Appellate Tribunal allows appeal by Union Bank, excluding subsidiary assets from coercive action.

The Appellate Tribunal allowed the appeal filed by Union Bank of India, setting aside the Adjudicating Authority's order directing the bank not to take coercive steps regarding properties mortgaged by the appellant companies. The Tribunal emphasized that exclusive securities not forming part of the liquidation estate should be excluded from such actions, in accordance with statutory provisions and precedents excluding subsidiary assets from the liquidation estate.

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Issues:
1. Appellant's appeal against the order of the Adjudicating Authority.
2. Validity of the direction to the bank not to take coercive steps regarding properties mortgaged by the appellant companies.
3. Dispute over the possession and sale of properties in liquidation proceedings.
4. Authorization for filing the appeal post-bank merger.
5. Inclusion of subsidiary assets in the liquidation estate.

Issue 1: Appellant's appeal against the order of the Adjudicating Authority

The Appellant, Union Bank of India, filed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, against the order dated 20.08.2020 passed by the Adjudicating Authority. The order directed the Appellant not to take coercive steps regarding properties mortgaged by the Appellant companies until the completion of the liquidation proceedings of the corporate debtor IVRCL Limited.

Issue 2: Validity of the direction regarding properties mortgaged by the appellant companies

The Appellant argued that the properties mortgaged by Respondents 1 to 4 were exclusive securities not forming part of the liquidation estate. The Adjudicating Authority's order prevented the Appellant from taking coercive steps, such as the sale of these properties, which the Appellant contested as it believed the assets were not part of the liquidation estate.

Issue 3: Dispute over possession and sale of properties in liquidation proceedings

The Respondents objected to the Appellant's Demand Notice and Possession Notice issued under the SARFAESI Act. They argued that allowing the Appellant to proceed with these actions would negatively impact the sale of the corporate debtor as a going concern. The Adjudicating Authority considered the bid for the corporate debtor as a going concern and set aside the Possession Notice, emphasizing the importance of maintaining the value of the liquidation estate.

Issue 4: Authorization for filing the appeal post-bank merger

The Respondents challenged the appeal's authorization due to the merger of Corporation Bank into Union Bank of India. However, the Appellant's authorization to file the appeal was found to be in accordance with the Scheme of Amalgamation of the Banks, ensuring the enforceability of contracts and agreements post-merger.

Issue 5: Inclusion of subsidiary assets in the liquidation estate

The Adjudicating Authority clarified that subsidiary assets, including the exclusive securities provided by Respondents 1 to 4, were not part of the liquidation estate as per Section 36(4)(d) of the Code. Precedence from previous judgments highlighted that assets of subsidiaries were excluded from the liquidation estate, leading to the setting aside of the Adjudicating Authority's order.

In conclusion, the Appellate Tribunal allowed the appeal, emphasizing that exclusive securities not forming part of the liquidation estate should be excluded from coercive actions, in line with statutory provisions and previous judgments.

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