2023 (8) TMI 550 - SCH - Insolvency and Bankruptcy

Supreme Court on CIRP Expenses: Bank's Liability, Borrower's Responsibility

The Supreme Court clarified that expenses incurred by the Resolution Professional during the Corporate Insolvency Resolution Process were to be borne by ... Sanction of the One Time Settlement (OTS)/compromise proposal - HELD THAT:- As per the terms of the clause 10 of OTS, all expenses from the date of appointment of the Resolution Professional (RP) on 03.01.2020 till the date of OTS Sanction/sanction advice, that is 21.07.2020, have to be met by the respondent – Bank of Baroda. Post the OTS sanction/sanction advice, the expenses have to borne and paid by the borrower, that is, the appellant – Pitampur Poly Products Limited. The RP who is present through video conferencing and has drawn our attention to the Statement of RP Fees and Expenses (Security, Lawyer etc.), enclosed at page 330 of the appeal paper book. She agrees that an amount of Rs.2,36,000/- remains to be paid as fees, which she accepts will be for the period upto 04.08.2020. In addition, the expenses of Rs.5,22,902/- are payable as legal fees, security guard expenses etc. The RP on being questioned has stated, that the market value of the property of which title deed/document are with the respondent – Bank of Baroda is about Rs.2,00,00,000/-. The respondent – Bank of Baroda directed to make a payment of RS.3,79,451/- being 50% of the total amount of Rs.7,58,902/- due to RP, within a period of one month from today - appeal disposed off. Issues involved:The issues involved in this case include the interpretation of clauses in the One Time Settlement (OTS) Sanction between a borrower and a bank, specifically regarding the payment of expenses incurred by the Resolution Professional (RP) during the Corporate Insolvency Resolution Process (CIRP), and the release of title deed/document by the bank.Interpretation of Clause 15 of OTS Sanction:The Supreme Court examined the terms of Clause 15 of the OTS Sanction which stipulated that expenses from the appointment of the RP on 03.01.2020 until the date of OTS Sanction on 21.07.2020 were to be borne by the Bank of Baroda. Post-OTS sanction, the borrower, Pitampur Poly Products Limited, was responsible for the expenses. The Court clarified that this clause pertained to expenses incurred and payable during the CIRP period.Relevance of Clause 10 in OTS Sanction:The respondent bank cited Clause 10 of the OTS Sanction, emphasizing that the settlement would not impact the CIRP process, as it was subject to the discretion of the National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT). However, the Court held that Clause 10 did not affect the payment of expenses by the bank as outlined in Clause 15, which specifically addressed expenses during the CIRP period.Resolution of Payment Dispute and Release of Title Deed:During the proceedings, it was revealed that Pitampur Poly Products Limited was willing to bear 50% of the RP's expenses to resolve the matter amicably. The RP confirmed outstanding fees of Rs.2,36,000 and additional expenses of Rs.5,22,902. The Court directed the bank to pay 50% of the total amount due to the RP, with Pitampur Poly Products Limited also contributing an equal sum. Upon payment, the bank was instructed to return the original title deed/document to the borrower within a week.Final Decision and Disposal of Appeal:In conclusion, the Supreme Court disposed of the appeal by ordering the specified payments to be made within one month, ensuring the release of the title deed/document. The parties were granted liberty to seek clarification from the Court if needed, and any pending applications were deemed disposed of as per the judgment.