2022 (6) TMI 622 - AT - Insolvency and Bankruptcy

Tribunal overturns order freezing individual's bank accounts, clarifying Resolution Professional's limited powers under I&B Code.

The Tribunal set aside the impugned order that froze the Appellant's bank accounts, ruling that the Resolution Professional lacked authority to freeze ... Jurisdiction - power/authority of Respondent No.1/Resolution Professional (RP) to freeze Bank Accounts - HELD THAT:- On going through the impugned order passed by the ‘Adjudicating Authority’ (National Company Law Tribunal) Division Bench-II, Chennai, it is clear that the ‘Adjudicating Authority’ had not addressed the legal aspect(s) of the matter that whether the Respondent No.1 / Resolution Professional had any authority in Law to freeze Bank Account belonging to the Appellant. Since that aspect of the matter was not addressed by the ‘Adjudicating Authority’ and the same is conspicuously absent at the time of passing of the impugned order, this ‘Tribunal’, is constrained to interfere with the said order, and sets aside the same because of the fact that the Respondent No.1 / Resolution Professional, in Law has only ‘An Authority’ to exercise control over Bank Accounts operated by the ‘Corporate Debtor’ and not otherwise. Appeal allowed. Issues:1. Authority of Resolution Professional to freeze bank accounts.2. Legal aspects addressed by the Adjudicating Authority.3. Interference by the Tribunal in the impugned order.Analysis:Issue 1: Authority of Resolution Professional to freeze bank accountsThe Appellant, a Real Estate Developer, entered into a Joint Development Agreement with Respondent No.3 for a housing project. The Appellant borrowed money from Respondent No.2, securing it with a mortgage on the project land. The grievance arose when the Resolution Professional (RP) froze the Appellant's bank accounts under the mistaken belief that they belonged to the Corporate Debtor. The Appellant argued that the RP lacked authority to freeze these accounts, citing Section 18(1)(f) of the I&B Code, which specifies the assets the Interim Resolution Professional can control. The Tribunal noted that the RP's actions were unfounded as the Appellant was the sole account holder, leading to the setting aside of the impugned order.Issue 2: Legal aspects addressed by the Adjudicating AuthorityThe Adjudicating Authority's order partially accepted the Appellant's stance but directed the release of 50% of the funds in the bank accounts. However, it failed to address whether the RP had the legal authority to freeze the Appellant's accounts. This oversight led the Tribunal to intervene and set aside the order, emphasizing that the RP's powers extend only to the Corporate Debtor's accounts, not those of third parties like the Appellant.Issue 3: Interference by the Tribunal in the impugned orderThe Tribunal, upon reviewing the impugned order, found that the Adjudicating Authority did not consider the crucial legal aspect of the RP's authority to freeze the Appellant's accounts. As a result, the Tribunal deemed it necessary to overturn the order to uphold justice. Consequently, the Tribunal allowed the Company Appeal, setting aside the impugned order without imposing any costs.In conclusion, the Tribunal's decision in the present case focused on clarifying the limits of the Resolution Professional's authority, ensuring that actions taken are within the legal framework established by the I&B Code.