2019 (12) TMI 340 - AT - Insolvency and Bankruptcy

Direction to Liquidator to collect the amount of ₹ 5.95 Crores plus interest accrued thereon from DRT II Chennai for being dealt with under provisions of Section 53 of I B Code - HELD THAT - The Adjudicating Authority failed to take the right of the Appellant of realizing the security interest and sit out of liquidation, under consideration before passing an order of liquidation and assigning the assets of the company to the liquidator. The provisions of Section 52 of the I B code were not complied with. On the perusal of documents it can be ascertained that the corporate debtor gave as security to the appellant bank the sums it had to receive from Southern Railways for such projects so executed. The submission of the Corporate Debtor that the sums deposited by the Southern Railways, into the credit of the account in O.A. No. 131 of 2013 were all receivables from projects for which no loans were taken from the appellant is untenable. Matter remanded back to decide the security interest of the Appellant Bank before the liquidator can be given the assets of the corporate debtor to be dealt with under section 53 of the I B Code.

Issues:
1. Appeal under section 61 (1) of the Insolvency and Bankruptcy Code, 2016 against an order passed by the National Company Law Tribunal, Chennai.
2. Appellant's contention regarding the direction to the Liquidator to collect a specific amount from DRT-II Chennai.
3. Challenge of DRT order by Corporate Debtor in High Court and subsequent directions regarding funds release.
4. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.
5. Order of liquidation due to lack of receipt of Resolution Plan.
6. Interpretation of duties and powers of the Liquidator under the I&B Code.
7. Appellant's claim of security interest and right to liquidate.
8. Compliance with Section 52 of the I&B Code regarding secured creditors' rights.
9. Failure to consider Appellant's right to realize security interest before liquidation.
10. Hypothecation agreement between Appellant bank and Corporate Debtor.
11. Stay of the direction to the liquidator and subsequent tribunal orders.
12. Completed railway projects assigned to the Appellant Bank for security.

Analysis:
1. The appeal was filed against an order directing the Liquidator to collect a specific amount from DRT-II Chennai. The Appellant, a secured Creditor, argued that it had not relinquished its security interest, challenging the sustainability of the direction given by the Adjudicating Authority.
2. The Corporate Debtor challenged a DRT order in the High Court, leading to directions regarding the release of funds. The Appellant Bank had projects assigned for security, and the High Court modified the DRT order to deposit a specific amount with the DRT, without deciding on the merits of the claim.
3. The CIRP was initiated against the Corporate Debtor, leading to the appointment of a Resolution Professional and subsequent liquidation due to the lack of a Resolution Plan.
4. The duties and powers of the Liquidator under the I&B Code were interpreted, emphasizing the need to protect and preserve the assets of the Corporate Debtor during liquidation.
5. The Appellant claimed its security interest and right to liquidate, stating that if the amount deposited with DRT-II was released in its favor, it would move out of the liquidation process without claiming further amounts.
6. The Adjudicating Authority's failure to consider the Appellant's right to realize security interest before liquidation was highlighted, citing non-compliance with Section 52 of the I&B Code regarding secured creditors' rights.
7. The Hypothecation agreement between the Appellant bank and the Corporate Debtor, along with the registration of the charge with the ROC, was crucial in determining the Appellant's security interest.
8. The tribunal stayed the direction to the liquidator and remanded the matter to decide on the security interest of the Appellant Bank before proceeding with the assets of the Corporate Debtor under Section 53 of the I&B Code.

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