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2022 (9) TMI 683 - AT - Insolvency and BankruptcyResolution Professional (RP) seeking a direction to Bank of India/the Appellant herein to release an amount of Rs.100Lakhs/- held in the no lien account - seeking release for the purpose of CIRP of the Corporate Debtor Company/M/s. Actif Corporation Limited. - whether the amount of Rs. 1 Crore lying in the no lien account belongs to the Appellant Bank? - HELD THAT - It is relevant to note that this amount was admittedly paid by the Corporate Debtor pursuant to an OTS Proposal on 15.07.2017 to show its bona fide. It is not in dispute that the OTS, as proposed, did not materialise and the amount of Rs.1 Crore was parked in the no lien account maintained with the Bank. CIRP was initiated on 26.11.2019. Despite repeated requests of the RP, the Appellant Bank did not release the said amount. The said amount was to be adjusted/utilised upon approval of the Resolution Plan and was not to be adjusted towards Interest or Principal till then. Prior to the commencement of CIRP, this amount was not adjusted by the Bank towards the loan account of Bank as the OTS Proposal had failed. Once the CIRP was initiated, keeping in view that the OTS had failed, the amount lying in the no lien account belongs to the Corporate Debtor and under Section 18(f) of the Insolvency and Bankruptcy Code, 2016, the IRP/RP is obligated to take control and custody of all the assets and properties of the Corporate Debtor . Further, the Bank could not have appropriated this money once the period of Moratorium has commenced on 26.11.2019. The contention of the Learned Counsel for the Appellant Bank that the Bankers lien over the money held in a customer s account is a Statutory Right, is unable, keeping in view the facts of the attendant case and also that CIRP had commenced on 26.11.2019, and having regard to the fact that the amount was deposited with a specific understanding that the amount shall not be used by the Bank until approval of OTS. Admittedly, the said amount was paid at the behest of the Corporate Debtor by a third party and it was lying with the Bank for more than five years. There is no illegality or infirmity in the Order of the Adjudicating Authority - Appeal dismissed.
Issues:
Appeal arising from Impugned Order dated 19.01.2021 allowing Interim Application for release of Rs.100 Lakhs held in 'no lien account' for CIRP of 'Corporate Debtor Company'. Dispute over ownership of Rs.1 Crore paid by Corporate Debtor to show commitment towards OTS Proposal. Analysis: 1. The Appeal challenged the Adjudicating Authority's decision to allow the Interim Application seeking the release of Rs.100 Lakhs held in a 'no lien account' for the Corporate Insolvency Resolution Process (CIRP). The Adjudicating Authority observed that the amount was to be utilized upon approval of the resolution plan and was not to be adjusted towards interest or principal until then. The Bank had not adjusted this amount in the loan account of the Corporate Debtor before the commencement of CIRP, indicating that the bank agreed to no lien on this amount until the OTS proposal was approved. The Adjudicating Authority held that the amount in the 'no lien account' belonged to the Corporate Debtor and should be dealt with by the Resolution Professional as per the provisions of the Insolvency and Bankruptcy Code, 2016. 2. The Appellant Bank argued that the Rs.1 Crore amount came from a third party and was not recorded in the Balance Sheet as an asset. They contended that the amount did not belong to the Corporate Debtor as it was received under a contractual arrangement with a third party. The Bank asserted its statutory right of 'Bankers Lien' over the money held in the 'no lien account' and claimed that the amount became its asset after the OTS proposal failed. The Bank maintained that the amount was paid to show the Corporate Debtor's bona fide in pursuance of a Settlement Proposal and was not part of the Corporate Debtor's assets. 3. The Respondent/Resolution Professional argued that the amount in the 'no lien account' did not belong to the Bank as it was deposited by the Corporate Debtor to show commitment towards the OTS Proposal. Despite repeated requests, the Bank did not release the amount, leading to the Resolution Professional filing the Interim Application. The Respondent emphasized that the Bank had no right over the money in the 'no lien account' as it was deposited by the Corporate Debtor through another company for the OTS. The Respondent relied on a Supreme Court judgment to support their argument regarding the nature of such deposits. 4. The Tribunal considered the contentions of both parties and analyzed the nature of the Rs.1 Crore amount deposited in the 'no lien account'. The Tribunal noted that the amount was paid by the Corporate Debtor to show commitment towards the OTS Proposal and was not to be utilized until the plan was approved. As the OTS proposal failed, the amount in the 'no lien account' belonged to the Corporate Debtor. The Tribunal referenced relevant provisions of the Insolvency and Bankruptcy Code, 2016, regarding the control and custody of assets by the Resolution Professional. The Tribunal dismissed the Appeal, finding no illegality or infirmity in the Adjudicating Authority's order, and upheld that the amount in the 'no lien account' belonged to the Corporate Debtor. 5. The Tribunal concluded that the Bank's claim that the money in the 'no lien account' belonged to them was baseless, emphasizing that the amount deposited by the Corporate Debtor for the OTS Proposal was to be treated as the property of the Corporate Debtor. The Tribunal's decision was based on the understanding that the amount in question was not to be utilized by the Bank until the approval of the OTS Proposal, and therefore, the Bank had no right over the money once the CIRP had commenced.
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