2021 (1) TMI 980 - Tri - Insolvency and Bankruptcy

Seeking direction to the Respondent, i.e. Bank of India, to release an amount of ₹ 100 Lacs held in the No Lien Account , for the purpose of Insolvency Resolution Process - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - It is noted that the Corporate Debtor, to show their commitment and bonafide towards resolution plan (i.e. one time settlement proposal) has furnished a Cheque for ₹ 1 crore to the respondent/ bank on 12.07.2017 along with a letter with a request to keep the proceeds in No Lien Account and instructed that the said amount may be adjusted / utilized upon approval of resolution plan (i.e. one time settlement), however, in any case, it should not be adjusted towards interest/ other charges/ principal till then. The company is committed to bring the balance amount to the extent of 10% as per their commitment once approval is accorded by the lead bank. Before the date of commencement of CIRP, the respondent bank has not adjusted this amount in the loan account of the corporate debtor, whereas it has kept the same in a separate account as instructed by the corporate debtor. It shows that the bank has agreed for no lien to this amount till OTS proposal is approved by the bank. Hence, on initiation of CIRP, the amount kept in a separate account as 'No Lien Account' by the respondent bank is the asset of the corporate debtor and the RP has to deal with the same as per the provisions of the IB Code. Application allowed.

Summary

Issues:
Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking direction to release funds for Insolvency Resolution Process (CIRP).

Analysis:
1. The applicant, a Resolution Professional, filed an application seeking direction for the release of ?100 Lacs held in the "No Lien Account" by the respondent, Bank of India, for the purpose of the CIRP of the Corporate Debtor Company, M/S. Actif Corporation Ltd.

2. The Corporate Debtor was under CIRP as per the order dated 26.11.2019, and various financial creditors, including the respondent, had filed their claims.

3. The applicant claimed that despite communication and discussions in the CoC meeting, the respondent did not release the amount of ?100 Lacs held in the No Lien Account, which was a violation of the I&B Code.

4. The respondent argued that the amount was part of a one-time settlement proposal made by the Corporate Debtor, involving a Cheque issued by Avazy Realcon and not the Corporate Debtor. The respondent maintained that the amount was not refundable and did not constitute an asset of the Corporate Debtor.

5. The Tribunal noted that the Corporate Debtor had provided the Cheque to the respondent as part of its commitment towards a resolution plan, with instructions to keep the amount in the No Lien Account until the plan was approved. The respondent had not adjusted this amount in the loan account of the Corporate Debtor before the commencement of CIRP.

6. The Tribunal held that the amount kept in a separate No Lien Account by the respondent was an asset of the Corporate Debtor, as agreed upon by the bank, and should be dealt with by the Resolution Professional as per the provisions of the Insolvency and Bankruptcy Code.

7. Consequently, the Tribunal allowed the application with the above observations and disposed of the matter without any order as to costs.