Bank Of Baroda vs Deepa Venkat Ramani, R.P & Anr

[Arising out of Order dated (03.05.2019) passed by National Company Law Tribunal, Single Bench, Chennai in MA/69/2019 in CP/233/IB/2017]

Company Appeal (AT) (Insolvency) No. 632 of 2019

IN THE MATTER OF:

Bank of Baroda ...Appellant

Versus

Mrs. Deepa Venkat Ramani Anr ....Respondents

Resolution Professional

Present: For Appellant : Ms. Praveena Gautam with Ms.Sweety Pandey and Mr. Pawan Shukla, Advocates

For Respondents : Mr.Rajiv Shankar Dvivedi, Advocate for R-1. Mr. K.S. Madhavan, with Ms.Swati Bansal, Mr.Ankit Gosain, CJ Sathish Kumar, Advocates for R2 along with Liquidator in person. Ms.Usha Singh and Ms.Nidhi Saini, Advocates for Intervener

JUDGEMENT

(4th December, 2019)

Dr. Ashok Kumar Mishra, Member Technical

1. The present Appeal is preferred under section 61 (1) of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as 'the I&B Code, 2016') against the

impugned order dated 03.05.2019 passed by National Company Law Tribunal, Single

Bench, Chennai( hereinafter referred to as Adjudicating Authority ) under Section 33

of the I& B Code in MA/69/2019 in CP/233/IB/2017.

Company Appeal (AT) (Insolvency) No. 632 of 2019 2

2. The issue raised by the Appellant in this appeal is that the direction given by

the Adjudicating Authority (National Company Law Appellate Tribunal ), Single Bench

Chennai in terms of the Impugned order dated 03.05.2019 to the extent that the

Liquidator shall collect the amount of Rs 5.95 Crores plus interest accrued thereon

from DRT -II Chennai for being dealt with under provisions of Section 53 of I&B Code

is unsustainable, as the Appellant- Bank of Baroda is a secured Creditor which has

not relinquished its security interest.

3. The DRT in O.A. No.131/2013 by its order dated 02.08.2019 passed an interim

order giving a direction to the General Manager, Southern Railway, Park Town,

Chennai restraining them from releasing any payment without any further direction

from tribunal in this regard. The Corporate Debtor Challenged the aforesaid order of

DRT, Chennai in W.P. No. 29206 of 2013 before the High Court of Madras. The list of

Railway Project mortgaged to the Appellant Bank were submitted by the Southern

Railway , Chennai and Corporate debtor.

4. The Hon'ble High Court after hearing the parties at length, in W.P. No. 29206 of

2013, vide the order dated 28.11.2013 modified the aforesaid order passed by the

DRT, Chennai to direct the Southern Railway ( Garnishee ) to deposit Rs. 7.50 Crores

out of the funds, that will be released after completion of measurement and other

formalities with the DRT-I which was later transferred to DRT - II for want of territorial

jurisdiction. No order relating to the merits of the claim was passed.

5. Thereafter, the Appellant submits that M/s. L&T Finance Ltd.( Financial

Creditor) filed an application under section 7 of the I & B Code, against the Corporate

Debtor to initiate the Corporate Insolvency Resolution Process (CIRP). The

Adjudicating Authority vide its order dated 21.11.2017 admitted the said application

Company Appeal (AT) (Insolvency) No. 632 of 2019 3

and initiated the Corporate Insolvency Resolution process against the Corporate

Debtor by appointing the IRP. The Adjudicating Authority vide order dated 30.05.2018

appointed Mrs. Deepa Venkatramani as Resolution professional on application filed by

one of the directors and promoters.

6. The Adjudicating Authority passed an order of liquidation of Corporate Debtor

due to lack of receipt of Resolution Plan under Section 30 (6) of the I&B Code, 2016.

X. "As regards the issue raised by the resolution Professional; in the

Additional Affidavit filed on 01.02.2019, it is noted that section 35 (1) (b) and

(d) of the I&B Code, 2016 contemplates that it is the duty of the Liquidator to

take into his custody or control all the assets, property, effects and actionable

claims of the corporate debtor and to take such measures to protect and

preserve the assets and properties of the corporate Debtor as he considers

necessary. A cursory glance of the Additional Affidavit filed by the Applicant

/ Resolution professional reveals that the amount of Rs 7.50 Crores

deposited with the DRT - 1 Chennai is transferred to DRT forms part of an

estate of the assets of the corporate Debtor for the purpose of Liquidation as

per Section 36 (3) of the code."

7. The Appellants submits that the appellant never relinquished its right or

security interest to liquidate. The Appellant further submitted that in case the said

amount deposited with DRT - II in the OA filed by the bank is released in its favor

towards the claim filed by them, the appellant bank shall move out of liquidation

process without claiming any further amount from the company.

Company Appeal (AT) (Insolvency) No. 632 of 2019 4

8. The Adjudicating Authority erred in determining the security interest of the

Appellant bank pending over the Corporate Debtor before passing an order of

liquidation. The provision of Section 52 of the I&B code enumerates:

Section 52.

(4) A secured creditor may enforce, realize, settle, compromise or deal with the secured

assets in accordance with such law as applicable to the security interest being realised

and to the secured creditor and apply the proceeds to recover the debts due to it.

(5) If in the course of realizing a secured asset, any secured creditor faces resistance

from the corporate debtor or any person connected therewith in taking possession of,

selling or otherwise disposing off the security, the secured creditor may make an

application to the Adjudicating Authority to facilitate the secured creditor to realize such

security interest in accordance with law for the time being in force.

(6) The Adjudicating Authority, on the receipt of an application from a secured creditor

under sub-section (5) may pass such order as may be necessary to permit a secured

creditor to realize security interest in accordance with law for the time being in force.

9. The Adjudicating Authority failed to take the right of the Appellant of realizing

the security interest and sit out of liquidation, under consideration before passing an

order of liquidation and assigning the assets of the company to the liquidator. The

provisions of Section 52 of the I&B code were not complied with.

10. The Corporate Debtor by way of Hypothecation agreement had pledged his assets

to the Appellant bank as Bank Guarantee for availing cash credit of Rs.20 Crores. The

Charge is also registered with the ROC as appearing on the MCA website. Such charge

on the assets of corporate debtor can also be seen in ROC records in "assets Company Appeal (AT) (Insolvency) No. 632 of 2019 5

under charge". Under the said agreement outstanding money, receivables, claims,

bills, contracts, engagements and securities which are due or become due during the

course of business of corporate debtor are furnished as security with the Appellant

bank.

11. The impugned order passed by the Adjudicating Authority to the extent it

directed the liquidator to collect the aforesaid amount with interest accrued thereon

from OA. No. 426 of 2014 on the file of DRT Chennai was stayed on 17.06.2019 by

this Appellate tribunal. On 1.07.2019 this Appellate tribunal directed that the interim

order passed on 17.06.2019 shall continue until further orders.

12. The following are the completed railway projects assigned to Appellant Bank for

security from the list filed by the Corporate Debtor in the Hon'ble High Court -

i. LOA No. W/496/SNK/103/CN (7192) Agmt No. 49/CN/2009 with receivables of

Rs.85 lacs

ii. LOA No.168/2008-09 Agmt. No. 28/2008-09 with receivables of Rs.170 lacs

The project no. 1 herein is also mentioned in the list of completed projects

filed by the Southern Railway in the Hon'ble High Court. The above are the completed

projects whose security was furnished by the Appellate bank and final bill is pending

therein which are submitted in High Court by the Corporate Debtor himself.

13. On the perusal of documents it can be ascertained that the corporate debtor

gave as security to the appellant bank the sums it had to receive from Southern

Railways for such projects so executed. The submission of the Corporate Debtor that

the sums deposited by the Southern Railways, into the credit of the account in O.A.

Company Appeal (AT) (Insolvency) No. 632 of 2019 6

No. 131 of 2013 were all receivables from projects for which no loans were taken from

the appellant is untenable.

14. Therefore, we set aside the order dated 03.05.2019 of the Adjudicating

Authority and remand back the matter to them to decide the security interest of the

Appellant Bank before the liquidator can be given the assets of the corporate debtor to

be dealt with under section 53 of the I&B Code.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Dr. Ashok Kumar Mishra) Member (Technical)

SS

New Delhi

Company Appeal (AT) (Insolvency) No. 632 of 2019