The Bombay High Court has held that an application made for withdrawal of an amount deposited with the court does not amount to a suit/ proceeding/ execution within Section 14 of the IBC and therefore, the party that deposited the amount cannot oppose such an application merely because it is undergoing moratorium.
In his order, Justice G.S. Patel has clarified that such amount is considered to be placed beyond the reach of either party and therefore, it is not 'the property' of either party, pending adjudication as to entitlement by the Court.
The observations were made while disposing of an application for withdrawal filed by Nahar Builders against an amount of Rs. 8 crores, deposited by the Respondent HDIL with the Prothonotary & Senior Master of the high court.
The said amount was deposited pursuant to an arbitral award in favour of the Petitioner, and the application for leave to withdraw the deposited amount of Rs. 8 crores was filed before the high court by Nahar Builders after the time for the challenge to that Award had passed.
This application was opposed by HDIL stating that it was undergoing moratorium in view of the insolvency proceedings under the IBC Code and that the amount of Rs. 8 crores deposited with the Court was 'the property of HDIL' within the meaning of Section 14 of the IBC.
Refuting this argument, the court held that "the provisions regarding a moratorium cannot possibly apply to such cash deposits made in the Court". It said,
"The application for withdrawal cannot be conceivably be considered a suit, proceeding or execution within the meaning of Section 14(1)(a)."
The court clarified that once an amount is deposited with the Court, it is placed beyond the reach of either party without permission of the Court which cannot be accessed, pending adjudication as to entitlement by the Court.
"Once the Arbitrator held that it was Nahar Builders that was entitled to this amount, and that award became enforceable as a decree of this court, then no question remained of the amount being claimed by HDIL. In another manner of speaking, from the time the deposit was made until the time withdrawal is ordered, that amount is not the property of either party to the dispute," Justice Patel held.
"The provisions regarding a moratorium cannot possibly apply to such cash deposits made in this Court… money has no colour. Once it is deposited in Court no party can automatically claim any right to it without an adjudication by a Court."
With these observations, the Prothonotary & Senior Master was directed to transfer the amount to the Petitioners.
"Since there is an Award in favour of Nahar Buidler of this amount plus interest, clearly the withdrawal of this amount and accrued interest will be in partial or perhaps even complete satisfaction of Nahar Builders' award," the court lastly held.
Dhaval Vussonji & Associates was represented by Dhaval Vussonji, Managing Partner, Sonam Mhatre, Partner and Tejas Shah, Associate.
Case Title: Nahar Builders Ltd v. Housing Development and Infrastructure Ltd.
Case No.: Comm Arbitration Petition No. 74/2017
Quorum: Justice GS Patel
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