NCLAT Holds ICBC Cannot Retain ₹27.60 Crore FD as Reliance Owed No Dues, Lien Letter Limited to Debtor’s Own Liabilities [Read Order]

The National Company Law Appellate Tribunal (NCLAT) held that the Industrial and Commercial Bank of China Limited (ICBC) was not entitled to retain a fixed deposit of Rs. 27.60 crore belonging to Reliance Communication Infrastructure Limited (RCIL), as no dues were owed by the corporate debtor and the lien letter did not extend to the liabilities of other group companies.

The appeal arose from an order passed by the National Company Law Tribunal (NCLT), Mumbai Bench, directing ICBC to lift the lien marked on RCIL’s fixed deposit and release the amount with interest to the Resolution Professional (RP) of RCIL.

The fixed deposit had been made by RCIL on 27 March 2017, and on the same day, the company issued a lien letter authorising the bank to mark a lien on the deposit for any specific advance or other moneys due from RCIL to the bank.

During the Corporate Insolvency Resolution Process (CIRP) of RCIL, initiated on 25 September 2019, the RP requested ICBC to release the fixed deposit, explaining that RCIL had no outstanding dues with the bank.

ICBC refused, claiming that the lien covered dues owed by another Reliance Group company, Reliance Infratel Limited (RITL), to which it had extended foreign currency facilities. The RP applied the NCLT seeking release of the deposit, which was allowed.

Before the NCLAT, ICBC argued that the lien letter authorised the bank to hold the deposit not only for RCIL’s dues but also for amounts due from RCIL jointly with others, and thus, it was entitled to retain the amount for the group’s obligations.

The bank also argued that under Section 171 of the Indian Contract Act, 1872, it had a general lien over the customer’s assets for any balance due, and this right survived the initiation of CIRP.

The RP opposed these arguments and submitted that the fixed deposit was RCIL’s asset and that no credit facility was ever granted by ICBC to RCIL. It was argued that the lien letter referred only to the corporate debtor and not to any third parties.

The RP further stated that under Sections 17 and 18 of the Insolvency and Bankruptcy Code, 2016, the RP was required to take control of the company’s assets, and the bank’s refusal violated these provisions.

The bench comprising Justice Ashok Bhushan (Chairperson), Barun Mitra, and Arun Baroka (Technical Members) observed that the wording of the lien letter referred only to “us,” which clearly meant RCIL. The tribunal explained that the lien could apply only to dues owed by RCIL and not to debts of any other group company.

It observed that RCIL had never availed any credit facility from ICBC and was not jointly liable with any other entity. The bench pointed out that under Section 171 of the Contract Act, a general lien can only be exercised for the customer’s own debts, and not for those of third parties.

The tribunal upheld the NCLT’s order directing the release of the fixed deposit with interest, holding that ICBC could not retain the amount as RCIL owed no dues to it. The appeal was dismissed with no order as to costs.

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