Morgan Securities & Credits Pvt. Ltd vs Resolution Professional Of Videocon ...

Morgan Securities & Credits Pvt. Ltd. ...Appellant

Vs

Resolution Professional of Videocon Industries Ltd. ....Respondent

Present:

For Appellant: Mr. Krishnendu Datta, Mr. Abhishek Puri and Ms. Surbhi Gupta, Advocates. For Respondents: Ms. Misha, Mr. Vaijayant Paliwal and Ms. Moulshree Shukla, Advocates for RP.

With

Company Appeal (AT) (Insolvency) No. 1367 of 2019

IN THE MATTER OF:

Morgan Securities & Credits Pvt. Ltd. ...Appellant

Vs

Videocon Industries Ltd. through Resolution Professional ....Respondent

Present:

For Appellant: Mr. Krishnendu Datta, Mr. Abhishek Puri and Ms. Surbhi Gupta, Advocates. For Respondents: Ms. Misha, Mr. Vaijayant Paliwal and Ms. Moulshree Shukla, Advocates for RP.

With

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020. -2-

Company Appeal (AT) (Insolvency) No. 1368 of 2019

IN THE MATTER OF:

Morgan Securities & Credits Pvt. Ltd. ...Appellant

Vs

Venugopal N. Dhoot & Anr. ....Respondent

Present:

For Appellant: Mr. Krishnendu Datta, Mr. Abhishek Puri and Ms. Surbhi Gupta, Advocates.

For Respondents: Ms. Misha, Mr. Vaijayant Paliwal and Ms. Moulshree Shukla, Advocates for RP.

With

Company Appeal (AT) (Insolvency) No. 20 of 2020

IN THE MATTER OF:

Videocon Industries Ltd. Resolution Professional ...Appellant

Vs

Morgan Securities & Credits Pvt. Ltd. ....Respondent

Present:

For Appellant: Ms. Misha, Mr. Vaijayant Paliwal and Ms. Moulshree Shukla, Advocates for RP. For Respondents: Mr. Krishnendu Datta, Mr. Abhishek Puri and Ms. Surbhi Gupta, Advocates.

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020. -3-

ORDER

22.01.2020: Appellant - 'Morgan Securities & Credits Pvt. Ltd.' (Financial

Creditor) in their respective appeals have challenged common order dated 11th

November, 2019 passed by the Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench whereby its Miscellaneous Application seeking release

of amount of Rs.20 Crores deposited with the Registrar General of the Hon'ble

High Court of Delhi upon invocation of the Bank Guarantee issued by the

Allahabad Bank, in favour of it, has been rejected.

2. The Adjudicating Authority held that the amount will be deposited with

the Resolution Professional of 'Videocon Industries Ltd.' (Corporate Debtor) and

observed that the said amount of Rs.20 Crores is an asset of the Corporate

Debtor given as 'security interest' to 'Morgan Securities & Credits Pvt. Ltd.'.

3. Part of the impugned order has been challenged by the Resolution

Professional wherein the Adjudicating Authority observed that the amount of

Rs.20 Crores has been given as security interest by the Corporate Debtor to

'Morgan Securities & Credits Pvt. Ltd.'.

4. Before initiation of the Corporate Insolvency Resolution Process, in an

arbitration proceeding arbitral award was passed by the Arbitral Tribunal on 29th

April, 2013 in favour of the Appellant - 'Morgan Securities & Credits Pvt. Ltd.'

against the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020.

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5. Pursuant to an order passed by Honb'le High Court of Delhi on 13th

November, 2013 under Section 9 of the Arbitration and Conciliation Act, 1996,

in petition filed on behalf of the Appellant, the Corporate Debtor was directed to

deposit a Bank Guarantee of Rs.20 Crores with the Registrar General, during the

pendency of the challenge to Arbitral Award, which was so deposited.

6. Pursuant thereto, on the request of the Corporate Debtor, Allahabad Bank

executed a Deed of Guarantee on 6th December, 2013 in favour of the Registrar

General of the Hon'ble High Court of Delhi for a sum of Rs.20 Crores.

7. The Corporate Insolvency Resolution Process was initiated against

'Videocon Industries Ltd.' (Corporate Debtor) on 6th June, 2018. During the

Corporate Insolvency Resolution Process, an application under Section 34 of the

Arbitration and Conciliation Act, 1996 was filed by the Corporate Debtor, which

was rejected and the amount of Rs.20 Crores was ordered to be retained in the

account of the Registrar General of Honb'le High Court of Delhi, subject to

further order as may be passed in insolvency proceedings.

8. An appeal under Section 37(1)(b) of the Arbitration and Conciliation Act,

1996 was moved by 'Morgan Securities & Credits Pvt. Ltd.' only with regard to

the part of the order passed by the Single Bench of the Hon'ble High Court of

Delhi relating to the fixed deposit amount of Rs.20 crore which was ordered to

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020.

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be retained with the Registrar General subject to the decision of insolvency

proceeding. The Division Bench of the Hon'ble High Court of Delhi dismissed

the said appeal under Section 37(1)(b) with following observations:-

"11. To that extent, the Learned Single Judge was right in

concluding that as on the date of passing of the impugned

order i.e. 7th February, 2019 with the insolvency proceedings

having already commenced, the moratorium in terms of

Section 14 of the IBC would be in place. How the said amount

of Rs. 20 Crores together with interest accrued thereon should

be dealt with would, therefore, be subject to the orders passed

by the NCLT in such insolvency proceedings.

12. Consequently, this Court rejects the submission on

behalf of Appellant that since the sum of Rs. 20 Crores

together with interest thereon is not the asset of the VIL, it

should not be dealt with or made subject to orders of NCLT,

Mumbai. The impugned order does not call for interference.

The appeal is dismissed. The applications are also

dismissed."

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020.

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9. The Appellant - 'Morgan Securities & Credits Pvt. Ltd.' thereafter

challenged the said order dated 28th August, 2019 before the Hon'ble Supreme

Court, which was dismissed by the Hon'ble Supreme Court in SLP (C) No. 21259

of 2019 with observation that any observation made will not come in the way of

final adjudication of the matter by the National Company Law Tribunal.

10. Thereafter, the Resolution Professional moved application for release of

amount of Rs.20 Crores. The Appellant - 'Morgan Securities & Credits Pvt. Ltd.'

appeared and opposed it. It was submitted, as Appellant submitted before this

Appellate Tribunal, that the Bank Guarantee dated 6th December, 2013

furnished by Allahabad Bank to secure the payment of 'Morgan Securities &

Credits Pvt. Ltd.' and is not asset of the Corporate Debtor because the Allahabad

Bank has issued the Bank Guarantee without recourse to the Corporate Debtor.

11. It was further submitted on behalf of the Appellant - 'Morgan Securities &

Credits Pvt. Ltd.' that the amount of Rs. 20 Crores was not covered under

moratorium in terms of Section 14(3) of the I&B Code.

12. Stand of the Resolution Professional is that the Corporate Debtor

furnished the Bank Guarantee in favour of the Registrar General of the High

Court of Delhi, pursuant to order dated 13th November, 2013 passed by the Delhi

High Court. The Allahabad Bank has issued the Bank Guarantee at the

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020.

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instance of the Corporate Debtor and renewed it from time to time on the request

of the Corporate Debtor. Lastly, it was renewed on the request of the Corporate

Debtor on 2nd December, 2017 valid upto 5th December, 2018. It was further

submitted that the 'Morgan Securities & Credits Pvt. Ltd.' has filed a claim

amounting to Rs.325 Crores with the Resolution Professional which includes the

amount as awarded. The Resolution Professional collated and verified the claim

of the Appellant and admitted an amount of Rs.76.45 Crore, which was the

amount awarded by the Arbitral Tribunal in favour of the - 'Morgan Securities &

Credits Pvt. Ltd.' (Financial Creditor). As per the said claim, the Appellant -

'Morgan Securities & Credits Pvt. Ltd.' has joined as part of the Committee of

Creditors with voting share of 0.13% without any objection.

13. It was further submitted that any lien or arrangement in force against the

Corporate Debtor prior to commencement of Corporate Insolvency Resolution

Process is not enforceable during the moratorium, therefore, 'Morgan Securities

& Credits Pvt. Ltd.' cannot claim any priority or lien in the aforesaid amount of

Rs.20 Crores, which is lying deposited with the Registrar General.

14. From the facts as discussed above, it is clear that the amount of Rs.20

Crores deposited by way of Bank Guarantee was against the sum of Rs.76.45

Crores awarded, therefore, said amount of Rs.20 Crores, if payable to the

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020.

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if, it is accepted that said amount of Rs.20 Crores, as deposited with the Registrar

General of Delhi High Court, is meant for payment to the Appellant - 'Morgan

Securities & Credits Pvt. Ltd.' against the awarded amount of Rs.76.45 Crores,

in light of the decision of Hon'ble Supreme Court in "Himachal Pradesh Housing

& Urban Development Authority Vs. Ranjit Singh Rana, (2012) 4 SCC 505", we

hold that the Bank Guarantee of Rs.20 Crores given by the Bank on behalf of

the Corporate Debtor, relates to the claim of the Appellant - 'Morgan Securities

& Credits Pvt. Ltd.' which has been taken care by the Resolution Professional

against the claim preferred in the Corporate Insolvency Resolution Process.

Such being the position, during the Corporate Insolvency Resolution Process,

the amount will be deposited with the Resolution Professional and the

Appellant's claim can be taken care by the Successful Resolution Applicant, if a

resolution plan is approved. During the liquidation stage the amount of Rs.20

Crores cannot be treated as 'Security Interest', merely because it was deposited

against award amount of Rs.76.45 Crores.

15. The submission of the Appellant - 'Morgan Securities & Credits Pvt. Ltd.'

that the amount of Rs.20 Crores belongs to the Allahabad Bank, cannot be

accepted, as it was issued by the Bank on the request of the Corporate Debtor

against the security interest. Further, even if it is accepted that it belongs to the

Allahabad Bank, the bank being not aggrieved, the Appellant - 'Morgan

Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020.

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Securities & Credits Pvt. Ltd.' (Financial Creditor) cannot file appeal raising

cause of another Financial Creditor (Allahabad Bank).

16. For the reason aforesaid, while we uphold the finding given by the

Adjudicating Authority that the amount of Rs.20 Crore is an asset of the

Corporate Debtor, we hold that the observation that the amount was 'a security

interest in Morgan's favour' being against the facts and law is set aside.

17. We make it clear that aforesaid Rs.20 Crores be added in the total assets of

the Corporate Debtor, which may be taken care by the Resolution Professional

for finalizing the resolution plan and / or during the liquidation process, if any

plan is not approved. Appeals filed by the Financial Creditor - 'Morgan Securities

& Credits Pvt. Ltd.' being Company Appeal (AT) (Ins.) No. 1366 of 2019, 1367 of

2019, 1368 of 2019 are dismissed. Company Appeal (AT) (Ins.) No.20 of 2020

filed by Corporate Debtor - 'Videocon Industries Ltd.' is allowed. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

[Justice Anant Bijay Singh] Member (Judicial) am/gc Company Appeal (AT) (Insolvency) No. 1366 of 2019, 1367 of 2019, 1368 of 2019 & 20 of 2020.