Partial success in debt recovery case; respondent to release funds with interest. Affidavit required for fund utilization. Future remedies permitted.

The Tribunal partially allowed the application, directing the respondent to release specific amounts along with accrued interest to the corporate debtor's account. The Resolution Professional was instructed to file an affidavit detailing the utilization of these funds within a specified timeframe. Remedies for certain items were allowed to be pursued in the future.

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Issues Involved:
1. Release of funds retained by the respondent in violation of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Allegation of fraud against the Resolution Professional.
3. Validity of moratorium under Section 14 of the IBC.
4. Treatment of fixed deposits held as collateral security and margin money for bank guarantees.

Issue-wise Detailed Analysis:

1. Release of Funds Retained by the Respondent:
The Resolution Professional (RP) filed an application under Section 60(5) read with Section 74(2) of the IBC, 2016, seeking a direction for the respondent, Indian Overseas Bank, to release funds retained in violation of the Code. The respondent had adjusted several amounts towards its dues despite the moratorium declared under Section 14 of the Code. The amounts in question were detailed in a table provided in the judgment. The RP later withdrew claims for certain items, leaving disputes over specific amounts.

2. Allegation of Fraud Against the Resolution Professional:
The respondent's written submission included a statement alleging fraud by the RP. The RP’s counsel objected, noting the lack of pleadings to support this claim. The respondent's counsel acknowledged the mistake and withdrew the allegation, which was duly recorded by the Tribunal.

3. Validity of Moratorium Under Section 14 of the IBC:
The Tribunal examined Section 14 of the IBC, which imposes a moratorium on certain actions against the corporate debtor upon the commencement of the Corporate Insolvency Resolution Process (CIRP). The respondent argued that the fixed deposits were exempt from the moratorium under Section 14(3)(b), which pertains to sureties in a contract of guarantee. The Tribunal, referencing the Supreme Court's decision in State Bank of India vs. V. Ramakrishnan and Another, concluded that the respondent's actions were not covered under Section 14(3)(b).

4. Treatment of Fixed Deposits Held as Collateral Security and Margin Money for Bank Guarantees:
- Item No.1 (Collateral Security): The respondent had adjusted a fixed deposit held as collateral security for a loan. The RP argued that this adjustment violated the moratorium. The Tribunal noted a lack of evidence regarding the creation of a charge under Section 77 of the Companies Act, 2013, and thus did not make a definitive ruling on this item.
- Item No.5 (Margin Money for Bank Guarantee): The respondent had encashed a fixed deposit kept as margin money for a bank guarantee, which was invoked post-moratorium. The Tribunal, referencing a decision in Pankaj Khaitan, RP vs. Allahabad Bank, held that the respondent could not retain the fixed deposit and directed its release to the corporate debtor for utilization per the Code.

Judgment:
The Tribunal partially allowed the application:
1. Directed the respondent to release amounts corresponding to Item Nos. 2, 5, 6, 7, 8, and 9, along with any accrued interest, to the corporate debtor's account.
2. Instructed the RP to file an affidavit detailing the utilization of these amounts within two weeks of the Tribunal's reopening post-lockdown.
3. Allowed the RP to pursue remedies for Item No.1 in accordance with the law in the future.

The application (CA No.95/2018) was thus disposed of.

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