2022 (2) TMI 463 - Tri - Insolvency and Bankruptcy

Return of deposit made as security by the Corporate Debtor with the Respondent - period under the Lease Deed expired and the premises leased thereunder was vacated by the Corporate Debtor - Whether the rental dues can be adjusted against the security deposit lying with the Respondent or whether it is liable to be returned to the Applicant? - HELD THAT - The facts which are available for appreciation before this Tribunal have to be appreciated in the right perspective for arriving at a conclusion on the right of the Applicant to get refund of the deposit amount. Even if the arrears can be adjusted, are they adjusted by the date of CIRP is the crucial question, since, after CIRP no adjustment can be made. One indication that no appropriation was done is the claim form submitted by the Respondent to the RP and the admission of the claim by the RP. The correspondence through the mails also shows that there was a demand by the Applicant for refund of the deposit and that he did not express any acquiescence for any appropriation of the deposit towards the rentals - There is no mention made in the said mail that the amount towards the rental dues have been set-off against the deposit. It only states that the person representing the Trust has requested their people to sit with the accounts people of the hospital and get reconciled again. The counsel on the basis of the said ledger account contends that the appropriation as argued is not done and hence the same is reflected in the ledger account as the due amount from the Applicant. The ledger account is from the period 01.04.2017 to 13.03.2018 which is the CIRP commencement date. Hence as on that date also the ledger reflected that the rental due of ₹ 24,26,736/- was due. The argument of the Respondent's Counsel that the claim was submitted as an abundant caution gets nullified by the ledger account reflecting it as a due amount. The contention of the Respondent that the rental dues are set-off against the deposit and hence the refund of the entire amount of deposit cannot be made stand dismissed - application is allowed and there shall be a direction to the Respondent to return the Security Deposit of ₹ 56,92,040/- to the Corporate Debtor.

Summary

Issues:
1. Whether the rental dues can be adjusted against the security deposit lying with the Respondent or whether it should be returned to the Applicant.
2. What is the final decision regarding the return of the security deposit.

Issue 1 - Detailed Analysis:
The Resolution Professional of the Corporate Debtor filed an application seeking the return of a security deposit of INR 56,92,040 to the Corporate Debtor, deposited with the Respondent in accordance with a Lease Deed. The lease period expired on 31.05.2020, and the Corporate Debtor vacated the premises as agreed. However, the Respondent failed to return the Security Deposit, claiming a set-off against alleged dues. The Respondent argued that rental arrears and dues to a sister concern justified the retention of the deposit. The main contention was whether the Respondent could adjust rental dues against the security deposit after the initiation of the Corporate Insolvency Resolution Process (CIRP).

The Applicant contended that the Respondent was not entitled to appropriate rental dues from the deposit post-CIRP initiation and should return the amount. The Respondent claimed that the appropriation was already done before CIRP, reducing the deposit amount. The Tribunal analyzed the lease agreements, correspondence, and conduct of the parties to determine if the rental dues were appropriately adjusted. The Respondent's claim form for rental dues and the Applicant's demand for deposit refund were crucial pieces of evidence in this analysis.

The Tribunal considered legal precedents emphasizing that amounts due prior to CIRP cannot be appropriated during the moratorium period unless proven otherwise. The Respondent's ledger account showed the rental dues as outstanding even before CIRP commencement, contradicting the Respondent's argument of appropriation. The Tribunal dismissed the Respondent's claim of set-off and held that the Respondent must return the entire security deposit to the Corporate Debtor.

Issue 2 - Detailed Analysis:
After thorough analysis and consideration of the arguments presented by both parties, the Tribunal allowed the application. A direction was issued to the Respondent to return the Security Deposit of INR 56,92,040 to the Corporate Debtor. The decision was based on the finding that the Respondent's claim of adjusting rental dues against the deposit was not substantiated by evidence and was not permissible post-CIRP initiation. The Tribunal's decision aimed to ensure the Corporate Debtor's financial stability during the CIRP and prevent unjust enrichment of the Respondent at the Corporate Debtor's expense.