The National Company Law Appellate Tribunal, Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Mr. Kanthi Narahari (Technical Member), while adjudicating an appeal filed in Beauty Etiole Pvt. Ltd. v C. Sanjeevi & Ors, has held that the Resolution Professional is only authorized in law to exercise control over Bank Accounts operated by the Corporate Debtor and not otherwise.
Beauty Etiole Pvt. Ltd. ("Appellant") is a Real Estate Developer, who had entered into a Joint Development Agreement with the Respondent No.3 (Corporate Debtor) for constructing a multi-storeyed housing complex comprising of 557 Flats on 4.23 Acres of land at Perungudi, Chennai. In this connection, the Appellant had borrowed money from the Respondent No.2 for the project against a secured mortgage.
On 16.06.2021, the Resolution Professional had issued a letter to the ICICI Bank and the Respondent No.2 for freezing four 'Bank Accounts' belonging to the Appellant and utilizing the funds for the aforesaid Project. The NCLT Bench had also passed an order dated 01.11.2021 permitting payment of salary, loan interest and suppliers' dues from accounts which included the Appellant's bank account.
The Appellant filed an appeal before the NCLAT challenging the order dated 01.11.2021 passed by NCLT Chennai Bench.
Contentions Of The Appellant
The Appellant contended that the Resolution Professional had issued the Letter dated 16.06.2021 under the mistaken belief that the concerned Bank Accounts belonged to the Corporate Debtor. Reliance was placed on Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016, which states that the Interim Resolution Professional can take control and custody of these assets over which the 'Corporate Debtor' has ownership rights, as recorded in the balance sheet of the Corporate Debtor or its information, utility for the depository of securities or any other registry that records their ownership of assets etc.
It was submitted that the Resolution Professional did not have any authority to freeze the four Bank Accounts of the Appellant who was a third party.
1. Whether Resolution Professional has any authority in law to freeze Bank Account belonging to a third party?
Decision Of The NCLAT
The NCLAT observed that the "Resolution Professional has 'no authority' in law to exercise his power over the Four 'Bank Accounts' and as a consequent thereof, he cannot freeze these 'Bank Accounts' in the considered opinion of this 'Tribunal'."
The NCLAT Bench held that the Resolution Professional, in law has only an authority to exercise control over Bank Accounts operated by the 'Corporate Debtor' and not otherwise. Accordingly, the order dated 01.11.2021 was set aside.
Case Title: Beauty Etiole Pvt. Ltd. v C. Sanjeevi & Ors., Company Appeal (AT) (CH) (Ins.) No. 316/2021
Counsel For Appellant : Mr. Ramakrishnan Viraraghavan, Senior Counsel Mr. Chetan Sagar, Advocate
Counsel For Respondents : Ms. M. Savitha Devi, Advocate for R2