Bank Cannot Hold OTS Earnest Money Once It Accepts Resolution Plan: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has held that once a bank accepts full consideration under an approved resolution plan and issues a No-Dues Certificate, it cannot later claim any right over additional funds or assets belonging to the Corporate Debtor. A coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar, in an order dated 5 December 2025, held that Bank of India's claim of having a right to appropriate the Rs 1.51 crore deposited as earnest money for a proposed One-Time Settlement (OTS) could not survive once the Corporate Debtor Pranav Constructions System Pvt Ltd entered insolvency and the moratorium took effect. “Even assuming that appropriation under OTS took place, once the Bank accepted full consideration under the Resolution Plan and issued a No-Dues Certificate, the Bank is estopped from asserting any independent rights over additional money belonging to the Corporate Debtor,” the tribunal observed. The dispute arose during the post-approval phase of the resolution plan submitted by J Kumar Infraprojects Ltd, the Successful Resolution Applicant (SRA) for Pranav Constructions. The SRA sought release of Rs 1.51 crore lying in a no-lien account maintained with Bank of India. The amount had been deposited between February and March 2021 as earnest money for an OTS that was never completed, as the Bank did not proceed with it after commencement of CIRP. Although the Bank retained the money in a no-lien account, it had not appropriated it before Pranav Constructions was admitted into CIRP on 11 March 2022. J Kumar Infraprojects argued that Bank of India had already received its full settlement of over Rs 20.80 crore under the approved resolution plan and had issued a No-Dues Certificate in April 2024, confirming that no further amount remained payable. The SRA contended that the Bank could not revive pre-CIRP arrangements or retain any part of the Corporate Debtor's funds once the resolution plan became binding on all stakeholders. The tribunal agreed, reiterating that after the commencement of insolvency proceedings, any attempt to adjust, recover, or retain money belonging to the debtor is barred, irrespective of earlier commercial arrangements. It held that even if the Bank believed it had a right under the proposed OTS, such a right could not be exercised after the moratorium. “Since, Bank of India has accepted the plan, voted in favour of it and issued a No-Dues Certificate. Having obtained full consideration, it could not have appropriated the amounts under no lien account after commencement of CIRP in view of express provision under Section 14,” the tribunal noted. The tribunal also clarified that two fixed deposits of Rs 55 lakh and Rs 1.08 crore were created by the SRA during CIRP to safeguard provident fund and gratuity dues of the Corporate Debtor's employees. As the competent authorities had not yet verified the exact liabilities, these deposits were required to remain earmarked until the dues were fully quantified and discharged under the resolution plan. The tribunal partly allowed the application and directed Bank of India to release the entire Rs 1.51 crore, along with accrued interest, to the SRA within four weeks. It permitted the Bank to retain the two fixed deposits until provident fund and gratuity dues were conclusively determined and settled. Case Title: J Kumar Infraprojects Limited (Applicant 1) and Ors vs. Bank of India & Ors Case Number: IA 2747 of 2025 in CP(IB)/3923(MB)/2019 For Applicants: Advocate Amir Arsiwala For Respondents : Advocate Prajakta Menezes for J Kumar Infraprojects; Advocate Rakesh K Gupta for Odette EngineersClick Here To Read/Download Order

Bank Cannot Hold OTS Earnest Money Once It Accepts Resolution Plan: NCLT Mumbai

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