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TMI Blog2022 (5) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... t of expenses incurred by the liquidator in securing m.v. Tag-22 has been ordered by the Adjudicating Authority which has to be paid by the Appellant. The actions relating to protection and preservation of two vessels Tag 22 and Tag 6 were taken by the liquidator during the period 3rd to 5th October, 2019, as is clear from the e-mails exchanged between the charge holders of two vessels, namely United Bank of India and Hero Fincorp and the liquidator (emails attached at pp. 45-48 of appeal paperbook) and also from the tax invoice submitted by K.E. Salvage (attached at pg. 49 of the appeal paperbook). Therefore, the action relating to securing the two vessels was taken much after the Appellant had obtained order from the Bombay High Court under its Admiralty Jurisdiction on 18.3.2019 and 23.4.2019 and therefore the vessel Tag 22 had become the asset of the Appellant. Thus, it is clear the any action taken thereafter for securing the vessel Tag 22 was undertaken by the liquidator with the explicit consent of the Appellant/Hero Fincorp in pursuance of Hero Fincorp s interest in protecting and preserving its asset Tag 22, and the action being taken for liquidation of the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted (in short Hero Fincorp ) which had charge of vessel Tag 22, that two vessels, namely Tag 6 and Tag 22, which are assets in the liquidation estate, have come close to each other and may make contact which might result in potential damage to the vessels. This email was also sent to United Bank of India, which had the charge of vessel Tag 6. The liquidator also mentioned in the email that he has reached out to a salvage company, namely K.E. Salvage for securing the two vessels for their protection and preservation and asked it to provide an estimate for the proposed job. The Appellant has further submitted that vide e-mail dated 3.10.2019 it communicated to the liquidator its willingness to contribute funds for securing the vessel Tag 22 and also requested for starting the job of securing the vessels. After completion of the securing operation, K.E. Salvage submitted tax invoice dated 9.10.2019 amounting to Rs. 14,75,000 (Rupees Fourteen Lakhs Seventy Five Thousand only) for shifting and re-anchoring the two vessels during the period starting from 3rd to 5th October 2019. On being requested to provide details of the job undertaken, K.E. Salvage provided relevant details vide e-ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertake the securing operation since it had no technical expertise or knowledge of shipping activities and also agreed to contribute its share in the expenses so incurred. He has further argued that the Appellant indicated its intention to exit from the liquidation process vide notice dated 9.10. 2019 in view of the fact that it had obtained statutory remedy for enforcement of the mortgage for the vessel under its charge by invoking the Admiralty Jurisdiction of the Hon ble Bombay High Court and the Hon ble Andhra Pradesh High Court but the said notice did not elicit any response from the liquidator. 6. The Learned Counsel for Appellant has further contended that it was therefore constrained to prefer MA No. 3656 of 2019 seeking directions of the Adjudicating Authority for permission to exit from the liquidation process and keep vessel Tag 22 out of the liquidation estate, and also for including the expenses incurred in securing the two vessels for their preservation and protection in the liquidation expenses. His argument is that since the said expenses were incurred after the liquidation commencement date, it cannot form part of the CIRP expenses and therefore it should be incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered on 23.4.2019 and, therefore, the expenses incurred for securing the specific charge Tag 22 of the Appellant have to be borne by the Appellant. The Learned Counsel for Appellant has adverted to para 8 of the Impugned Order to claim that the Appellant had, through e-mail dated 4.10.2019, agreed to reimburse 50% of the total expenses and this fact is not disputed by the Appellant and, therefore, such expenses should not form part of CIRP or liquidation process expenses. 9. The Learned Counsel for Respondent/Liquidator has urged that, in accordance with the order given by the Adjudicating Authority in MA No. 3656 of 2019, the Appellant should not be allowed to exit from the liquidation process until it clears its proportionate CIRP costs and also pays the expenses incurred by the liquidator in securing its charge vessel Tag 22. 10. The provisions in the Liquidation Process Regulations that are relevant to this case are as follows: 16. Submission of claim (1) A person, who claims to be a stakeholder, shall submit its claim, or update its claim submitted during the corporate insolvency resolution process, including interest, if any, on or before the last date mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted that the liquidator, who is responsible for preservation and protection of the assets in the liquidation estate, exchanged email communications starting with an e-mail dated 2.10.2019 (emails attached at pp.45-48 of the appeal paperbook) to both Appellant/Hero Fincorp and United Bank of India, under whose charges the vessels Tag 22 and Tag 6 were held respectively, that the two vessels have come close to each other and may come into contact leading to potential damage, whereupon vide e-mail dated 3.10.2019 (attached at pg. 45 of the appeal paperbook) the Appellant communicated its unreserved willingness to contribute funding needed for securing Tag 22 and also requested the liquidator to undertake the securing operation. Again, vide e-mail dated 4.10.2019, the Appellant expressed its willingness to contribute 50% of the funds required for securing the two vessels Tag 22 and Tag 6. The order portion in the Impugned Order is as follows:- The application be and the same is allowed in part. The applicant may opt out of the liquidation estate u/s 52 of the Code subject to clearance of proportionate CIRP costs and payment of the expenses incurred by the liquidator in securing m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of India and Hero Fincorp and the liquidator (emails attached at pp. 45-48 of appeal paperbook) and also from the tax invoice submitted by K.E. Salvage (attached at pg. 49 of the appeal paperbook). Therefore, the action relating to securing the two vessels was taken much after the Appellant had obtained order from the Bombay High Court under its Admiralty Jurisdiction on 18.3.2019 and 23.4.2019 and therefore the vessel Tag 22 had become the asset of the Appellant. Thus, it is clear the any action taken thereafter for securing the vessel Tag 22 was undertaken by the liquidator with the explicit consent of the Appellant/Hero Fincorp in pursuance of Hero Fincorp s interest in protecting and preserving its asset Tag 22, and the action being taken for liquidation of the Corporate Debtor is under the provisions of the IBC. Moreover, the security interest of the Appellant in its charge vessel Tag 22 is being realised under section 52(1)(b) of the IBC. Therefore, we do not think it is relevant in this case that the liquidator s vendor K.E. Salvage should await orders of the Hon ble Bombay High Court for payment of its claim from the sale proceeds of vessel Tag 22. We are of the clear o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by it to realise its charge in Tag 22. We, therefore, do not find any error in the Impugned Order regarding payment to be made by the Appellant, of its proportionate share in the expenses incurred in securing vessel Tag 22 alongwith securing vessel Tag 6. 19. We are also of the view that even after the salvage operation undertaken during 3rd - 5th October, 2019, the Appellant has not only refused to pay the cost of securing and protecting the vessel Tag 22 and has engaged the liquidator in protracted litigation. We note that the action taken by the liquidator in protecting and preserving Tag 22 was for the benefit of the Appellant and the litigation undertaken by the Appellant caused expenditure which has ultimately cut into the value of the liquidation estate, thereby affecting the financial interest of the creditors/stakeholders. We, therefore, order that the Appellant shall pay a cost of Rs. One Lakh as litigation expenses to the liquidator, which shall go into the liquidation estate. Both, the proportional share of the Appellant in securing the two vessels Tag 22 and Tag 6 and the litigation cost shall be paid by the Appellant within 15 days of this judgment. 20. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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