TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 475
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....or to distribute an amount of INR 223 crore from the cash balance available with the Corporate Debtor in the proportion of their respective voting share in the erstwhile CoC; (b) That this Tribunal be pleased to permit the Financial Creditors of the Corporate Debtor to distribute the cash balances available with the Corporate Debtor, other than such cash which the is currently required for the operation of the Corporate Debtor as a going concern, in such manner and proportion as may be determined by the Financial Creditors; (c) That this Tribunal may be pleased to grant interim and ad-interim reliefs in terms of prayers (a) to (b) above; (d) That the Tribunal be pleased to pass any other Order in the interest of justice in favour of the Applicant herein. A. Background facts and circumstances 2. The present application was filed by IDBI Bank Limited, on behalf of itself and other financial creditors of M/s EPC Constructions India Limited ("Corporate Debtor"), viz. Central Bank of India, EXIM Bank, Corporation Bank (now Union Bank of India), ICICI Bank, Laxmi Vilas Bank, Axis Bank and Union Bank of India (hereinafter collectively referred to as the "Applicant"), pending the i....
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....the amounts shall be replenished by the financial creditors within 15 days of demand. B. Submissions made on behalf of the Applicant 7. It is submitted that, in the facts of the present case, the Applicant is seeking that the "cash balance" forming part of the "liquidation estate" available with the Corporate Debtor be distributed to the stakeholders. Under Section 36(3)(c) and (i) of the Code, the cash balances available with the Corporate Debtor form part of the liquidation estate. The relevant extract of Section 36 of the Code is as follows - "36. Liquidation estate. - (1) For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3), which will be called the liquidation estate in relation to the corporate debtor. .... (3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following: - (a) any assets over which the corporate debtor has ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate debtor or an information utility or records in the registry or any depository recording securities of the ....
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....itors and to distribute the "proceeds". The relevant portion of Section 35 reads as follows - "35. Powers and duties of liquidator. - (1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely: - ..... (j) to invite and settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code; ....." 9. Further, Section 53 of the Code provides that the "proceeds from the sale of the liquidation assets shall be distributed" as per the order of priority set out therein. Section 53 does not expressly provide that a distribution from the liquidation estate cannot take place till such time as there is a sale of the liquidation assets. Section 53 is extracted as follows - 53. Distribution of assets. - (1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period as may be specified, namely: - (a) the insolvency resolution process costs and the liquidation c....
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...., Regulation 42(1) of the IBBI (Liquidation Process) Regulations, 2016 stipulate that subject to Section 53 of the Code, the liquidator shall not commence distribution before the list of stakeholders and the asset memorandum has been filed with the Adjudicating Authority. In the present case, we verily believe that the above requirements have already been fulfilled. From a literal reading of Regulation 42, it is relevant that distribution can commence once the list of stakeholders and the asset memorandum has been filed and that, such distribution shall follow the distribution mechanism set out in Section 53. Regulation 42 is as follows - "42. Distribution. (1) Subject to the provisions of section 53, the liquidator shall not commence distribution before the list of stakeholders and the asset memorandum has been filed with the Adjudicating Authority. (2) The liquidator shall distribute the proceeds from realization within ninety days from the receipt of the amount to the stakeholders. (3) The insolvency resolution process costs, if any, and the liquidation costs shall be deducted before such distribution is made." 12. The Applicant submits that the Order passed by NCLT, Ko....
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....e directed to distribute the available cash balance amongst the stakeholders in the order of priority stipulated in Section 53 of the Code. Submissions by Respondent/ Liquidator: 16. The present application has been filed by IDBI Bank in its capacity as a financial creditor and lead lender of EPC Construction India ("Corporate Debtor") as well as a representative of all other lenders of the Corporate Debtor forming part of the Joint Lenders meeting held on 18.03.2021, inter-alia, seeking a direction against the Respondent / Liquidator to distribute the available cash balance of the Corporate Debtor, amongst the stakeholders of the Corporate Debtor in favour of whom the same are charged, including the Applicants herein, as per the waterfall mechanism set out in Section 53 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code"), and amongst the workmen of the Corporate Debtor as required under Section 53 (1) (b) (i) of the Code after accounting for the costs/ reserving the estimated costs under Section 53(1) (a) towards Insolvency Resolution Process costs and the liquidation costs. 17. The consolidated reply filed by the Respondent on 03.08.2021 in response to this application an....