CIRP funds in insolvency case belong to Corporate Debtor, Bank of India cannot claim them.

The Tribunal held that amounts received during the Corporate Insolvency Resolution Process (CIRP) are assets of the Corporate Debtor and cannot be claimed by the Bank of India. It ruled that earmarking 25% of receipts for the Bank of India during the moratorium period violates Section 14 of the Insolvency and Bankruptcy Code (IBC). The final resolution plan, approving a settlement of Rs. 9 crores for the Bank of India without conditions on CIRP receipts, was upheld. The Resolution Professional was directed to ensure proper utilization of CIRP funds as per the IBC and approved plan, with the impugned order quashed and set aside.

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Issues Involved:
1. Applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) during the Corporate Insolvency Resolution Process (CIRP).
2. Legality of the Committee of Creditors (COC) decision to earmark 25% of receipts for repayment to the Bank of India.
3. Validity of the revised resolution plan and the amounts retained by the Bank of India.
4. Implementation and monitoring of the approved resolution plan.

Detailed Analysis:

Issue 1: Applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) during CIRP
The appellant argued that the impugned order disregards Section 14 of the IBC, which mandates a moratorium period during which no accruals can be alienated from the Corporate Debtor's account. The CIRP was initiated and a moratorium was imposed on the Corporate Debtor's assets on 26.10.2017. The appellant contended that the decision to earmark 25% of receipts for repayment to the Bank of India during the moratorium period is against the law, as per Section 14 of the IBC. This section prohibits transferring, encumbering, alienating, or disposing of any assets of the Corporate Debtor during the moratorium period.

Issue 2: Legality of the COC decision to earmark 25% of receipts for repayment to the Bank of India
The appellant highlighted that the decision taken in the first COC meeting to earmark 25% of receipts for repayment to the Bank of India was influenced by the Bank, which holds 90% voting rights in the COC. The appellant argued that no creditor can divert receipts of the Corporate Debtor during the moratorium period, as per Section 14 of the IBC. The appellant also pointed out that the Resolution Professional raised concerns about this decision in his written synopsis, stating that the money belongs to the Corporate Debtor and should not be appropriated by the Bank of India.

Issue 3: Validity of the revised resolution plan and the amounts retained by the Bank of India
The appellant submitted a resolution plan offering Rs. 6.22 crores to the Bank of India, which was deemed inadequate by the Bank. Consequently, a revised resolution plan was submitted, allowing the Bank to retain amounts received prior to 1.4.2018. However, the Bank sought a larger amount of Rs. 9 crores, which was accepted in the final resolution plan approved by the COC and the Adjudicating Authority. The appellant claimed that the Bank received Rs. 1,68,23,462, including Rs. 88,16,071 during the moratorium period, and is refusing to part with Rs. 88,16,071, which is over and above the approved resolution amount of Rs. 9 crores.

Issue 4: Implementation and monitoring of the approved resolution plan
The respondents argued that the appeal is not maintainable as it was filed by the Successful Resolution Applicant and not the Corporate Debtor or the erstwhile Resolution Professional. They contended that the decision in the first COC meeting cannot be challenged now and that the Successful Resolution Applicant had accepted the condition earlier. The respondents cited the Supreme Court's decision in Kalparaj Dharamshi vs. Kotak Advisories Limited, emphasizing the court's respect for the commercial wisdom of the COC. The Adjudicating Authority directed the Resolution Applicant and the Resolution Professional to ensure the implementation of the successful resolution plan.

Conclusion:
The Tribunal concluded that the amounts received during the CIRP are assets of the Corporate Debtor and cannot be appropriated by the Bank of India. The Tribunal emphasized that the COC's decision to earmark 25% of receipts for the Bank of India during the moratorium period is against Section 14 of the IBC. The final resolution plan approved by the COC and the Adjudicating Authority included Rs. 9 crores as the full and final settlement for the Bank of India, with no conditions attached regarding the receipts during the CIRP. The Tribunal directed the Resolution Professional to ensure proper utilization of the amounts received during the CIRP as per the IBC provisions and the approved resolution plan. The impugned order was quashed and set aside, and the Resolution Professional was tasked with overseeing the implementation of the resolution plan within one month.

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