2020 (2) TMI 1633 - Tri - Insolvency and Bankruptcy

Seeking necessary directions to realize its security interest and keep its mortgaged assets out of liquidation of Tag Offshore Limited - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - One of the vessels needed to be moved away to prevent any catastrophe. The RP had engaged a professional agency to move m.v. TAG 22 thereby incurring expenditure. He had brought the fact to the notice of the applicant. The applicant in its e-mail dated 04.10.2019 had agreed to reimburse 50% of the total fees. It is contended by the respondent that these expenses would not form part of the CIRP expenses. Unless the applicant makes good the payment it could not be allowed to exit from the Liquidation Process. The expenses incurred thereby could not be directed to be part of the CIRP expenses. It is contended by the applicant that since one of the two vessels in danger held as security by applicant, it could only bear 50% of the expenses involved in averting the collision. The expenses incurred for securing TAG 22 for preventing the collision could not form a part of the liquidation expenses. More so, when the applicant wishes to exit the liquidation process. Thus, the contention of the applicant to avoid payment is flawed. Even otherwise by the action of the liquidator, the charge of the applicant was protected. The other members of the CoC could not be saddled with any part thereof. The applicant needs to bear the whole of the expenses incurred by the liquidator in protecting its charge. Hence ordered. Application allowed in part - the applicant may opt out of the liquidation estate u/s 52 of the Code subject to clearance of proportionate CIRP costs and payment of the expenses incurred by the liquidator.

Summary

Issues:
1. Application seeking directions to realize security interest and keep mortgaged assets out of liquidation.
2. Dispute over expenses incurred for securing vessels during liquidation process.
3. Applicant's liability to bear expenses for averting collision of vessels.
4. Interpretation of Section 52 of the Insolvency and Bankruptcy Code regarding exiting the liquidation process.

Issue 1: Application seeking directions to realize security interest and keep mortgaged assets out of liquidation:
The Tribunal dealt with an application filed by an applicant under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking directions to realize its security interest and exclude its mortgaged assets from the liquidation of the Corporate Debtor. The applicant expressed willingness to exit the liquidation process and redeem the mortgaged assets held exclusively by them. The Tribunal analyzed the facts leading to the application, including the admission of a Company Petition against the Corporate Debtor and the appointment of a Liquidator. The applicant invoked statutory remedies under the Admiralty Act prior to the Corporate Insolvency Resolution Process. The Tribunal considered the applicant's submissions regarding the exclusive charge of the vessels and the adoption of appropriate statutory remedies to redeem the charge.

Issue 2: Dispute over expenses incurred for securing vessels during liquidation process:
A dispute arose regarding the expenses incurred for securing the vessels during the liquidation process. The applicant claimed that it was not liable to bear the expenses, while the respondent contended that the applicant had agreed to reimburse 50% of the total fees for securing the vessels. The respondent argued that these expenses should not form part of the Corporate Insolvency Resolution Process expenses. The Tribunal examined the communications between the parties, highlighting the agreement by the applicant to reimburse a portion of the fees. The respondent emphasized that unless the applicant fulfilled the payment agreement, it could not exit the liquidation process.

Issue 3: Applicant's liability to bear expenses for averting collision of vessels:
The respondent contended that the applicant needed to bear the expenses incurred for averting a potential collision between vessels. The respondent argued that since one of the vessels in danger was held as security by the applicant, it should bear 50% of the expenses involved in preventing the collision. The Tribunal considered the circumstances leading to the expenses and the actions taken by the liquidator to protect the applicant's charge. The Tribunal concluded that the applicant was liable to bear the entire expenses incurred by the liquidator in safeguarding its charge.

Issue 4: Interpretation of Section 52 of the Insolvency and Bankruptcy Code regarding exiting the liquidation process:
The Tribunal addressed the interpretation of Section 52 of the Insolvency and Bankruptcy Code concerning the applicant's request to exit the liquidation process. The Tribunal allowed the applicant to opt out of the liquidation estate under Section 52 of the Code, subject to clearing proportionate Corporate Insolvency Resolution Process costs and payment of the expenses incurred by the liquidator in securing one of the vessels to prevent a collision. The Tribunal emphasized that the expenses for securing the vessel could not be considered part of the liquidation expenses, especially when the applicant wished to exit the process.

This detailed analysis of the judgment from the National Company Law Tribunal in Mumbai covers the issues involved comprehensively, providing a thorough understanding of the legal complexities and decisions made by the Tribunal.