TaxTMI 
TaxTMI 
2020 (2) TMI 1665
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....he transaction of appropriating the margin money of the corporate debtor appropriated by the respondents in breach of the moratorium declared by this Hon'ble tribunal, therefore, both the applications are taken up and are being decided by the common order. 2. The present applications has been filed under Section 60 (5) of the IBC, 2016 by the Suprio Kumar Chaudhary, RP of JVL Agro Industries Ltd. RP as well as by SBI as an intervenor, being a financial creditor of the corporate Debtor seeking necessary directions against Punjab National Bank (Respondent No.1), Bank of Baroda (Respondent No.2), Indian Overseas Bank (Respondent No.3), Oriental Bank of Commerce (Respondent No.4), Corporation Bank(Respondent No.5), and Allahabad Bank(Respondent No.6) to reverse the transaction of Appropriating- liquidating fixed deposit made as the margin money against letter of credit and demand loan aggregating to Rs. 164,24,70,284/- of the Corporate Debtor appropriated by the said respondent i.e. margin money in breach of the moratorium declared by this Hon'ble Tribunal and thereafter to credit the amount of the said margin money into the corporate Debtor's current accounts and the intervener i.e....
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....to take the matter to NCLT for decision in law and direction as PNB was forthright in mentioning that their action in adjusting such FDs were in tune with IBC considering the nature of financing through LCs. 6. It is further submitted that such appropriation of margin money by the Respondent No. 1 to 6 is not allowed under the terms of moratorium declared by this Tribunal and the margin money being a security tendered by the corporate debtor for issuance of letters of credit cannot be foreclosed during the moratorium on account of section 14(1) (c) of the Code. Thus, there is a specific bar on the financial creditors in enforcing or adjusting the securing interest provided by JVL and in the present case the security interest is the margin money against the LCs issued by the Respondent banks on behalf of JVL, which are the assets belonging to JVL. 7. The issues which requires considerations in the present case is as follows: a) Whether margin money which is in form of security for issuance of letter of credit to the Corporate Debtor can be foreclosed/recovered/debited from the accounts of the Corporate Debtor by a financial creditor during the CIRP period. b)....
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....e margin money is asset of Corporate Debtor so appropriation of it results in enforcement over the assets of the corporate debtor during the pendency of CIRP and moratorium and is violation of express provision of Section 14 of IBC as well as the claim of the financial creditors cannot be setoff by appropriation of margine money during the CIRP period. 10. The learned counsel for the applicant In support of his argument has placed reliance on certain judgments to opine on similar issues that are as mentioned: a) In State Bank of India u. Debeshish Nanda (Company Appeal (AT) (Insolvency) No. 49 of 2018, b) Indian Overseas Bank u. Mr. Dinkar T. Subramaniam, Resolution Professional for Amtek Auto Limited f Company Appeal (AT) (Insolvency) No. 267 of 2017. c) IRP of Ruchi Soya Industries Limited u. ICICI Rank Limited (MA 84/2018 in C.P. (IB) 1371 & 1372 (MB)/201 7. d) Uniworld Sugars Private Limited (CA No. 277-2018 in Company Petition No. (ÍB)/ 120/ALD/ 2017. 11. In the light of the aforesaid case laws, the counsel for the applicant submitted that it is a settled position of law that the IBC does not permit enforcement of margin money b....
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....argin money. It is also contended that in regard to the moratorium not to apply any surety in the contract of guarantee of the corporate debtor it is submitted that LC are basically a contract of guarantee and it is contingent liability of the corporate debtor which crystalizes on happening of uncertain future event. The security interest on which the RP is relying to make claims does not exit, as the RP could not produce even a single documents showing creation of security interest on the margin amount or margin money. 15. It is admitted facts that LC is an independent transaction and bank is bound to extend from time to time the validity period of LC and it cannot be said that money payable by the issuing bank are money belonging to judgment debtor. It is further submitted that the corporate debtor has admitted in its annual report and balance sheet as on 31 March, 2018 that they have offset the financial asset and liability to the extent of 87.10 crores of which Rs. 59.26 crores is PNBs share which is also reflected in Form C. And as per clause 8 of Form C of IBBI (Insolvency Resolution Process for Corporate persons) Regulations, 2016, the claim submitted by the banks/credito....
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....from unilaterally initiating enforcement action which could defeat a holistic restructuring of the company arid further ensures that the company has control over its operating assets to be able to continue transacting as a going concern and the financial economy of the company should not hampered during the process. 18. The legal content of provisions related to the moratorium under the code reproduced here before decoding Sec 14: 13. Declaration of moratorium and public announcement. - (1) The Adjudicating Authority, after admission of the application under section 7 or section 9 or section 10, shall, by an order - (a) declare a moratorium for the purposes referred to in section 14; (b) cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under section 15; and (c) appoint an interim resolution 6rofcssional iii the manner as laid down in section 16. (2) The public announcement referred to in clause (b) of sub-section (1) shall be made immediately after the appointment of the interim resolution professional. 14. Moratorium. - (1) Subjec....
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....uch circumstances as may be specified.] (3) The provisions of sub-section (1) shall not apply to - (a) such transactions, agreements or other arrangement as may be notified by the Central Government in consultation' with any financial sector regulator or any other authority; (b) a surety in a contract of guarantee to a corporate debtor. (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. 19. In view of the provisions contained thereof, the adjudicating authority finds that the margin money which is in form of security, was appropriated by the financial creditors from the accounts of the corporate debtor , after the CIR process has been intiated and all these transactions were don....