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2021 (7) TMI 289 - AT - Insolvency and BankruptcyCompnay under liquidation / CIRP - Tripartite Agreement - Pledge agreement - MSTC Limited had supplied goods to the Corporate Debtor - secured (Operational) creditor or not - goods procured by MSTC for consumption of Corporate Debtor, stored at the premises of Corporate Debtor, under custody of FSNL for MSTC, which were to be issued to Corporate Debtor on cash and carry basis was in practical execution modified accepting Memorandum of Pledge treating Corporate Debtor as Pledger delivering goods by way of arrival of shipment at its factory premises for payment of amounts mentioned in the Memorandum which was to be treated as advance by MSTC to Corporate Debtor. MSTC thus claims existence of pledge and goods at site to be of MSTC and to be secured. HELD THAT - The Interim Resolution Professional took note of the records and on said basis calculated the stocks. However, there is no material shown that before the second Inspection dated 12th May, 2018 was done, at any time the Interim Resolution Professional and the Resolution Professional did actually go and take or cause to be taken physical verification of the stocks. When the provisions require taking control and custody of the assets, it would be necessary for the Interim Resolution Professional/ Resolution Professional to show steps taken on such count. Without doing this, when MSTC was constantly mentioning in its letters that it was Secured Creditor with goods pledged to it lying on the premises of the Corporate Debtor, nothing was done and when the assessment was carried out on 29th March, 2018, fault is being found with the official of the Corporate Debtor signing the Joint Statement of Inspection. We discard such effort on the part of the Appellant. The Appeal shows that the Appellant (Resolution Professional-now Liquidator) is conscious that Geo Chem is an agency empanelled with MSTC which is an International Inspection and Testing Company. The Resolution Professional did not have any reason to question the action of Geo Chem in the first Inspection Report. Grievance was not about the taking place of Inspection. It was only with regard to Authority of official of Corporate Debtor to sign the document. Although the records of the Corporate Debtor of which the Interim Resolution Professional took note showed lower stocks (even lower that the Second Inspection Report) and were unreliable, the First Inspection Report dated 29th March, 2018 showed that there were much higher quantities of Steam Coal and MT Steel Billets. By the time the Second Inspection could happen on 3rd May, 2018, MT Steel Billets was almost not there and MT Steam Coal had drastically reduced - Fact remains that even the Resolution Professional did move the Adjudicating Authority so as to secure direction through SFIO which direction appears to have been later on modified to get investigation done through local police. Charge sheet now is pending. The matter zeros down to the position that MSTC had in view of the agreements and arrangements with the Corporate Debtor to store the goods which appear to have been imported, on the premises of the Corporate Debtor but FSNL was to be the custodian. The access of FSNL and MSTC appears to have got lost when CIRP started and Interim Resolution Professional/ Resolution Professional came into management. First Inspection Report read with Second Inspection Report show Substantial goods have been lost/missing/ consumed (or whatever) for which MSTC cannot be blamed - if the Appellant claims that the goods were of the Corporate Debtor the taking over of control and custody would have to be shown. If the Appellant claims that the goods were not of the ownership of the Corporate Debtor (and inspection Report shows presence of the goods), there is no material to show that the same were returned to the owner. The Appellant wants to claim that pledge should not be recognised. In the facts of the matter where goods of MSTC have disappeared drastically from custody of Corporate Debtor under management of IRP/ RP, if the Agreements (as on record) between parties are seen, the goods- (Steam Coal and Steel Billets which reduced between the First Inspection Report and Second Inspection Report) was of the ownership of MSTC. Same must be deemed to have been consumed at the Bankura Unit which was functional during CIRP. The value of the same should in that case have to step up the ladder under Section 53 of IBC as CIRP costs. However, this not having been claimed by MSTC, the impugned order is upheld, which placed MSTC on a lower rung, considering the facts. There is no substance in the Appeal - appeal dismissed.
Issues Involved:
1. Whether MSTC Limited (MSTC) should be recognized as a secured operational creditor. 2. The validity and implications of the pledge agreements between MSTC and the Corporate Debtor. 3. The responsibilities of the Interim Resolution Professional (IRP) and Resolution Professional (RP) regarding the control and custody of assets. 4. The impact of the missing stock on the claims of MSTC. 5. The relevance of Section 77 of the Companies Act, 2013 in determining secured creditor status. Issue-wise Detailed Analysis: 1. Recognition of MSTC as a Secured Operational Creditor: The Adjudicating Authority treated MSTC as an operational creditor with security interest, based on the pledge agreements. The Tribunal upheld this, noting that if a security interest is created or exists in favor of an operational creditor, such operational creditor would be considered a secured creditor. The Tribunal found that MSTC had security interest in the pledged goods supplied, thus recognizing MSTC as a secured creditor. 2. Validity and Implications of Pledge Agreements: The Tribunal examined the agreements between MSTC and the Corporate Debtor, including the tripartite agreement involving FSNL as the custodian of the pledged stock. The agreements stipulated that goods procured by MSTC were to be stored at the Corporate Debtor’s premises under FSNL's custody and released on a cash and carry basis. The Tribunal noted that these agreements created a valid pledge, giving MSTC a security interest in the goods. 3. Responsibilities of IRP and RP Regarding Control and Custody of Assets: The Tribunal emphasized the duties of the IRP and RP under Sections 18(1)(f) and 25(1) of the Insolvency and Bankruptcy Code (IBC) to take immediate custody and control of all assets of the Corporate Debtor. The Tribunal found that the IRP and RP failed to conduct a proper physical verification of the stocks, which led to the disappearance of substantial quantities of pledged goods. The Tribunal held the IRP and RP responsible for not securing the assets adequately. 4. Impact of Missing Stock on MSTC's Claims: The Tribunal considered the two inspection reports, one conducted on 29th March 2018 and another on 3rd May 2018, which showed a significant reduction in the stock of Steam Coal and Steel Billets. The Tribunal concluded that the missing stock, which was under the control of the IRP and RP, could not be blamed on MSTC. The Tribunal held that the value of the missing goods should be accounted for, impacting MSTC's claim. 5. Relevance of Section 77 of the Companies Act, 2013: The Appellant argued that MSTC could not be considered a secured creditor due to the non-registration of the charge under Section 77 of the Companies Act, 2013. However, the Tribunal noted that Section 77(4) provides that non-registration does not prejudice any contract or obligation for repayment of the money secured by a charge. The Tribunal found that the agreements and the Memorandum of Pledge created a valid security interest in favor of MSTC, despite the non-registration of the charge. Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision to recognize MSTC as a secured operational creditor. The Tribunal emphasized the responsibilities of the IRP and RP in managing the assets and held them accountable for the missing stock. The Tribunal also clarified the applicability of Section 77 of the Companies Act, 2013, in the context of the pledge agreements, supporting MSTC's claim as a secured creditor.
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