2024 (11) TMI 482 - AT - IBC

Refund of amount deposited as part of a settlement under the MoU - maintainability of Application filed by the Appellant under Section 60(5) of the Insolvency and Bankruptcy Code - HELD THAT - From the facts brought on the record it is clear that insofar as dues of JDECL is concerned 12A Application was filed which was allowed by the Adjudicating Authority approving the 12A and the CIRP of JDECL thus came to be closed. Entire debt of the Financial Creditor with JDECL was Rs.3 Crores which CIRP stood closed and entire debt also discharged. MoU also indicates that Rs.25 Lakhs was to be paid with regard to debt of Corporate Debtor on execution of MoU and rest of the payments were made within 4 years as per the schedule given in revised MoU as noted above. No further payment with regard to dues of Corporate Debtor could be paid since the Resolution Plan could not be approved by the Adjudicating Authority although CoC has approved the Resolution Plan for the Corporate Debtor. The Adjudicating Authority has returned a finding that Application was not maintainable under Section 60(5) which findings have been questioned before this Tribunal by the Counsel for the Appellant and are supported by submission of Counsel for the Respondent. In the facts of the present case we are of the view that Application filed by Appellant was maintainable under Section 60(5)(c) since the questions arose out of are in relation to the Insolvency Resolution of the Corporate Debtors UCL and JDECL - out of Rs.3, 25, 00, 000/- amount of Rs.3 Crores was paid to clear the debt dues of JDECL whose CIRP stood closed by allowing the Application under Section 12A. Thus the CIRP was successfully closed of JDECL by payments of the entire debt there is no question of refund of amount out of Rs.3 Crore which culminated in the closure of the CIRP of JDECL. Promoter/Director who succeeded in closure of the CIRP on payment of entire dues cannot be heard in saying that although CIRP is closed but amount paid to the CoC be refunded to them. The amount of Rs.3, 25, 00, 000/- consist of two payments (i) Rs.3 Crores for 12A Application under JDECL and Rs.25 Lakhs for approval of the Plan of UCL. The CIRP of JDECL having been closed by allowing 12A Application the said amount becomes non-refundable. The Appellant which is none else then entity brought into existence by Promoter/Directors and investors to resolve the debt of JDECL and Corporate Debtor cannot take double benefit i.e. (i) closing of CIRP of JDECL by satisfaction of the entire debt and asking again the refund of the amount which was paid for closure of CIRP of JDEC. The prayer of the Appellant thus to refund amount of Rs.3 Crores is dishonest unjust and has rightly been rejected. However the amount of Rs.25 Lakhs which was paid on signing of the MoU and the approval of the Resolution Plan of Corporate Debtor could not take place we are of the view that amount of Rs.25 Lakhs needs to be refunded to the Appellant by the Financial Creditors Respondent No. 2 herein. The Impugned Order of the Adjudicating Authority dated 26.07.2022 need to be modified only to the extent that the amount of Rs.25 Lakhs which was paid by the Appellant on signing of MoU dated 07.08.2020 towards Resolution Plan of Corporate Debtor need to be refunded to the Appellant. Rest of the Order of the Adjudicating Authority is affirmed - appeal allowed in part.

Summary

Issues Involved:

1. Whether the Appellant is entitled to a refund of Rs. 3.25 Crores deposited as part of a settlement under the MoU.
2. Whether the Application filed by the Appellant under Section 60(5) of the Insolvency and Bankruptcy Code was maintainable.
3. Whether the Adjudicating Authority erred in imposing a cost of Rs. 1 Lakh on the Appellant.
4. Whether the Adjudicating Authority's finding of collusion in the Application was justified.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Rs. 3.25 Crores:

The Appellant sought a refund of Rs. 3.25 Crores deposited in a no-lien account as part of a settlement under a revised Memorandum of Understanding (MoU) dated 07.08.2020. The MoU was aimed at resolving the debts of the Corporate Debtor (UCL) and a related entity, JDECL. The MoU specified that Rs. 3 Crores was for the full and final settlement of JDECL's dues, and Rs. 25 Lakhs was for the Corporate Debtor's resolution plan. The CIRP of JDECL was closed following a Section 12A application, which was allowed by the Adjudicating Authority, and the entire debt of Rs. 3 Crores was discharged. The Tribunal found the Appellant's request for a refund of Rs. 3 Crores dishonest and legally impermissible, as the CIRP of JDECL had been closed by satisfying the entire debt. However, the Tribunal held that the Rs. 25 Lakhs paid for the Corporate Debtor's resolution plan should be refunded, as the plan could not be approved due to the non-deposit of the Performance Security by the Resolution Applicant.

2. Maintainability of the Application under Section 60(5):

The Tribunal considered whether the Application filed by the Appellant was maintainable under Section 60(5) of the Insolvency and Bankruptcy Code. It concluded that the Application was maintainable, as it involved questions arising out of or in relation to the insolvency resolution of the Corporate Debtors, UCL and JDECL. The Tribunal noted that the issues were related to the insolvency process and the MoU, which was part of the resolution efforts.

3. Imposition of Cost of Rs. 1 Lakh:

The Adjudicating Authority had imposed a cost of Rs. 1 Lakh on the Appellant, finding the Application to be collusive and filed at the behest of the Promoters of the Corporate Debtor. The Tribunal did not specifically address the imposition of costs in its judgment, but by modifying the order to allow the refund of Rs. 25 Lakhs, it implicitly acknowledged that the Appellant had a legitimate claim to that extent.

4. Finding of Collusion:

The Adjudicating Authority found the Application to be a collusive effort by the Appellant, who was formed by the Promoters/Directors of UCL and JDECL. The Tribunal noted that the Appellant was indeed an entity created by the Promoters for investment purposes in the resolution process. However, it did not explicitly address the finding of collusion in its final order, focusing instead on the entitlement to the refund of Rs. 25 Lakhs.

Conclusion:

The Tribunal modified the Adjudicating Authority's order to the extent that the Rs. 25 Lakhs paid on signing the MoU for the Corporate Debtor's resolution plan should be refunded to the Appellant. The rest of the order, including the closure of JDECL's CIRP and the non-refund of Rs. 3 Crores, was affirmed. The appeal was thus partly allowed, with the Financial Creditor directed to refund Rs. 25 Lakhs to the Appellant within a month. Each party was ordered to bear its own costs.