2019 (5) TMI 479 - Tri - Insolvency and Bankruptcy

Defreezing of bank account of Corporate Debtor - case of the respondent is that though the amount was transferred into the RP's account to meet CIRP cost, however, the insurance claim amount is the property of the Respondent. Reason being that though the amount was received during moratorium period , but the fire in the premises broke out pre-moratorium and at that point of time the premises were mortgaged with the Respondent Bank. HELD THAT - The damaged premises were mortgaged with the Respondent Bank and the insurance claim is the property of the Respondent Bank. Moreover, since the Respondent/SBI wishes to opt out of the liquidation estate U/ s 52 of the code, and realise its security interest on its own, therefore, it can be held that since the property is under the exclusive charge of the bank therefore, all encumbrances thereon and all incomes and claim including the insurance claim, therefrom relate to the Respondent Bank. It is justifiable to direct the liquidator to place on record the remaining assets yet to be disposed off under liquidation process along with the information of liquidated value. On the basis of such detail now demanded, it can be ascertained that how much work is yet to be performed by the liquidator so as to determine the cost of liquidation as well as professional fees - Application allowed in part.

Summary

Issues:
Corporate Insolvency Resolution Process; Defreezing bank account of Corporate Debtor; Custody of mortgaged assets; Freezing of Liquidation Account; Insurance claim ownership; Realization of security interest; Remaining assets disposal under liquidation process; Liquidation cost determination; Professional fees determination; Bank account statement submission.

Analysis:
The judgment pertains to a Miscellaneous Application filed by the liquidator under section 35(1)(n) of the Insolvency and Bankruptcy Code seeking directions to defreeze the bank account of the Corporate Debtor. The Corporate Insolvency Resolution Process of the company had commenced earlier, leading to liquidation. The liquidator alleged that the State Bank of India (SBI) had taken custody of mortgaged assets and frozen the Corporate Debtor's account, hindering the liquidation process.

The Applicant contended that the Respondent (SBI) had locked the factory premises and frozen the Liquidation Account, impeding the liquidator's duties. The Respondent argued that a fire incident had occurred at the factory, leading to insurance claims and subsequent transfer of the amount to the bank account. The Respondent denied freezing the account, stating regular payments were made.

The Tribunal analyzed the ownership of the insurance claim amount, determining it belonged to the Respondent Bank due to the mortgaged assets. As the Respondent sought to realize its security interest independently, the Tribunal held that all incomes and claims, including the insurance claim, were related to the Respondent Bank. The Tribunal directed the liquidator to provide details of remaining assets for disposal to ascertain the liquidation cost and professional fees.

The judgment partly allowed the Miscellaneous Application, instructing the liquidator to record remaining assets and their values for cost determination. The frozen account was not to be disturbed until further instructions, and the SBI was directed to provide the bank account statement to the liquidator for review. The SBI was also instructed to update the Tribunal on the liquidation progress for future actions.

In conclusion, the Tribunal's decision addressed the issues of asset ownership, account freezing, and liquidation cost determination, providing directions for the parties involved to ensure a smooth liquidation process and fair resolution of financial matters.