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2025 (4) TMI 252 - AT - IBCProvisional Attachment Order - challenge to attachment on the ground that it is affecting the rights of financial institutions to recover the amount borrowed by the defaulters whose account was declared Non-Performing Assets (NPA) - HELD THAT - It has been admitted that the Resolution Plan against one company has been approved and even final order has been passed by the NCLT. The other Company is under liquidation. In the changed scenario so far as the financial institutions are concerned they cannot maintain their claim to the extent it was claimed to release the mortgaged property having settled their amount in the Resolution Plan before NCLT at a lower amount as admitted and otherwise the order of the NCLT has a consequence. The Counsel appearing for the financial institutions even made a reference to Section 32A of IBC with all consequences. There may be inter-se dispute on the claim of the financial institutions which cannot be determined by this Tribunal having limited jurisdiction which otherwise can be settled in a given case by Special Court if a case is made out. The cases may be of nature where borrower may have no objection to the claim of the financial institution and for release of property. However in the present case since much water has flown after the attachment of the property it would be appropriate to relegate the financial institutions to take remedies as appropriate now after the order of the NCLT and remedy aforesaid would be obviously as provided under the statutes. The Counsel for the appellants referred Section 32A of IBC and otherwise this Tribunal has made a reference to Section 8(7) of the Act of 2002. Thereby in the present case it would be appropriate to dispose of all the appeals preferred by the financial institutions to take recourse of the remedy now appropriate for them in the background that the NCLT has passed a final order and the provisions of IBC would have its own consequences. The financial institutions are accordingly given liberty to press their claim as is suitable to them. Conclusion - i) Financial institutions could not justify the release of attached properties beyond the amounts settled in the Resolution Plan approved by the NCLT. ii) The Tribunal lacked jurisdiction to resolve inter-se disputes between financial institutions and borrowers which could be addressed by a Special Court under Section 8(7) of the Act of 2002. These appeals are disposed of with a liberty to take appropriate remedy as are now permissible.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include: 1. Whether the attachment of properties by the respondent under the Provisional Attachment Order (PAO) affects the rights of financial institutions to recover amounts from borrowers whose accounts have been declared Non-Performing Assets (NPA). 2. The implications of the National Company Law Tribunal's (NCLT) approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC) on the claims of financial institutions and other appellants. 3. The jurisdiction of the Tribunal in addressing inter-se disputes between financial institutions and borrowers concerning attached properties. 4. The applicability of Section 8(7) of the Prevention of Money-Laundering Act, 2002, in seeking remedies for financial institutions regarding attached properties. 5. The rights and limitations of Liquidators and Resolution Professionals following the NCLT's final order. ISSUE-WISE DETAILED ANALYSIS 1. Attachment of Properties and Rights of Financial Institutions The financial institutions challenged the attachment of properties on the grounds that it hindered their ability to recover debts from borrowers whose accounts had been declared NPAs. The Tribunal required the financial institutions to refer to the NCLT order approving the Resolution Plan to determine the settlement amounts. It was revealed that the settlement amounts were lower than the amounts due, which weakened the financial institutions' claims for property release. The Tribunal emphasized that the financial institutions' claims should be viewed from multiple angles, including the possibility of settlements between borrowers and financial institutions, and the potential for disputes over repayment claims. The Tribunal noted that such disputes fell outside its jurisdiction and could be addressed by a Special Court under Section 8(7) of the Act of 2002 if a case was made out. 2. Implications of NCLT's Approval of Resolution Plan The Tribunal highlighted that the NCLT's approval of the Resolution Plan and the subsequent final order had significant consequences for financial institutions. The institutions could not maintain their claims for property release beyond the settlement amounts specified in the Resolution Plan. The Tribunal acknowledged that the financial institutions had the liberty to pursue claims against guarantors for any remaining amounts. 3. Jurisdiction and Inter-se Disputes The Tribunal clarified that it lacked jurisdiction to determine inter-se disputes between financial institutions and borrowers regarding attached properties. Such disputes could be settled by a Special Court if a case was made under Section 8(7) of the Act of 2002. The Tribunal emphasized the need for financial institutions to seek appropriate remedies under the relevant statutes. 4. Applicability of Section 8(7) of the Act of 2002 The Tribunal explained that Section 8(7) of the Act of 2002 provided a remedy for financial institutions to seek the release of attached properties through a Special Court, even during ongoing trials. The financial institutions were encouraged to pursue this remedy if applicable. 5. Rights of Liquidators and Resolution Professionals The Tribunal acknowledged that the NCLT's final order limited the roles of Liquidators and Resolution Professionals. Their rights and actions would be governed by the NCLT's order, and they were advised to pursue appropriate remedies available under the legal framework. SIGNIFICANT HOLDINGS The Tribunal held that: - Financial institutions could not justify the release of attached properties beyond the amounts settled in the Resolution Plan approved by the NCLT. - The Tribunal lacked jurisdiction to resolve inter-se disputes between financial institutions and borrowers, which could be addressed by a Special Court under Section 8(7) of the Act of 2002. - Financial institutions were granted the liberty to pursue appropriate remedies under the Act of 2002 and other relevant statutes following the NCLT's final order. - Liquidators and Resolution Professionals were bound by the NCLT's order, and their rights were limited to the consequences of the Resolution Plan and liquidation proceedings. - Companies under liquidation or Corporate Insolvency Resolution Process could not challenge the attachment of properties, as the consequences of liquidation or Resolution Plan approval would follow. The appeals were disposed of with the provision that appellants could seek a review or recall of the order if the NCLT's order was set aside by the NCLAT, provided it had a direct effect on any appeal. The Tribunal emphasized the importance of pursuing remedies as appropriate under the current legal framework.
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