2019 (11) TMI 1859 - AT - IBC

Preservation and protection of corporate assets: resolution professional duty under IBC and interim finance subject to COC approval

Preservation and protection of corporate assets is emphasised, reiterating the resolution professional's duty to preserve assets and continue business ... Preservation and protection of assets of the corporate debtor - non-dissipation of assets - duty of the resolution professional - interim finance subject to approval of the committee of creditors - payment of corporate insolvency resolution process costs by the committee of creditors - conversion of security in liquidation - Section 25 of Insolvency and Bankruptcy Code, 2016 - Section 12 3rd Proviso - HELD THAT:- It is stated that no Resolution Plan has been approved as yet. The learned Resolution Professional fairly states that in the circumstances as now appearing, liquidation is appearing to be unavoidable. Having gone through the submissions made and the Impugned Order and the developments as appearing where the Company is likely to go in liquidation, we do not think that at the stage, we should interfere with the Impugned Order where the Adjudicating Authority took a conscious decision not to dissipate the assets of the Company. As per Section 25 of Insolvency and Bankruptcy Code, 2016, Resolution Professional has duty to preserve and protect the assets of Corporate Debtor including the continued business operations and for the purpose, interim finance can be raised subject to approval of COC. Adjudicating Authority directed that CIR costs should be met by COC. There is nothing wrong in this. Thus, we dispose of this Appeal and the Appellant may take further steps in the process before the Adjudicating Authority in terms of the provisions of the IBC. Issues: Whether the Appellate Tribunal should interfere with the Adjudicating Authority's order refusing to direct Axis Bank to release margin money (fixed deposits) held as security against letters of credit for meeting CIRP costs.Analysis: The Adjudicating Authority declined the Resolution Professional's prayer to release the security, directing that company assets, whether liquid or fixed, not be dissipated and that CIRP costs be met by the Committee of Creditors. The Tribunal observed that Section 25 of the Insolvency and Bankruptcy Code, 2016 imposes on the Resolution Professional the duty to preserve and protect the assets of the corporate debtor and that interim finance may be raised only with COC approval. Given the circumstances, including the company's likely liquidation and the absence of an approved resolution plan within the extended timelines, the Tribunal found no ground to overturn the Adjudicating Authority's decision to protect assets for the liquidation stage and to require CIRP costs to be considered by the COC.Conclusion: Appeal dismissed; the impugned order refusing to direct release of the security is not interfered with (decision in favour of Respondent).