAT.
Sirohi argued that she was a senior citizen living in Delhi NCR without any source of income. She maintained that she had sold her personal jewellery as a last resort to meet her living expenses.
According to her submissions, the deposits in her account included ₹13,25,248 from the sale of gold jewellery and related items, and ₹5,66,966 transferred from her mother-in-law’s bank account following its closure.
She contended that these amounts were excluded assets under Sections 155(2) and 79(14) of the IBC. She also claimed that she was unaware of the moratorium when she withdrew the money.
The bankruptcy trustee opposed these arguments, submitting that the estate had vested in him upon his appointment and that the withdrawals were unauthorised.
The NCLAT held that the dispute had to be examined through the statutory vesting of the bankruptcy estate, rather than through the appellant’s claimed ignorance of the moratorium.
“The correct test is vesting, not moratorium,” the tribunal observed.
It explained that Section 128(1)(c) restrains creditors from taking action against the bankrupt’s property. That provision does not govern the bankrupt’s own dealings with property that has already vested in the trustee.
The tribunal held that the bankruptcy estate vests in the trustee by operation of law, without requiring any conveyance, assignment or transfer. Money standing to the credit of a bank account constitutes property.
Consequently, from May 21, 2025, the relevant bank balance belonged to the bankruptcy estate and was for the trustee to hold. The subsequent withdrawals amounted to dealings with property that Sirohi was no longer entitled to deal with.
Rejecting the jewellery exemption argument, the tribunal examined the limited protection available under Section 79(14)(c), read with Rule 5(a) of the 2019 Bankruptcy Rules.
It explained that the provision protects only unencumbered personal ornaments that cannot be parted with in accordance with religious usage, subject to a value ceiling of ₹1 lakh.
The jewellery sale proceeds claimed by Sirohi exceeded ₹13 lakh—more than thirteen times that ceiling.
The tribunal further held that the exclusion attaches to the assets described in the statutory provision and does not automatically extend to money received from their sale.
It noted that Sirohi’s Form E recorded jewellery as “Nil” at the commencement of bankruptcy. What she held at that stage was a bank balance. The tribunal found no provision in the Code carrying the protected character of personal ornaments over to their sale proceeds.
The NCLAT held that financial hardship could not expand Section 79(14), which contains a closed list of excluded assets.
It also found no satisfactory explanation for the withdrawal of ₹18.95 lakh through two transactions within five days.
The plea of lack of knowledge was rejected because statutory vesting does not depend on the bankrupt’s awareness. The tribunal additionally noted that the trustee’s intimation had been delivered to Sirohi on June 5, 2025, eleven days before the first withdrawal.
She was also represented at the creditors’ meeting on July 1, 2025, and wrote to the trustee concerning her bank accounts on July 22, 2025. Further ATM withdrawals nevertheless followed on July 23 and 24.
Sirohi argued that her counsel had joined the August 3, 2026 hearing through video conferencing but could not make the necessary submissions because of an unstable internet connection.
The NCLAT found that this claim was unsupported by the record. It noted that notice had been served on September 22, 2025, yet no reply had been filed for more than ten months.
The tribunal held that recall was not a matter of right and that, even on Sirohi’s version, no prejudice had been demonstrated.
Both appeals were therefore rejected, with no order as to costs. Pending interlocutory applications, if any, were closed.
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