Uco Bank vs G Ramachandran

UCO Bank, Rep. by Chief Manager, Jubilee Hills Branch, 8-2-293/82/A/490, Road No. 10 and Road No. 22 Corner, Hyderabad, Telangana-500033 ...Appellant

Versus

Mr. G. Ramachandran, IBBI Reg. No. IBBI/IPA-002/IP- N00167/2017-2018/10437 Resolution Professional, M/s. Sai Regency Power Corporation Pvt. Ltd., F-10, Syndicate Residency No. 3, Dr. Thomas, First Street, Off South Boag, Road, T. Nagar, Chennai-600017 ...Respondent

Present:-

For Appellant: Ms. Shalini, Advocate. For Respondent: Mr. Divyam Agarwal and Mr. Yohaann Limathwalla, Advocates.

ORDER

(Virtual Mode)

03.11.2020 I.A. No. 2038 of 2020

Learned Counsel for the Appellant submits that there is some delay in

filing of the Appeal. The impugned order was passed on 29th May, 2020 when

there was lockdown going on. She submits that there is also an order of Hon'ble

Supreme Court extending time due to Pandemic. Learned Counsel for the 2

Respondent does not object. We hold that considering the submissions, the

delay, if any, deserves to be condoned and I.A. No. 2038 of 2020 is disposed of.

Company Appeal (AT) (Insolvency) No. 761 of 2020

2. Heard Learned Counsel for the Appellant and the Learned Counsel for the

Respondent. Learned Counsel for the Appellant is submitting that the

Respondent/Resolution Professional filed the Application before the

Adjudicating Authority (NCLT, Special Bench, Chennai) having M.A. No. 39 of

2020 in IBA/92/2019 and claimed that the Appellant Bank was required to

refund Rs. 2,27,94,706/- which had been adjusted during CIRP by the Appellant

Bank from Fixed Deposits of the Corporate Debtor/M/s. Sai Regency Power

Corporation Pvt. Ltd. against the outstanding amount in relation to vehicle loans

and loans taken by group companies. The Learned Counsel submitted that the

Adjudicating Authority has passed impugned order directing the Appellant to

restore the credit to the Corporate Debtor's account so as to facilitate Resolution

Plan.

3. The Learned Counsel submitted that the Application under Section 7 of

Insolvency and Bankruptcy Code, 2016 (IBC in short) against M/s. Sai Regency

Power Corporation Pvt. Ltd.-Corporate Debtor was admitted on 27th March,

2019. She submitted that the Resolution Professional issued public notice in

Tamil and thus the Appellant Bank was not aware of the admission of the

Application under Section 7 of IBC.

4. To this, the Learned Counsel for the Respondent stated that with Reply

Annexure-B at Page 19 is notice published on 30th March, 2019 in Business

Standard in English. The Learned Counsel states that the Copy filed is defective

Company Appeal (AT) (Insolvency) No. 761 of 2020 3

as portion relating to the Corporate Debtor appears to have got cut in the copy-

paste. The Learned Counsel has now sent by WhatsApp the complete copy to the

Court Master and the copy is downloaded and is marked as 'X' for identification

and taken on record. The document shows publication (regarding initiation of

CIRP) on 30th March, 2019, in English Newspaper also.

5. The Learned Counsel for the Appellant then states that the Corporate

Debtor had opened two FDRs with the Appellant Bank and had approached for

sanction of two car loans. The Appellant Bank had sanctioned the vehicle loans

and Company was regularly paying monthly instalments. It is stated that group

companies of Corporate Debtor M/s. Kamang Dam Hydro Power Pvt. Ltd. and

M/s. J.R. Power Pvt. Ltd. approached the Appellant Bank for sanction of demand

loans for which the Corporate Debtor offered two FDRs as security. For the

demand loans all the documents were submitted and executed by the Corporate

Debtor in 2011. According to the Appellant in good faith the Bank sanctioned

demand loans of Rs. 50,00,000/- to one of the group company by mane M/s.

Kamang Dam Hydro Power Pvt. Ltd. and another demand loan to another Group

company by name M/s. J.R. Power Pvt. Ltd. It is claimed that in good faith, the

Appellant appropriated the amounts as the Appellant was secured creditor and

could appropriate the FDs and set of amounts due. It is stated that the Appeal

claims that the Appellant was not aware of the CIRP proceeding.

6. Learned Counsel for the Appellant relies on Section 173 of IBC to submit

that there is provision of mutual credit and set of. She also refers to Section 36

(4) (b) of the IBC to submit that set of and appropriation could be accepted.

7. The Learned Counsel for the Respondent submits that Section 173 and

Section 36 would be relevant during the stage of liquidation proceedings and not

Company Appeal (AT) (Insolvency) No. 761 of 2020 4

during pendency of CIRP. He states that Liquidation Order is not yet passed in

the matter though period as provided under Section 12 of IBC is over.

8. The Learned Counsel for the Respondent refers to the Impugned Order

where the Adjudicating Authority relied on Indian Overseas Bank Vs. Mr. Dinkar

T. Venkatsubramaniam and in which this Tribunal had made observations that

once moratorium has been declared, it is not open to any person including the

Financial Creditor and the Appellant Bank to recover any amount from the

account of the Corporate Debtor, nor it can appropriate any amount towards its

own dues.

9. The Learned Counsel for Appellant has also submitted that she may be

given further opportunity to file Rejoinder and Written Submission. We are

however not ready to give further time for this. We have already heard the learned

counsel for both sides.

10. It is apparent that CIRP was initiated on 27th March, 2019 and later on,

the Respondent found that the Appellant Bank had adjusted certain amounts

which it could not, considering Section 14 of IBC. The Respondent on 06th

December, 2019, wrote to the Appellant Bank Letter Annexure A-2 which reads

as under:

"Dear Sir,

1. We write to you in the capacity of the Resolution Professional of the Corporate Debtor ("RP").

2. It has come to our notice that your Bank has, without any Instructions of the RP, adjusted the fixed deposit bearing account number 19050310045848 and 19050310046265 ("Fixed Deposits") of the Corporate Debtor with your Bank (along with the interest thereon) aggregating to INR 2,07,31,503 (INR Two Crore Seven Lakhs Thirty-One Thousand Five Hundred and Three only) on 09/07/2019 against the outstanding in relation to vehicle loans and loans taken by group companies ("Outstanding Dues")

Company Appeal (AT) (Insolvency) No. 761 of 2020 5

3. You are aware that the Corporate Debtor is presently undergoing corporate insolvency resolution process and the moratorium period is in effect vide order dated 27th March, 2019 of Hon'ble NCLT Chennai. It is pertinent to note that all the claims as on the Insolvency Commencement Date have to be submitted by way of appropriate claim form to the Resolution Professional. (Order Copy is attached with this letter)

4. Kindly note that as per Section 17 (d) of the Insolvency and Bankruptcy Code, 2016 ("Code"), "From the date of appointment of the interim resolution professional, ... the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional."

5. It has been held by the Hon'ble National Company Law Appellate Tribunal in the case of Indian Overseas Bank Vs. Mr. Dinkar T. Venkatsubramaniam, Resolution Professional for Amtek Auto Limited {(2018) 145 SCL 0138}, that:

"Once the moratorium has been declared it is not open to any person including the 'Financial Creditors and the Appellant bank to recover any amount from the account of the "Corporate Debtor", nor it can appropriate any amount towards its own dues."

G. Ramachandran Insolvency Professional - (IBBI/IPA-002/IP-N00167/2017-18/10437) R/o, F-10, Syndicate Residency No. 3, Dr. Thomas, First Street, Off South Boag, Road, T. Nagar, Chennai-600017 Email:irp.regency@ibcprofessionalsolutions.com

6. In the light of the aforesaid provisions, the said action of your Bank of debiting the above mentioned amount from the Fixed Deposit of the Corporate Debtor (without the approval of the RP) tantamount to appropriation of amount towards its dues during the period of moratorium, and is strictly in contraventions to the provisions of the Code.

7. We therefore, hereby call upon you to release payment INR 2,27,94,796 (Inclusive of INR 20,63,293 towards new FD bearing A/C:

19050310060650 and appropriated amount of INR 2,07,31,503) plus interest accrued up to the date of actual transfer to the below mentioned account ("Amount Due") within a period of 3 days of receipt of this notice, failing which we will be compelled to initiated appropriate legal proceedings against you for recovery of the Amount Due as well as for the losses suffered by the Corporate Debtor due to your failure to make timely payment, at your sole risk as to cost and consequences.

Name of the Beneficiary : Sai Regency Power Corporation Private Limited Bank Name & Branch : Punjab National Bank, Mumbai LCB, Cuffe Parade, Colaba, Mumbai

Company Appeal (AT) (Insolvency) No. 761 of 2020 6

Account Number : 2175002900000695 IFSC Code : PUNB0217500

8. This notice is sent without prejudice to our rights and contentions."

11. The facts and developments are apparent from the above letter and

considering the provisions of Section 14, we have no doubt that the impugned

order as passed by the Adjudicating Authority is required to be maintained.

Once CIRP was initiated and Section 14 of IBC applied such adjustment by

Appellant cannot be maintained. Lack of knowledge of initiation of CIRP would

not be relevant. When CIRP was initiated, the Appellant Bank could not have

adjusted the amounts as has been done in this matter.

There is no substance in the Appeal. The Appeal is dismissed.

No order as to costs.

[Justice A.I.S. Cheema] Member (Judicial)

[V.P. Singh] Member (Technical)

Basant B./nn/

Company Appeal (AT) (Insolvency) No. 761 of 2020