TaxTMI 
TaxTMI 
2026 (5) TMI 1677
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....2 (AHM) of 2022 in CP (IB) No. 322 (AHM) of 2018 concerning Galaxy Cotton and Textiles Pvt. Ltd. (hereinafter referred to as 'Galaxy Cotton' for convenience). The appellants are third parties to the liquidation of Galaxy Cotton and applicants to I.A. No. 1131 of 2022 and I.A. No. 1052 of 2022. The Facts: 1. The broad facts which are necessary for considering the present batch of appeals and largely undisputed are briefly stated: a) Sometime in 2008, the corporate debtor (to be), namely M/s Galaxy Cotton had availed a loan from the SBI against the security of the debtor's warehouse. b) The appellants herein are traders in cotton and between 04.02.2013 and 02.04.2013 Giriraj had deposited 3,300 bales of cotton, while Nilesh had deposited 800 bales of cotton between 29.03.2013 and 05.04.2013. In all both the appellants had stocked cotton bales totaling 4,100, in the warehouse of Galaxy Cotton, which, to repeat was under the mortgage with SBI. Of the total, 3,300 bales belonged to Giriraj, the appellant in CA 2036, and the balance 800 belonged to Nilesh, the appellant in C.A.2037 of 2024, with a combined total weight of 6,68,300 kg. For this purpose, they entere....
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....d to be waste cotton and could not be sold, and that the sale proceedings were deposited in fixed deposit. f) While things stood thus, SBI initiated proceeding in CP (IB) No. 322 (AHM) of 2018 under Sec. 7 IBC against Galaxy Cotton, and this came to be admitted on 10.10.2019. On coming to know of the same, on 19.12.2019, the appellants herein claim to have intimated the resolution professional that the cotton bales of cotton in the warehouse of the Galaxy Cotton belonged to them. g) CIRP of Galaxy Cotton ended unsuccessfully, and hence on 29.08.2022, the Adjudicating Authority ordered its liquidation and the first respondent herein came to be appointed as the liquidator. The appellants re-asserted their title to the cotton bales vide their separate communication dated 08.09.2022 to the liquidator, and required the liquidator to preserve their cotton. On 19.09.2022, the liquidator would reply that the obligation to take care of the appellants' cotton rests with BoB and that the cotton bales are not part of the liquidation asset. Subsequently, on 25.09.2022, they, as advised by the liquidator both the Giriraj and Nilesh submitted their respective Form-G and made a c....
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....est created over it in favour of SBI for a loan the bank had advanced to UV Cotton. 2. Finally, vide Order dated 23.08.2024, the Adjudicating Authority passed the following Order: "It is informed by the learned counsel for the financial creditor" (which in the context is BoB) "liquidator and SBI that the orders for vacating the premises of corporate debtor has been complied and goods have been shifted out of the premises of the Corporate Debtor. The applicants confirmed and raised certain issues which are not the prayers or not to be raised or heard by this Tribunal as the matter involves third party goods kept in the premises of the Corporate Debtor for which liquidator is not to be accountable in any manner.... In view of the same, the liquidator is directed to complete the liquidation process for disposal of other assets." This common Order passed in both the applications filed by the respective appellants herein are now under challenge. The pointed prayer of the appellants is to have the Order of the Adjudicating Authority now under challenge is set aside, which implies that their cotton bales be declared that they are not part of the liquidation-asset of the Gal....
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.... cotton in an interest-bearing account as directed vide the Order of the DRAT dated 29.06.2017. 4. Both the appellants and the SBI have filed their respective replies to the set of the applications which the other has filed. And this is largely reflected in the arguments they made. Therefore, we choose to dispense with the narration of the replies. Prelude to Arguments 5. The complexion of the appeals now stands drastically changed, since the dispute, if keenly observed, has moved away from where it has started. The appellants initially had approached the Adjudicating Authority with a prayer to exclude their respective cotton bales from the liquidation asset of Galaxy cotton. Now, during the pendency of the appeals, when the issue is before us, SBI has chosen to dispose of the cotton that was available physically in the warehouse of UV Cotton, but without reference to the Tribunal. It falls back on an earlier Order of the DRAT to sell those cotton bales. But after disposing of the cotton it has approached us to let the auction purchaser of the cotton to lift it as it is now under dual obligation to, (a) to hand over vacant possession of the warehouse of the UV cotton to it....
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....expressly permitted SBI to proceed with the sale of the cotton bales, and those orders permitting sale of the cotton bales were not independently challenged by the appellants. Pursuant thereto, 1,255 cotton bales were sold and the sale proceeds were retained in fixed deposits in terms of DRAT directions. The balance stock of cotton bales could not be sold earlier owing to its poor quality. e) the tribunals constituted under the IBC lack jurisdiction to adjudicate disputed questions of title, charge or inter se rights over the cotton bales, especially when those issues are pending before the DRAT. The appellants, instead of approaching the DRAT have invoked wrong jurisdiction under the IBC. f) At any rate, the liquidator of Galaxy cotton has not made the disputed cotton-bales as part of the liquidation estate. This is borne out by the e-auction process memorandum issued by the Liquidator, which specifically excluded disputed cotton-bales from the liquidation estate. This has been taken note of by the Adjudicating Authority and hence it, by order dated 08.07.2024, directed SBI to remove the goods from the premises of the Corporate Debtor. g) According to SB....
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....ifted only 2,98,225 kilograms from the premises pursuant to the order dated 08.07.2024. This, according to the appellants, demonstrated substantial depletion and deterioration of the stock while under the custody and control of the insolvency administration and SBI. e) that once the liquidator himself had accepted that the cotton bales did not form part of the liquidation estate of Galaxy Cotton, the Adjudicating Authority ought not to have disposed of the applications as infructuous merely because the goods had been shifted from the premises. According to the appellants, the substantive issues relating to exclusion, custody, preservation and consequential reliefs remained unadjudicated, and therefore the impugned order dated 23.08.2024 deserved to be set aside. 9. Reiterating its stands about the creation of security interest over 4,100 bales of cotton of the appellant, the learned counsel for Bank of Baroda explained how SBI began dealing or interfering with the security interest of BoB, and why BoB was constrained to initiate successfully S.A.91 of 2016 before the DRT and the challenge to it by the SBI before the DRAT Appeal No.101 of 2017 and the order of DRAT dated....
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....inable through the shareholding pattern. The Liquidator has no obligation to preserve or maintain third-party's goods that have been hypothecated to Bank of Baroda. Any dispute concerning quantity, quality, deterioration or entitlement to the cotton bales were matters exclusively between the appellants, SBI and Bank of Baroda. d) the claims filed by the appellants even though were provisionally admitted, the same were subsequently rejected upon verification as not maintainable. e) since the disputed cotton bales had already been removed from the premises of Galaxy Cotton and never formed part of the liquidation estate, the applications filed by the appellants had become infructuous. f) at any rate, given the fact that there is an ongoing dispute between SBI and BoB over the security interest over the cotton bales now pending adjudication by the DRAT, the same cannot be agitated before the tribunals under the IBC. 11. The appellants laboured to explain how they are related parties, but detailing the same is quite irrelevant in the context of the appeals. Discussion & Decision 12. It has been a long narration of facts and arguments, but to deal wit....
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....ently is bristled with contradiction. And, SBI's contradiction does not stop there. At one place it claims the security interest over the cotton bales by treating the same as belonging to Galaxy cotton, but alongside it stands by the decision of the liquidator to exclude the cotton bales from the liquidation-asset of Galaxy Cotton. Obviously, it enjoys playing the maze of its own contrivance. We watch the strategy of the SBI with amusement, and do not propose to undo what has been done. 16. Another argument that we heard pertains to the quality of cotton that were there after the initial sale of 1,255 bales of cotton by the SBI. While SBI asserted they were of poor quality, both the appellants and the Bank of Baroda strongly disputed it. This issue, however, may not concern us, but we underscore that the appellants are not without remedy in law, but this tribunal is not the forum where it could be agitated. 17. In fitness of things, we consider, that the appellants should have approached the DRAT concerned where the issue regarding title to cotton etc., is pending, but appeared to have believed that NCLAT as a one-stop-solution centre for all its challenges. We need to inform....