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2022 (8) TMI 1116 - AT - Insolvency and BankruptcySeeking a direction to the Insolvency Resolution Professional (IRP) to treat the Applicant s Claim as Assets in Trust - Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016 - whether the amount collected by the Corporate Debtor on behalf of the Carrier is essentially goods held in trust which can be recovered by the Appellant herein who stood subrogated? - HELD THAT - Clause 7.4 is invoked when the Agent becomes the subject of Bankruptcy Proceedings, or becomes subject to a similar legal process. Resultantly, any amount due and payable under Clause 7.2 becomes payable from the CIRP date. In the present case, the CIRP commenced on 22.10.2019 and Clause 7.4 of the Agreement becomes operable from the said date due to which all amounts collected by the Corporate Debtor on behalf of the Carrier is crystallised as a debt, due and payable to IATA as on 22.10.2019 - The phrase notwithstanding the normal remittance procedure under this Agreement indicates that Clause 7.4 of the Agreement overrides Clause 7.2 and therefore, the contention of the Learned Counsel for the Appellant that Clause 7.4 of the Agreement is unworkable as on the date of passing of the Impugned Order i.e.,16.12.2021, is unsustainable. Clause 7.2 of the Agreement does not declare any trust property with any certainty as the subject matter of the trust is defined as all monies collected by the Agent from Transportation and Ancillary Services sold under this Agreement - It is relevant to note that there was no prior demarcation as to which of the amounts were received under the terms of the Agreement and which amount was received on account of other transactions of the Corporate Debtor. In the absence of any separate trust account and specifically in the absence of any specific segregation/demarcation of the amount collected by the Corporate Debtor under the terms of the Agreement, no trust can be said to have come into the existence in favour of the Carrier in the present case as the goods that are said to be held in trust is the Money/amounts collected by the Corporate Debtor. There is no documentary evidence on record to establish that any steps were taken for creation of any separate trust account by the parties to the Agreement - it cannot be construed that a trust could have been created by IATA itself under Clause 7.2 of the Agreement as it cannot be presumed that all individual IATA Members have intended to create this trust under this Clause. At the cost of repetition, the contention of the Appellant Counsel that Clause 7.4 of the Agreement was unworkable , is untenable. Merely because Clause 7.2 of the Agreement states that the property of the Carrier must be held by the Agent in trust over the Carrier does not lead to an understanding that the money in fact is to be held by the Company in trust for the Carrier/IATA. If this is to be strictly interpreted, and if that was the truest intention of the parties, a separate trust account would have been opened to earmark the amounts received by the Corporate Debtor in terms of Clause 7.2 of the Agreement, which in the instant case is admittedly not done - There should be harmonious interpretation of both the Clauses and it is held that the Adjudicating Authority has rightly relied on Clause 7.4 of the Agreement which states that from the moment the Corporate Debtor goes into Insolvency, the money held by it on behalf of the Carrier would be crystallized as a debt which is due and payable by the Corporate Debtor and classified the Claim of the Appellant to be an Operational Debt under Section 5(21) of the Code. It is also relevant to mention that Moratorium under Section 14(1)(b) was imposed on 22.10.2019 and recovery of any such money which is in possession of the Corporate Debtor is prohibited. This Appeal fails and is accordingly dismissed.
Issues Involved:
1. Classification of the Appellant's Claim as 'Assets in Trust' under Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016. 2. Applicability of Clause 7.2 and Clause 7.4 of the Passenger Sales Agency Agreement. 3. Determination of the nature of the Appellant's claim as 'Operational Debt' under Section 5(21) of the Insolvency and Bankruptcy Code, 2016. 4. Impact of the Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 on the Appellant's claim. Detailed Analysis: 1. Classification of the Appellant's Claim as 'Assets in Trust' under Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016: The Appellant argued that the amount of Rs. 83,16,80,230/- collected by the Corporate Debtor on behalf of IATA constituted 'Assets held in Trust' as per Section 18(1)(f) of the Code. The Appellant contended that the IRP could not take control of these assets as they were held under trust. However, the Tribunal found that Clause 7.2 of the Agreement did not declare any trust property with certainty, as there was no separate trust account or specific segregation/demarcation of the amounts collected under the Agreement. Therefore, no trust was created in favor of the Carrier, and the explanation to Section 18(1)(f) was not applicable. 2. Applicability of Clause 7.2 and Clause 7.4 of the Passenger Sales Agency Agreement: Clause 7.2 of the Agreement stated that all monies collected by the Agent for transportation and ancillary services sold under the Agreement were the property of the Carrier and must be held in trust. Clause 7.4 stipulated that in the event of bankruptcy or liquidation, all monies due to the Carrier would become immediately due and payable. The Tribunal held that Clause 7.4, a non-obstante clause, overrode Clause 7.2 and became operable from the commencement of the CIRP on 22.10.2019. Thus, the amounts collected by the Corporate Debtor on behalf of the Carrier were crystallized as a 'debt' due and payable to IATA. 3. Determination of the nature of the Appellant's claim as 'Operational Debt' under Section 5(21) of the Insolvency and Bankruptcy Code, 2016: The Tribunal concluded that the amount owed by the Corporate Debtor to IATA was an 'Operational Debt' as defined under Section 5(21) of the Code. The Corporate Debtor was providing services to IATA, and the amounts collected were for the sale of air transportation and ancillary services. The Tribunal noted that the Appellant had initially filed its claim as an Operational Creditor and that the amounts collected were used for transactions with third parties, not just under the Agreement. Hence, the claim was rightly classified as an Operational Debt. 4. Impact of the Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 on the Appellant's claim: The Tribunal held that any payments made to the Appellant would violate the Moratorium imposed under Section 14(1)(b) and Section 14(1)(d) of the Code, which restricts transferring, encumbering, alienating, or disposing of any assets or legal rights of the Corporate Debtor. The Tribunal emphasized that the amounts held by the Corporate Debtor formed part of its cash and bank balance, and any payment to the Appellant would give undue advantage over other creditors. Therefore, no amount could be paid during the Moratorium period. Conclusion: The Tribunal dismissed the Appeal, holding that the Appellant's claim constituted an Operational Debt and could not be treated as 'Assets held in Trust' under Section 18(1)(f) of the Code. The Tribunal upheld the Adjudicating Authority's reliance on Clause 7.4 of the Agreement and the imposition of the Moratorium under Section 14 of the Code.
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