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2020 (10) TMI 481 - Tri - Insolvency and BankruptcyValidity of unilateral action of appropriation of receivables of the Corporate Debtor deposited in the cash credit account and the working capital account of the Corporate Debtor - Section 14 read with Section 17 and Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The 4th respondent, the State Bank of India in its reply states that they have recalled the loan accounts on 21.03.2017 much before the initiation of the Corporate Insolvency Resolution Process. The State Bank of India further states that the Corporate Debtor does not maintain any current account with this respondent. However, the Corporate Debtor availed various credit facilities which include cash credit from Overseas Vishakhapatnam Branch of State Bank of India In view of the fact that the erstwhile Resolution Professional himself remitted the amounts towards the credit of the cash credit account, this respondent has not violated/contravened provisions of Section 14 and Section 17(1) (d) of the Insolvency and Bankruptcy Code, 2016. In respect to the claim of ₹ 20.52 crores as on 13.07.2017 which included fund based outstanding of ₹ 1.46 crore and non-fund-based outstanding of ₹ 19.06 crore. The fund-based facilities have been paid off by the company management i.e. the erstwhile Resolution Professional. Hence, it is incorrect to states that the respondent has appropriated the fund towards the loan account during the Corporate Insolvency Resolution Process. Since, it was a unilateral act of the erstwhile Resolution Professional who has paid during the moratorium period. So, this respondent categorically states that they have not violated the provisions of Section 14 and 17 of the Insolvency and Bankruptcy Code, 2016. However, the erstwhile Resolution Professional has inadvertently paid the loan amount. During the moratorium period various payments towards non-fund and fund-based accounts of the respondents were credited by the erstwhile Resolution Professional. Hence, these payments ought to be reversed as receivables of the Corporate Debtor. The meeting to sort out the issue between them have failed. All banks are directed to reverse the due amounts - application allowed.
Issues:
Unilateral appropriation of receivables by banks during Corporate Insolvency Resolution Process. Analysis: 1. The Resolution Professional filed an application under Section 14, 17, and 60(5) of the Insolvency and Bankruptcy Code against four banks for appropriating receivables of the Corporate Debtor. The NCLT, NCLAT, and Supreme Court upheld the initiation of the Corporate Insolvency Resolution Process and the subsequent Resolution Plan approval. 2. The application aimed to reverse the appropriation of payments made by the banks during the Corporate Insolvency Resolution Process. The respondents claimed that some payments were made by the Resolution Professional and not appropriated towards the loan due of the Corporate Debtor, citing the judgment in "Indian Overseas Bank Vs. Mr. Dinkar T. Venkatsubramaniam." 3. The Adjudicating Authority directed a meeting between the Resolution Professional and the respondents to reconcile the outstanding amounts. The lenders had credited amounts towards the loan accounts of the Corporate Debtor during the CIRP period. 4. The banks provided details of the outstanding balances as per the claim form, showing that amounts were credited towards the loan accounts of the Corporate Debtor during the CIRP period. 5. The Central Bank of India, Bank of India, and State Bank of India presented their positions regarding the outstanding amounts and the actions taken during the CIRP, emphasizing the non-appropriation of funds by the banks. 6. The Resolution Professional submitted a table indicating the amounts to be reversed by each bank, which was not agreed upon during the meeting. The Adjudicating Authority directed the banks to reverse specific amounts credited during the moratorium period. 7. The Order directed Central Bank of India, Syndicate Bank, Bank of India, and State Bank of India to reverse due amounts within five weeks, based on the reconciliation of outstanding balances and payments made during the Corporate Insolvency Resolution Process.
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