2021 (9) TMI 275 - Tri - Insolvency and Bankruptcy

Refund of amount illegally retained - amounts were given during moratorium period for supply of goods/components - siphoning off proceeds of Corporate Debtor in contravention of Moratorium - contravention of Section 14, 31 and Section 74 of IBC - section 60(5) of the Insolvency Bankruptcy Code, 2016 - Maintainability of application under Rule 11 of the NCLT Rules, 2016 or under Section 60(5) of IBC, 2016 - HELD THAT - The provisions of Section 60(5) (a) (b) of IBC, 2016 are not applicable. Section 60(5)(c) of IBC, 2016 states that any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code shall be considered by the Adjudicating Authority - Admittedly, in the present matter, the Resolution Plan has already been approved. This period of 180 days may be extended under Section 12 of IBC, 2016 and in terms of the amended provision of Section 12 of IBC, 2016, the total period of insolvency resolution process is 330 days, which means that the period so referred to in Section 5(14) of IBC, 2016 is subject to the extension made under Section 12 of IBC, 2016 or when the Resolution Plan is approved by the Adjudicating Authority - in the case in hand, the Resolution Plan has already been approved by the Adjudicating Authority on 02.04.2019. Therefore, no insolvency proceeding is pending before the Adjudicating Authority. Maintainability of application under Rule 11 of NCLT Rules, 2016 - HELD THAT - During the pendency of any matter before the Tribunal, when there is no specific provision under the Act/Code is given only then the Tribunal may pass order by exercise of its power under Rule 11 of the National Company Law Tribunal Rules to deal with such situation. But herein the case in hand, no such matter is pending after the approval of Resolution Plan by the Adjudicating Authority, therefore, a separate application to deal with a new issue cannot be entertained under Rule 11 of the NCLT Rules, 2016. As per Section 25(1) of IBC, it is the first and foremost duty of the IRP/RP to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. And in order to protect and preserve the assets of the corporate debtor, a separate provision has been made under Section 14(2) of IBC and Sub Section 2A of Section 14 is added w.e.f. 28.12.2019, as per which the supply of essential goods or services of the Corporate Debtor shall not be terminated, suspended or interrupted during the period of moratorium. Even before the insertion of Sub Section 14(2A) there was a provision under Section 14(2) of IBC, which authorised the RP to permit anyone to continue the supply of essential goods or services which is necessary to keep the Corporate Debtor as a going concern. The goods/components were supplied by the respondents on the request of the RP during the moratorium period and the RP has acted as per the provision contained under Section 14(2) of the IBC 2016 - there is no contravention of provisions contained under Section 14 of IBC. Application dismissed.

Summary

Issues Involved:
1. Refund of ?12,30,457/- with interest.
2. Alleged contravention of Sections 14, 31, and 74 of the Insolvency and Bankruptcy Code (IBC), 2016.
3. Maintainability of the application under Rule 11 of NCLT Rules, 2016 and Section 60(5) of IBC, 2016.

Issue-wise Detailed Analysis:

1. Refund of ?12,30,457/- with interest:
The applicants sought a direction for the respondents to refund ?12,30,457/- with interest at 18% per annum, claiming the amount was illegally retained during the moratorium period for the supply of goods/components. The respondents countered that they had an ongoing business relationship with the Corporate Debtor since 2012 and had supplied goods based on mutual understanding. They maintained that the amount was part of a running account and that the Corporate Debtor owed them ?34,07,390/-. The Tribunal observed that the goods/components were supplied by the respondents on the request of the Resolution Professional (RP) during the moratorium period, and the RP acted as per the provisions of Section 14(2) of IBC, 2016. Therefore, there was no requirement for the respondents to refund the amount.

2. Alleged contravention of Sections 14, 31, and 74 of IBC, 2016:
The applicants contended that the respondents contravened Sections 14, 31, and 74 of IBC by siphoning off proceeds during the moratorium period. The respondents argued that they continued to supply essential goods to keep the Corporate Debtor as a going concern, as requested by the RP. The Tribunal referred to Sections 14(2), 14(2A), and 25 of IBC, which mandate the RP to preserve and protect the assets of the Corporate Debtor, including continued business operations. The Tribunal found that the RP's actions were in compliance with these provisions, and there was no contravention of Sections 14, 31, and 74 of IBC.

3. Maintainability of the application under Rule 11 of NCLT Rules, 2016 and Section 60(5) of IBC, 2016:
The Tribunal examined whether the application was maintainable under Rule 11 of NCLT Rules, 2016 or Section 60(5) of IBC, 2016. The Tribunal noted that Section 60(5) confers jurisdiction to entertain applications related to insolvency resolution or liquidation proceedings. However, in this case, the Resolution Plan had already been approved, and no insolvency proceeding was pending. Therefore, the application under Section 60(5) of IBC, 2016 was not maintainable. Similarly, Rule 11 of NCLT Rules, 2016 could not be invoked as no specific provision under the Act/Code was applicable, and no matter was pending before the Tribunal. Consequently, the application was not maintainable under Rule 11 of NCLT Rules, 2016.

Conclusion:
The Tribunal dismissed both IA/3927/2020 and IA/1356/2021, finding no merit in the applicants' contentions. The respondents' actions were in compliance with the relevant provisions of IBC, and there was no requirement to refund the amount of ?12,30,457/- to the Corporate Debtor.