Liquidator can Recover Amount belongs to Corporate Debtor through Application u/s 60(5)(c) of IBC: NCLAT [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) held that liquidators can recover the amount of the corporate debtor by filing an application under section 60(5)(c) of theInsolvency and Bankruptcy Code, 2016 ( IBC ).

Arkay Logistics Limited , the appellant filed appeal against an order passed by the NCLT, Mumbai by which the interlocutory aplication filed by the liquidator to recover the amount of the corporate debtor was allowed.

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The Corporate Debtor EPC Construction (India) Ltd.was awarded a contract by GSPL India Gasnet Ltd. (“GIGL”) on 18.01.2017. A Performance Bank Guarantee (“PBG”) amounting to Rs.21,17,30,000/- was to be submitted by the Corporate Debtor (“CD”) for working of the contract.

The Corporate Debtor after discussing with the Appellant requested the Appellant to arrange for issuance of the PBG from their existing line of credit with Axis Bank. The CD undertook to replace the PBG. In pursuance of the request made by the CD, Axis Bank provided PBG by marking a lien on the FD against 100% margin on two FDs. Time to time, payments were made by the corporate debtor to the appellant.

The CD wrote to the Appellant that net amount of Rs.18.10 crores has been paid in lieu of the lien marked by Axis Bank on two FDs against PBG issued in favour of the CD. No further amount could be paid by the CD, since Corporate Insolvency Resolution process (“CIRP”) commenced against the CD vide order dated 20.04.2018.

The contract awarded in favour of the Appellant was completed and PBG was released by GIGL and surrendered by the CD to the Axis Bank on 24.03.2021. Consequent to surrender of the PBG, the Bank also cancelled the lien marked on the FDs submitted by the Appellant.

The CD was put into liquidation by the Adjudicating Authority. The Liquidator after surrender of the PBG issued a Legal Notice dated 09.07.2022 to the Appellant calling upon the Appellant to release the amount of Rs.18.10 crores to the CD, as the PBG with lien on Appellant FD stand returned and PBG was also cancelled.No reply was given

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An IA was filed by the Liquidator which came to be allowed in which the Adjudicating Authority held that it was the obligation of the Liquidator to take steps to return the said amount to the CD. The appellant submitted that Liquidator was free to initiate proceedings for recovery in a competent Court as per Section 35(1)(k) of the Insolvency and Bankruptcy Code, 2016 and Liquidator could not have filed the Application before the Adjudicating Authority and should have taken recourse to appropriate proceedings in a competent Court.

It was argued that recovery of debt, even if admitted, cannot be ordered under Section 60, sub-section (5) of the IBC. There is no debt due and payable by the Appellant to the Corporate Debtor. The Adjudicating Authority has only summary jurisdiction which cannot conduct a detailed examination of the factual disputes.

Per contra, the respondent submitted that the amount under the PBG ought to have been returned, which was the amount belonged to the CD and that the Liquidator, who has duty to protect the assets of the CD was fully entitled to file an Application seeking return of the amount to the CD, which belonged to it. The Application was fully maintainable before the Adjudicating Authority.

It was submitted that there were dues on the CD, amounting to Rs.16.35 crores, is a concocted and dishonest story. In the CIRP of the Corporate Debtor, the Appellant neither filed any claim before the RP or before the Liquidator and had any dues of the Appellant were there on the CD, there was no impediment on the Appellant for filing its claim.

The tribunal noted that in Gujarat Urja Vikas Nigam Ltd. vs. Mr. Amit Gupta ( 2019) it was held that considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor.

The bench of Justice Ashok Bhushan ( Chairperson ), Mr. Barun Mitra ( Technical Member ) and Mr. Arun Baroka ( Technical Member ) found that the Liquidator was trying to recover any debt, which was owed by the Appellant to the CD. Rather, the Liquidator was only asking for the refund of the amount, which was given by the CD towards margin money for securing a PBG through the Appellant from its credit line of the Axis Bank.

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The Liquidator along with the Application has filed the Bank statements reflecting the payment of Rs.18.10 crores to the Appellant, which amounts were towards margin money arranged by Appellant for issuing the PBG.

The theory that “the CD owed Rs. 15 crores to the appellant which is sought to be developed in the Appeal by the learned Counsel for the Appellant is unacceptable and is only an attempt to raise the dispute regarding transactions, where no such dispute ever existed.” the bench viewed while dismissing the appeal.

To Read the full text of the Order CLICK HERE

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