2020 (4) TMI 349 - Tri - Insolvency and Bankruptcy

Tribunal upholds Respondent's right to withhold consignment in insolvency case

R. Venkatakrishnan, RP Versus Continental Warehousing Corporation (Nhava Sheva) Ltd.

The Tribunal dismissed the Resolution Professional's application seeking release of a consignment held by the Respondent during the Corporate Insolvency ... Resolution Professional us/s 60(5) r/w 14 seeking release of goods - CIRP already initiated - During the CIRP period, the Corporate Debtor had transactions with the Respondent and the payments have been made in accordance with the terms agreed upon. - It is claimed that, the Respondent has illegally held back it on account of the payments outstanding prior to the CIRP period dated 09-12-2018, in respect of which, the claim has already been filed and admitted by the Applicant herein. HELD THAT:- This Corporate Debtor is not the owner of the goods, it is evident on record that the Corporate Debtor is not the consignee, the Corporate Debtor was only engaged to provide clearance services, for which, we need not labour over the facts to say that the asset lying with the Respondent is not the asset of the Corporate Debtor - Even looking at the invoices allegedly raised by the Respondent on the Corporate Debtor dated 23-4-2019, 30-5-2019 and also other documents filed by the Applicant clearly indicate that buyer of those goods is M/s. Sundaram Fasteners whereby it cannot be inferred that the Corporate Debtor has right over the goods lying with the Respondent. For the goods not belonging to the Corporate Debtor, the Corporate Debtor, by virtue of invocation of moratorium, cannot ask for the custody of the asset showing as if the asset belongs to the Corporate Debtor. Assuming that the asset is belonging to the Corporate Debtor, even then also, by virtue of contractual arrangement which is in the nature of bailment protected not only by Contract Act but also by Customs Act cannot be said as an asset of the Corporate Debtor as stated in the explanation to section 18 of the Code. However, the Respondent counsel, adding it as a supplementary to the above point, has reiterated that the Corporate Debtor not being the consignee nor the importer of the goods it has ownership rights, it has to be construed that it has acted as an agent on behalf of the importer, therefore, this Applicant has no right to ask for release of the consignment. Application dismissed. Issues involved:1. Claim by Resolution Professional for release of consignment during Corporate Insolvency Resolution Process (CIRP).2. Respondent's assertion of ownership and lien on consignment.3. Interpretation of ownership rights and liabilities under Customs Act and Insolvency and Bankruptcy Code.Analysis:1. The Resolution Professional filed an application seeking directions for the release of a consignment held by the Respondent during the CIRP. The Respondent had withheld a consignment belonging to a third party, M/s. Sundaram Fasteners, due to outstanding payments from the Corporate Debtor. The Resolution Professional argued that the Respondent should not have held back the consignment during the moratorium period and requested the release of the goods for the smooth continuation of the CIRP.2. The Respondent contended that the consignment did not belong to the Corporate Debtor but to M/s. Sundaram Fasteners. As a Customs bonded Warehouse and Container Freight Station (CFS), the Respondent claimed the right to exercise a lien on the cargo for dues payable to Customs and services rendered. The Respondent highlighted that the importer had outstanding dues jointly payable by M/s. Sundaram Fasteners and the Corporate Debtor, and it had the right to retain the goods until payment was made.3. Upon review of the submissions, it was established that the Corporate Debtor was not the owner of the goods but acted as a Customs House Agent for clearance services. The consignee was identified as M/s. Sundaram Fasteners, and documents confirmed that the Corporate Debtor was not the consignee but a service provider. The Tribunal emphasized that the consignment did not belong to the Corporate Debtor, and even if it did, the contractual and bailment arrangements under the Customs Act protected the Respondent's right to retain the goods until dues were settled. Therefore, the application was dismissed as misconceived, affirming the Respondent's right to withhold the consignment.