ICICI Bank's Status as Secured Creditor Upheld: NCLAT Sets Aside NCLT Order Directing Release of Fixed Deposit Collateral [Read Order]

The Principal Bench of National Company Law Appellate Tribunal (NCLAT), New Delhi, upheld ICICI Bank’s status as a secured financial creditor, holding that fixed deposits pledged as cash collateral constitute valid security during insolvency proceedings. The Tribunal set aside the NCLT’s earlier direction to release the fixed deposits, allowing the appeal and confirmed ICICI Bank’s right to retain its collateral.

The Appellant, ICICI Bank Ltd., filed an appeal challenging the order dated 23.04.2024 passed by the National Company Law Tribunal, Kolkata Bench (hereinafter referred to as “the Adjudicating Authority”) in IA (I.B.C)/548(KB)2024 and in IA (I.B.C)/2093(KB)2023 in C.P. (IB)/1382(KB)2020. The Adjudicating Authority, by the impugned order, allowed the application filed by the Resolution Professional (hereinafter referred to as "the Respondent").

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The Corporate Debtor, Darjeeling Organic Tea Pvt. Ltd., approached the Appellant, ICICI Bank Ltd., for non-fund based facilities, which were extended against fixed deposits provided by the Corporate Debtor. Subsequently, on 31.07.2021, an overdraft facility amounting to ₹1,00,00,000/- was extended to the Corporate Debtor against a cash collateral of fixed deposit of ₹1,06,00,000/-.

The Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor commenced on 28.10.2022, pursuant to an order passed by the National Company Law Tribunal, Kolkata. The Appellant filed its claim on 03.01.2024 in ‘Form–C’ as a financial creditor, specifically asserting its status as a secured creditor. The claim was for an amount of ₹99,36,968.09/- as on 28.10.2022, detailing both non-fund based Bank Guarantees and the underlying fixed deposits.

On the other hand, the Respondent, the Resolution Professional, subsequently requested the Appellant to transfer the credit balance lying in any account maintained by the Corporate Debtor with the Bank. Following an exchange of emails, details of the fixed deposits were provided by the Appellant.

The Respondent thereafter filed IA(I.B.C)/2093(KB)2023 before the Adjudicating Authority, seeking directions against the Appellant to transfer the funds lying in the Corporate Debtor’s accounts maintained with the Bank to the CIRP Designated Account. Concurrently, the Appellant filed its own application, IA(I.B.C)/548(KB)2024, seeking a direction against the Respondent to modify its status from an unsecured financial creditor to a secured financial creditor, highlighting the incorrect classification by the Respondent.

The Adjudicating Authority, after hearing both parties, passed the impugned order dated 23.04.2024, allowing and disposing of both applications. The Adjudicating Authority directed the Appellant to release funds from FD Account No. 018713007341 (INR 6.52 Lacs), FD Account No. 694713013846 (INR 108.65 Lacs), and amounts received in Overdraft Account No. 018705009903 post CIRP commencement date of 28.10.2022 (INR 67424.80). The Adjudicating Authority, however, allowed the Appellant to retain the amount in FD Account No. 018713007339 (INR 14.40 Lacs) against a bank guarantee. Aggrieved by the said order, the Appellant preferred the present appeal before this Tribunal.

“(d) Ld. Counsel for the RP has drawn attention to page no. 67 of IA(I.B.C)/2093(KB)2023 whereby the RP has requested the ICICI Bank to release the following amounts:

i. FD Account No. 018713007341 : INR 6.52 Lacs;

ii. FD Ale No. 694713013846: INR 108.65 Lacs;

iii. FD Ale No. 018713007339: INR 14.40 Lacs and

iv. Amount received in Overdraft Ale No. 018705009903 post CIRP commencement date of28.10.2022: INR 67424.80”

The Counsel for the Appellant submitted that the fund-based facility was extended against fixed deposits provided by the corporate debtor, with complete details disclosed in the claim form, leaving no basis to deny secured creditor status. The corporate debtor's application dated 15.07.2021 for fund-based facilities explicitly mentioned fixed deposit backing, which formed part of the record.

Further, the Counsel argued that while the bank agreed to retain only item No. 3 before the adjudicating authority, the NCLT erroneously directed release of items 1, 2 and 4 without the appellant's consent or concession. It was emphasized that the security must be maintained and addressed only in the final CIRP resolution, not released prematurely as sought by the Resolution Professional.

On the other hand, the Counsel for the Respondent, submitted that despite repeated requests, the appellant failed to provide the sanction letter, preventing the RP from declaring it as a secured financial creditor. He clarified that no decision had been taken on the appellant's status even after the impugned order.

The Counsel argued that ICICI Bank had clearly stated it would relinquish its securities provided it retained secured creditor status, constituting an express concession before the adjudicating authority for release of items 1, 2 and 4 and the RP submitted that the appellant cannot challenge portions of the order based on its own consent given before the tribunal.

Further, the Counsel relied on the judgement of the Supreme Court in the matter of ‘Galada Power & Telecommunication Ltd.’ Vs. ‘United India Insurance Co. Ltd. & Anr.’, reported in [(2016) 14 SCC 161].

The Tribunal consisted of Chairperson, JusticeAshok Bhushan and Technical Member, Barun Mitra, heard and reviewed the matter.

The Tribunal, after considering the submissions made, held that the judgment cited by the respondent had no applicability to the present case. It found no waiver by the bank regarding release of fixed deposits held as security for non-fund based facilities extended to the corporate debtor, rendering the impugned order unsustainable.

Thus, the appeal was allowed and the NCLT order dated 23.04.2024 was set aside. The RP's application (I.A.2093/KB/2023) was dismissed while ICICI Bank's application (I.A.548/KB/2024) was allowed, directing that the bank be treated as a secured financial creditor and the parties were directed to bear their own costs.

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