Bank Deposit In Pursuance of One Time Settlement Proposal Remains Corporate Debtor's Asset When Settlement Fails: NCLAT Rules Against BOI [Read Order]
The tribunal held that the Adjudicating Authority has rightly held that the said amount of Rs. 1 Crore lying in “No Lien Account” with the Appellant bank is an asset of the Corporate Debtor
Bank Deposit – Corporate Debtor Asset – NCLAT – BOI – taxscan
Bank Deposit – Corporate Debtor Asset – NCLAT – BOI – taxscan
In a ruling against Bank of India (BOI), the New Delhi bench of National Company Law Appellate Tribunal (NCLAT) has held that the amount deposited with the bank by the corporate debtor in pursuance of an One Time Proposal to show bonafides will remain assets of the corporate debtor and can be taken under section 18 of the code when the said proposal is not materialised.
The appellant challenged the order passed on May 3, 2021 by which the appellant was directed to release Rs. 1 crore held in a No Line Account. The corporate debtor was admitted into insolvency on January 3, 2020 in pursuance of which the IRP initiated steps to manage the assets of the corporate debtor under section 18 of the code.
Despite requests made by the CoC in its 3rd meeting and communications of the IRP, the appellant refused to release the funds. The Resolution Professional filed an IA which was allowed by the Adjudicating Authority directing the release of the amount for CIRP purposes.
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The appellant stated that the said amount in the No Lien Account is not the assets of the corporate debtor as it was deposited via a cheque from Wellworth Apparels Private Limited. It was further contended that as per explanation to section 18 of the code, third party owned assets held under trust or contractual arrangements are excluded from the definition of the assets.
It was argued that the Corporate Debtor has not shown under what capacity this amount of Rs. 1 Crore has been received from Wellworth. Banker's lien over money lying is a statutory right. The money lying in the account is actually asset of the Bank itself.
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Per contra, the respondent submitted that the payment was made to Bank of India on account of Jaybharat Textiles & Real Estate Ltd., though the cheque has been issued by Wellworth Apparels Private Limited. In absence of OTS/Resolution Plan having been approved, the bank has no right to claim this money. The Appellant/Bank by its conduct in not encashing/adjusting the said money has admitted that it has no right over the said money.
The coram comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) observed that once the CIRP was initiated, the amount lying in the “No Lien Account”, which on that date belonged to the Corporate Debtor, by natural corollary is an asset of the Corporate Debtor which the IRP/RP was obliged to take under his control/custody as per provisions of Section 18 of IBC, 2016.
While dismissing the appeal, the tribunal held that the Adjudicating Authority has rightly held that the said amount of Rs. 1 Crore lying in “No Lien Account” with the Appellant bank is an asset of the Corporate Debtor. The IRP/RP has rightly claimed the said deposit for its utilization in CIRP.
To Read the full text of the Order CLICK HERE
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