2024 (11) TMI 552 - AT - IBC

Refund of security amount - adjustment of security amount in the claim - HELD THAT - On looking into Clause 8 of the Claim Form, in the claim itself the security amount was adjusted i.e. said amount was set off. The Adjudicating Authority has referred to judgment of Hon ble Supreme Court in Bharti Airtel Ltd. and Another vs. Vijaykumar V. Iyer and Others 2024 (1) TMI 187 - SUPREME COURT , which was a case of the CIRP. However, the judgment which has been extracted itself indicate that set off of account on mutual dealing is permitted under Regulation 29. It is submitted that the Adjudicating Authority has erred in observing that the amount set off by PVVNL against anticipated claim cannot be permitted. The present is not a case of anticipated claim but the claim filed by the Appellant is with adjustment of security claim. The view of the Adjudicating Authority that there could not have been set off/ adjustment of the claim by the Appellant cannot be approved. The direction of the Adjudicating Authority to pay Rs.1,15,33,600/- could not be sustained. The Appeal is partly allowed.

Summary

Issues:
1. Appeal against order allowing refund of security amount.
2. Challenge to adjustment of security amount in the claim.
3. Interpretation of Regulation 29 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

Analysis:
The judgment pertains to an appeal filed against an order allowing the refund of a security amount by the Adjudicating Authority. The Appellant had filed a claim with the Liquidator, mentioning the adjustment of the security amount. The Liquidator, however, filed an application leading to the impugned order. The Appellant contended that the Liquidator did not respond to the claim initially. The Respondent opposed this, citing a Supreme Court judgment that disallowed such adjustments. The Appellant clarified that they do not contest the view that provisions of the Electricity Act do not override the Insolvency and Bankruptcy Code (IBC).

The crux of the matter lies in Regulation 29 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which deals with mutual credits and set-off between the corporate debtor and another party. The Appellant had filed a claim form with the Liquidator, adjusting the security amount. The Adjudicating Authority referenced a Supreme Court judgment but misinterpreted it, leading to the erroneous conclusion that the adjustment by the Appellant was impermissible. The Appellate Tribunal clarified that the judgment cited actually permits set-off of accounts in cases of mutual dealings, as allowed under Regulation 29. Therefore, the direction of the Adjudicating Authority to pay a certain amount was found to be unsustainable, and the appeal was partly allowed on this basis.

In conclusion, the Appellate Tribunal, after considering the submissions of both parties and examining the relevant regulations, found that the adjustment of the security amount in the claim by the Appellant was permissible under Regulation 29. The Tribunal overturned the Adjudicating Authority's decision and partially allowed the appeal, emphasizing the correctness of the Appellant's position regarding the set-off of mutual credits in this context.