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of <h1>Tribunal rules raw materials not assets under Insolvency Code, orders return to applicant.</h1> <h3>M/s. Sun Pharmaceutical Industries Ltd., Weather Makers Pvt. Ltd. Versus Parabolic Drugs Ltd.</h3> M/s. Sun Pharmaceutical Industries Ltd., Weather Makers Pvt. Ltd. Versus Parabolic Drugs Ltd. - TMI Issues Involved:1. Applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) regarding the moratorium on recovery of property.2. Applicability of Section 18(1)(f) of the IBC concerning the control and custody of assets held under trust or contractual arrangements.3. Determination of whether raw materials supplied by the applicant qualify as assets under trust or contractual arrangements.Issue-wise Detailed Analysis:1. Applicability of Section 14 of the IBC regarding the moratorium on recovery of property:The Tribunal examined the provisions of Section 14(1)(d) of the IBC, which prohibits the recovery of any property by an owner or lessor if such property is occupied by or in possession of the Corporate Debtor during the moratorium period. The Tribunal noted that the term 'property' is defined under Section 3(27) of the IBC to include money, goods, actionable claims, land, etc. The raw material supplied by the applicant falls under the definition of 'property,' and therefore, its recovery would generally be prohibited under Section 14(1)(d) during the moratorium.2. Applicability of Section 18(1)(f) of the IBC concerning the control and custody of assets held under trust or contractual arrangements:The Tribunal considered the provisions of Section 18(1)(f) of the IBC, which mandates the Interim Resolution Professional (IRP) to take control and custody of any asset over which the Corporate Debtor has ownership rights. However, the explanation annexed to Section 18(1)(f) carves out an exception for assets owned by a third party but in possession of the Corporate Debtor, held under trust or contractual arrangements, including bailment. The Tribunal emphasized that such assets are excluded from the definition of 'assets' for the purpose of Section 18(1)(f), and hence, the IRP cannot take control and custody of these assets.3. Determination of whether raw materials supplied by the applicant qualify as assets under trust or contractual arrangements:The Tribunal analyzed the 'Manufacturing & Supply Agreement' dated 11.02.2010 between the applicant (Sun Pharmaceutical Industries Ltd.) and the Corporate Debtor (Parabolic Drugs Ltd.). The agreement contained specific clauses (3.11, 3.12, 3.14, 3.16, and 3.18) that explicitly stated the raw materials supplied by the applicant were to be used exclusively for manufacturing the product for the applicant and were to be held in trust by the Corporate Debtor. The Tribunal concluded that the raw materials supplied by the applicant were indeed held under a contractual arrangement and trust, as per the terms of the agreement.Conclusion:The Tribunal held that the raw materials supplied by the applicant, being held under a contractual arrangement and trust, fall within the exception provided under the explanation to Section 18(1)(f) of the IBC. Therefore, these raw materials do not constitute 'assets' for the purpose of Section 18(1)(f), and the IRP cannot take control and custody of them. Consequently, the Tribunal directed the return of the raw materials to the applicant, allowing the application (CA 206/2019 in CP 102/2018).Order:The application (CA 206/2019 in CP 102/2018) is hereby allowed, and the raw materials supplied by the applicant are to be returned from the possession of the Resolution Professional.
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