TaxTMI 
TaxTMI 
2021 (5) TMI 921
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....al Company Law Tribunal, Cuttack Bench, Cuttack), whereby the Learned Adjudicating Authority has allowed the Application filed by the Resolution Professional under Section 14 read with Section 17 and Section 60(5) of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as the 'Code') with the following directions:- "11. (i) Central Bank of India (Respondent No. 1) is directed to reverse the due amount i.e. to the tune of Rs. 1,419.89 lakhs. (ii) Syndicate Bank (Respondent No. 2) is directed to reverse the due amount i.e. to the tune of Rs. 326.87 lakhs. (iii) Bank of India (Respondent No. 3) is directed to reverse the due amount i.e. to the tune of Rs. 1.827.17 lakhs. (iv) State Bank of India (Respondent No. 4) is directed to reverse the due amount i.e. to the tune of Rs. 599.78 lakhs. (v) This order shall be complied by all the respondents, within five weeks of receipt of this order." Facts in brief: 2. Vide Order dated 06.07.2017, the Learned Adjudicating Authority has admitted the Section 7 Application. This Order of Admission was challenged vide Company Appeal (AT) (Insolvency) No. 92 of 2017 and this Tribunal has....
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....imits i.e. LC & Bill discounting facilities granted to the Corporate Debtor. In view of the fact that the erstwhile Resolution Professional himself remitted the amounts towards the credit of the cash credit account, this respondent has not violated/ contravened provisions of Section 14 and Section 17 (1) (d) of the Insolvency and Bankruptcy Code, 2016. In respect to the claim of Rs. 20.52 crores as on 13.07.2017 which included fund based outstanding of Rs. 1.46 crore and non-fund-based outstanding of Rs. 19.06 crore. The fund-based facilities have been paid off by the company management i.e. the erstwhile Resolution Professional. Hence, it is incorrect to states that the respondent has appropriated the fund towards the loan account during the Corporate Insolvency Resolution Process. Since, it was a unilateral act of the erstwhile Resolution Professional who has paid during the moratorium period. So, this respondent categorically states that they have not violated the provisions of Section 14 and 17 of the Insolvency and Bankruptcy Code, 2016. However, the erstwhile Resolution Professional has inadvertently paid the loan amount. 10. There is no representation for Syndicate ....
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....granted Fund- based [Cash Credit Hypothecation Facility] and Non- Fund based facilities [Bank Guarantee/ LC facility] of credit through a consortium of lenders comprising the Appellant banks, viz., Bank of India, State Bank of India, Central Bank of India and Syndicate Bank since 13.09.2011. The consortium was operating under the leadership of Bank of India. For availing the various facilities from the member banks of the consortium, the Corporate Debtor created first charge over its fixed assets and current assets. (iii) That the Corporate Debtor filed an Appeal before this Tribunal challenging the order of admission and this Tribunal vide its order dated 09.08.2017 directed the Resolution Professional to keep the company as a going concern and the bankers were also directed to cooperate with the Resolution Professional in this regard. [Annexure R-1, Pg 18-19 of Rejoinder] (iv) That the Consortium of banks submitted their claims on 18.07.2017 and the same was as follows: S. No. Name of Financial Creditor/ Bank Fund-Based Exposure (In Rs. Lakhs) Non- Fund based Exposure (In Rs. Lakhs) Total Admitted Amount by RP, Mr. Somani 1. Bank....
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....Debtor in the normal course of business. The Fund-based exposures were brought down by the erstwhile RP in order to reduce the interest expenses. It was the commercial decision of the erstwhile RP to reduce the fund-based exposure to the minimum than to hold liquid cash without any earing. Thus, the erstwhile RP squared off the liabilities with the lender banks. The Corporate Debtor as in turn made profit of Rs. 54.92* crores as on 31.03.2018 and also of Rs. 27.43* crores as on 31.03.2019. This clearly indicates that the Corporate Debtor Company had enough liquidity to maintain the company as a going concern and didn't require any working capital finance. * The Bills under Lender of Credit (LC) facility maturing during the CIRP were also honored by the erstwhile RP from the revenue generated by the 'Corporate Debtor Company' which was making good profits and had accumulated enough cash balance . Hence, the erstwhile RP chose to reduce the utilization of the fund based facilities and had squared off the Cash Credit Facilities with all the Banks. * Mr. Bhuvan Madan, the Resolution Professional, had requested the Banks to reverse the amounts remitted by the previous IRP while di....
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....rential transaction under Section 43 of IBC. * As per the document detailing the implementation of 'Resolution Plan', the total liquidation value is Rs. 305.23 Crs., the liquidation value of WC consortium is Rs. 210.100 Crs. and the cash available for distribution among all creditors is Rs. 44.47 Crs. So, the share and the cash component ought to be 68.85 per cent of Rs. 45.47 Crs. which is Rs. 31.30 Crs. whereas the distribution pattern allocated is Rs. 4.69 Crs. for the Secured Creditors, the details of which are as follows; Syndicate Bank 0.47 cr Bank of India 2.63 cr State Bank of India 0.86 cr Central Bank of India 0.76 cr Total 4.69* crores (approx. 10.31% ofthe total cash component) * As per the security holding the Bank should have get Rs. 31.30 Crs. but only Rs. 4.69 Crs. was allocated which is against the spirit of IBC. The admitted claim amount of dissenting Secured Creditors is Rs. 27.54 Crs. against the cash component arrived at Rs. 31.30 Crs. and therefore, the total admitted claim of the dissenting Creditors can be met from the available cash components and no amounts need be reversed. The sharing pattern was never made a part of t....
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....s. respectively out of the money received by the 'Corporate Debtor' in the accounts maintained with the respective Banks. Appropriation of amounts by the Appellant Banks towards repayment of pending dues results in the Appellants enjoying a preferential treatment over other Creditors which is in violation of the Code. * Learned Counsel strenuously submitted that unilateral appropriation of amounts is in violation of Section 17(1)(d) and Section 28 of the Code. Section 17(1)(d) provides that the Financial Institutions shall act on the instructions of the Resolution Professional with respect to working capital facilities. Section 28 of the Code provides that the Resolution Professional during the CIRP cannot take certain decisions without the prior approval of the CoC and hence, such transfers are not valid as no prior approval of the CoC was taken by the erstwhile IRP. Assessment: 4. For better understanding of the case the chronological order of events material to the case is detailed as hereunder; Date Events • On 13.09.2011 Ferro Alloys (Corporate Debtor) was granted Fund based [Cash Credit Hypothecation Facility] and Non-Fund based facilities....
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....ck allowed the Application filed by the Respondent and directed the Appellant Banks to reverse the amounts within 5 weeks. [Page 45] 5. This Tribunal in Company Appeal (AT) (Insolvency) No. 272 of 2020 preferred by the unsuccessful intervenor seeking direction for reconsideration of the 'Resolution Plan', has dismissed the Appeal vide an Order dated 08.06.2020 observing that 'it is a settled proposition of law that approval and rejection of 'Resolution Plan' depends upon the commercial wisdom of the CoC, which involves evaluation of the 'Resolution Plan' based on its feasibility and such commercial wisdom of the CoC with the requisite voting majority is non-justiciable and dismissed the Appeal'. 6. This Tribunal in Company Appeal (AT) (Insolvency) Nos. 207-208 of 2020, arising out of the Impugned Order dated 30.01.2020, passed by the Adjudicating Authority, National Company Law Tribunal, Cuttack Bench in IA No. 157/CTB/2019 and IA No. 175/CTB/2019 arising out of CP (IB) No. 251/KB/2017 dismissed both the Appeals on the ground that there is 'no material irregularity demonstrated in the CIRP before the Resolution Professional and that merely because the Ad....
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....te Debtor' did not maintain any Current Account from the date of commencement of the CIRP and hence, the question of appropriation from the Current Account does not arise. Since the Company was a going concern, and generating Profits it did not have any issue in servicing the bills under LC. Since the Company has not been issued any fresh LCs, the liability under LC became NIL. It was strenuously argued by the Learned Counsel for the Appellant that the ratio of 'Andhra Bank' V/s. 'M/s. F.M. Hammerle Textiles Ltd.' in Company Appeal (AT) (Insolvency) No. 61 of 2018 is squarely applicable to the facts of this case, as it was held in that Order dated 13.07.2018 that the Creditors may chose not to file claim if the NFB Facilities have not matured and decide to submit claim on its maturity after the completion of moratorium period subject to survival of the 'Corporate Debtor'. 10. It is the Respondent's case that during the CIRP of the 'Corporate Debtor', the Appellant recovered an amount of Rs. 41.73 Crs. in preference over the other Creditors. This issue was discussed in the 25th CoC Meeting and it was brought to the Notice of the Appellant Banks by the Resolution Professional vide....
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.... cannot be appropriated during the moratorium period. It is seen from the record that payments due under the LCs have been made out of the funds of the 'Corporate Debtor' as is established from the reduction of liabilities under non-fund based facilities. 14. This Tribunal in Company Appeal (AT) No. 267 of 2017 in 'Indian Overseas Bank' V/s. 'Mr. Dinakar T. Venkatsubramaniam Resolution Professional for Ambtek Auto Ltd.' held as follows:- "... Once Moratorium has been declared, it is not open to any person including 'Financial Creditor' and the Appellant Bank to recover any amount from the account of the 'Corporate Debtor', no it can appropriate any amount towards its own dues"... 15. It is also noted that the amounts were honored partly by margin held as FDR and partly by funds of the 'Corporate Debtor' deposited in its Cash Credit Accounts. We are of the view that merely because the 'Corporate Debtor' had enough liquidity to run the Company as a going concern, the act of the Appellant Banks to adjust the credit balance in the Cash Credit Account towards the debit balance after CIRP commenced, cannot be justified. If the Appellant's argument is accepted, then the act....
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.... the reversal of the amounts, the subject matter of the Impugned Appeal, is pending before this Tribunal, it would be against the interest of the Consortium of Lenders to release the title deeds. 21. At this juncture, it is relevant to reproduce Section 31 of the Code:- "31. Approval of Resolution Plan --- (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub- section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records rela....