Tribunal Orders CoC Banks to Refund Auction Purchase Amount

The Tribunal directed the certificate holder banks, who are CoC members, to refund the auction purchase amount with interest to the applicant within two weeks, aiming to prevent hardship and economic loss to the applicant. The order emphasized fairness and was to be promptly communicated to all parties involved.

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Issues:
1. Refund of auction purchase amount post initiation of CIRP.
2. Jurisdiction of the Recovery Officer and CoC.
3. Maintainability of the application under section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Analysis:

Issue 1: Refund of auction purchase amount post initiation of CIRP
The case involved the successful bidder seeking a refund of the entire sale consideration paid for two properties of the Corporate Debtor (CD) post initiation of Corporate Insolvency Resolution Process (CIRP). The Recovery Officer set aside the sale conducted before the admission of CD into CIRP and withdrew the sale certificate. The applicant prayed for a direction to the Resolution Professional (RP) to refund the total consideration amount with interest. The RP contended that the subject asset was under CIRP before the sale confirmation and suggested that the amount be refunded by the Certificate Holder Banks. The RP had no objection to the refund, and the CoC member representing SBI confirmed willingness to refund the amount. The Tribunal directed the certificate holder banks, who are CoC members, to refund the amount with accrued interest to the applicant within two weeks.

Issue 2: Jurisdiction of the Recovery Officer and CoC
The applicant argued that the Recovery Officer's actions post initiation of CIRP violated section 14 of the Insolvency and Bankruptcy Code, 2016, and that the DRT had no jurisdiction after admission of CD into CIRP. The CoC, represented by SBI, was held responsible for keeping the money post setting aside the sale, causing injustice to the applicant. The Tribunal found that the CoC, as certificate holder banks, should refund the amount to the applicant, as confirmed by the RP and CoC member.

Issue 3: Maintainability of the application under section 60(5) of the Code
The Tribunal analyzed the application under section 60(5) of the Code and noted that the claim was against the certificate holder banks, who are CoC members, and not against the CD or its properties. Citing a precedent, the Tribunal found the claim to be inter-se between the banks and the auction purchaser. However, considering the readiness of the lead bank representing the CoC to refund the amount, the Tribunal invoked Rule 11 of the NCLT Rules and directed the certificate holder banks to refund the amount to the applicant with accrued interest, ensuring justice and fairness.

In conclusion, the Tribunal disposed of the application, directing the certificate holder banks to refund the auction purchase amount with interest to the applicant within two weeks, emphasizing the need to prevent hardship and economic loss to the applicant. The order was to be communicated to all parties involved promptly.

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