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2020 (9) TMI 1115 - Tri - Insolvency and BankruptcyEarly hearing of application - Auction - section 60(5) of Insolvency and Bankruptcy Code, 2016 read with Rule 11 of National Company Law Tribunal Rules, 2016 - HELD THAT - The applicant has paid the entire sale consideration in respect of both the properties in the account of certificate holder banks on 17th September, 2019. The DRT proceedings against CD were initiated by a consortium of Banks who are the members of the CoC in the case in hand. So no doubt keeping the money in their hand after setting aside the sale is not proper and just. An application of this nature wherein a claim is raised not against the CD or against the properties now held by the CD but is against certificate holder banks who are the members of CoC is not maintainable. It is an inter-se claim in between certificate holder banks who received the consideration and the auction purchaser - there are force in the said submission on the side of the applicant/auction purchaser, especially wherein the lead bank representing the CoC showed its readiness to refund the amount. The certificate holder of the bank who are members of CoC are directed to keep the money paid by the applicant with accrued interest @ applicable to the Banks, till the date of refund to the applicant preferably with in two weeks from the date of receipt of this order by the bank. If such an order is not issued it would work much hardship, economical loss and injustice to the applicant who had purchased the property higher than the upset price notified by the Banks - application disposed off.
Issues:
1. Refund of auction purchase amount post initiation of CIRP. 2. Jurisdiction of the Recovery Officer and CoC. 3. Maintainability of the application under section 60(5) of the Insolvency and Bankruptcy Code, 2016. Analysis: Issue 1: Refund of auction purchase amount post initiation of CIRP The case involved the successful bidder seeking a refund of the entire sale consideration paid for two properties of the Corporate Debtor (CD) post initiation of Corporate Insolvency Resolution Process (CIRP). The Recovery Officer set aside the sale conducted before the admission of CD into CIRP and withdrew the sale certificate. The applicant prayed for a direction to the Resolution Professional (RP) to refund the total consideration amount with interest. The RP contended that the subject asset was under CIRP before the sale confirmation and suggested that the amount be refunded by the Certificate Holder Banks. The RP had no objection to the refund, and the CoC member representing SBI confirmed willingness to refund the amount. The Tribunal directed the certificate holder banks, who are CoC members, to refund the amount with accrued interest to the applicant within two weeks. Issue 2: Jurisdiction of the Recovery Officer and CoC The applicant argued that the Recovery Officer's actions post initiation of CIRP violated section 14 of the Insolvency and Bankruptcy Code, 2016, and that the DRT had no jurisdiction after admission of CD into CIRP. The CoC, represented by SBI, was held responsible for keeping the money post setting aside the sale, causing injustice to the applicant. The Tribunal found that the CoC, as certificate holder banks, should refund the amount to the applicant, as confirmed by the RP and CoC member. Issue 3: Maintainability of the application under section 60(5) of the Code The Tribunal analyzed the application under section 60(5) of the Code and noted that the claim was against the certificate holder banks, who are CoC members, and not against the CD or its properties. Citing a precedent, the Tribunal found the claim to be inter-se between the banks and the auction purchaser. However, considering the readiness of the lead bank representing the CoC to refund the amount, the Tribunal invoked Rule 11 of the NCLT Rules and directed the certificate holder banks to refund the amount to the applicant with accrued interest, ensuring justice and fairness. In conclusion, the Tribunal disposed of the application, directing the certificate holder banks to refund the auction purchase amount with interest to the applicant within two weeks, emphasizing the need to prevent hardship and economic loss to the applicant. The order was to be communicated to all parties involved promptly.
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