Liquidator Can Recover Amount Which Belongs To Corporate Debtor By Filing Application U/S 60(5)(c) Of IBC: NCLAT

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that liquidator can recover the amount of the corporate debtor by filing an application under section 60(5)(c) of the code before the NCLT as it is a matter which arises solely from or which relates to the insolvency of the Corporate Debtor. Brief Facts This appeal has been filed against an order passed by the NCLT, Mumbai by which the interlocutory aplication filed by the liquidator to recover the amount of the corporate debtor was allowed. The Corporate Debtor EPC Construction (India) Ltd. [earlier known as Essar Projects (India)] was awarded a contract by GSPL India Gasnet Ltd. (“GIGL”) on 18.01.2017. A Performance Bank Guarantee (“PBG”) amounting to Rs.21,17,30,000/- was to be submitted by the Corporate Debtor (“CD”) for working of the contract. The Corporate Debtor after discussing with the Appellant, wrote a letter dated 08.02.2017 requesting the Appellant to arrange for issuance of the PBG from their existing line of credit with Axis Bank. The CD undertook to replace the PBG. In pursuance of the request made by the CD, Axis Bank provided PBG by marking a lien on the FD against 100% margin on two FDs. Time to time, payments were made by the corporate debtor to the appellant. On 18.01.2018, the CD wrote to the Appellant that net amount of Rs.18.10 crores has been paid in lieu of the lien marked by Axis Bank on two FDs against PBG issued in favour of the CD. No further amount could be paid by the CD, since Corporate Insolvency Resolution process (“CIRP”) commenced against the CD vide order dated 20.04.2018. The contract awarded in favour of the Appellant was completed and PBG was released by GIGL and surrendered by the CD to the Axis Bank on 24.03.2021. Consequent to surrender of the PBG, the Bank also cancelled the lien marked on the FDs submitted by the Appellant. In view of the surrender of the PBG, the amount of margin money, which was deposited of Rs.18.10 crores to the Appellant, towards the issuance of PBG in favour of the CD, was required to be released to the account of the CD. The CD was put into liquidation by order dated 07.05.2021 by the Adjudicating Authority. The Liquidator after surrender of the PBG issued a Legal Notice dated 09.07.2022 to the Appellant calling upon the Appellant to release the amount of Rs.18.10 crores to the CD, as the PBG with lien on Appellant FD stand returned and PBG was also cancelled.No reply was given An IA was filed by the Liquidator which came to be allowed in which the Adjudicating Authority held that it was obligation of the Liquidator to take steps to return of the said amount to the CD. It was held that in the reply, the Appellant has not disputed its liability to pay back the amount, hence, there are no issues, which need adjudication by the Civil Court. The appellant was directed to return the amount. Contentions: The appellant submitted that Liquidator was free to initiate proceedings for recovery in a competent Court as per Section 35(1)(k) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”) and Liquidator could not have filed the Application before the Adjudicating Authority and should have taken recourse to appropriate proceedings in a competent Court. It was further submitted that recovery of debt, even if admitted, cannot be ordered under Section 60, sub-section (5) of the IBC. There is no debt due and payable by the Appellant to the Corporate Debtor. The Adjudicating Authoruty has only summary jurisdiction which cannot conduct a detailed examination of the factual disputes. Per contra, the respondent submitted that the amount under the PBG ought to have been returned, which was the amount belonged to the CD and that the Liquidator, who has duty to protect the assets of the CD was fully entitled to file an Application seeking return of the amount to the CD, which belonged to it. The Application was fully maintainable before the Adjudicating Authority. It was submitted that there being no dispute having been raised to the transactions in question, the Adjudicating Authority has rightly directed the amount be returned to the CD, which amount belonged to the CD. It was further submitted that there were dues on the CD, amounting to Rs.16.35 crores, is a concocted and dishonest story. In the CIRP of the Corporate Debtor, the Appellant neither filed any claim before the RP or before the Liquidator and had any dues of the Appellant were there on the CD, there was no impediment on the Appellant for filing its claim. Decision of The Tribunal: In Embassy Property Development Pvt. Ltd. vs. State of Karnataka,2020 the Supreme Court has held that “in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that...

Liquidator Can Recover Amount Which Belongs To Corporate Debtor By Filing Application U/S 60(5)(c) Of IBC: NCLAT

Mohd Malik Chauhan

Tags