2020 (9) TMI 439 - Tri - Insolvency and Bankruptcy

Tribunal Upholds RP Control Over Assets, Grants Electricity Relief to Corporate Debtor

State Bank of India And Ors. Versus Rohit Ferro Tech Limited and Ors.

M/s. MSTC Limited's application to conduct an auction and access the Corporate Debtor's plant for removal of pledged goods was dismissed by the Tribunal, ... Restraint on Respondents from disconnecting the electricity supply at the Bishnupur plant of the corporate debtor till completion of the corporate insolvency resolution process - section 14(2) and section 60 of the Insolvency & Bankruptcy Code, 2016 - HELD THAT:- There are no substance in the arguments of the applicant that he still has any right to the goods or raw material lying in the premises of the CD, even after the order of CIRP. The provisions of the Code are very much clear in this regard. The RP is the final authority who will take possession of the moveable and immovable properties of the CD after the order of CIRP. Anybody has any claim against the CD, it will have to submit its claim to the RP. What is admittedly true in this matter is that the applicant has already submitted its claim and its claim has already been admitted and taken on record, which hardly leaves any scope for the applicant to further claim any right to possession, or hold any auction sale thereof as prayed for. Application dismissed as being devoid of any merit or substance. Issues Involved:1. Whether M/s. MSTC Limited has the right to conduct an auction and access the plant of the Corporate Debtor for inspection and removal of pledged goods.2. Whether the Corporate Debtor can be restrained from disconnecting electricity supply at the Bishnupur plant during the Corporate Insolvency Resolution Process (CIRP).Issue-wise Detailed Analysis:1. Right to Conduct Auction and Access Plant for Inspection and Removal of Pledged Goods:M/s. MSTC Limited filed I.A.(IB) No. 611/KB/2020 under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking leave to conduct an auction and access the plant of the Corporate Debtor at Jajpur, Odisha, for inspection and removal of goods upon completion of sale through e-auction/tender. The applicant claimed ownership of goods worth over Rs. 47 crores, procured under agreements and stored in the premises of the Corporate Debtor, which were pledged to the applicant.The applicant argued that unauthorized removal of pledged goods by the Corporate Debtor and its promoters caused significant financial losses. Despite police complaints and a writ petition, unauthorized removal continued. The applicant sought permission to sell the goods by public auction, access for bidders to inspect the goods, and deployment of guards for protection.The Corporate Debtor's Resolution Professional (RP) and the suspended Board of Directors argued that the goods were part of the CIRP estate and the RP had control over them. The RP contended that the applicant's claim had been admitted, and the goods were not separate from the Corporate Debtor's assets.Upon hearing the arguments, the Tribunal found no substance in the applicant's claim to the goods post-CIRP order. The RP is the final authority over the Corporate Debtor's properties, and any claims must be submitted to the RP. The Tribunal dismissed the application I.A.(IB) No. 611/KB/2020, stating that the applicant had no right to possession or auction of the goods.2. Restraint on Disconnecting Electricity Supply at Bishnupur Plant:Mr. Supriyo Kumar Chaudhuri, the RP of the Corporate Debtor, filed I.A.(IB) No. 620/KB/2020 under Section 14(2) and Section 60 of the Insolvency & Bankruptcy Code, 2016, seeking to restrain the electricity supplier from disconnecting the power supply at the Bishnupur plant during the CIRP. The Corporate Debtor faced an acute liquidity crunch due to the lockdown imposed by the government amid the COVID-19 pandemic.The RP requested bifurcation of electricity invoices into pre-CIRP and CIRP periods and sought time to pay the dues. The electricity supplier raised invoices including dues from the pre-CIRP period and threatened disconnection for non-payment.The Tribunal noted the RP's efforts to run the organization as a going concern and the readiness to pay Rs. 1 crore immediately. The electricity supplier agreed not to disconnect the supply if payments were made as agreed. The Tribunal directed:- Payment of all arrears of electricity bills post-CIRP order in three equal monthly installments.- Regular payment of current consumption charges.- Immediate payment of the total amount due in case of default.The Tribunal disposed of I.A.(IB) No. 620/KB/2020 with these directions, ensuring the continuity of electricity supply during the CIRP.Conclusion:The Tribunal dismissed the application by M/s. MSTC Limited for auction and removal of pledged goods, affirming the RP's control over the Corporate Debtor's assets during CIRP. It granted relief to the RP by allowing installment payments for electricity dues and preventing disconnection, facilitating the Corporate Debtor's operations during CIRP.