Monday 21 June 2021

Ram Ratan Modi (RP of Duncans Industries Ltd.) Vs. ICICI Bank - Release of Attachment Orders & De-freezing of bank accounts, after moratorium has been imposed.

NCLT Kolkata (19.05.2021) in Ram Ratan Modi (RP of Duncans Industries Ltd.) Vs. ICICI Bank  [IA No. 1477/KB/2020 In CP (IB) No. 184/KB/2018] held that;

  • Therefore, in such a scenario, where moratorium has been imposed on the assets of the corporate debtor under the Code and no action can be taken against its assets under any other statute by virtue of section 238 of the Code, and the claims of the authorities having already been admitted by the Applicant, not de-freezing the account of corporate debtor would not only be antithetical to the Code but also averse to the principle of equity.

 

Excerpts of the order; 

# 2. The present application has been filed by Ram Ratan Modi (Resolution Professional of Duncans Industries Limited, the Corporate Debtor, under sections 17(1)(d), 17(2)(d) and 23(2) read with section 60(5) of the Insolvency and Bankruptcy Code, 2016 (the Code) praying to:-

  • “a. Direct the Respondent to release the lien/attachment over the current account maintained with them being account no. 63xxxxxxx368 in order to enable the Applicant herein to take control of the said accounts and carry out necessary transactions.”


# 3. Submissions made by Mr. Dipankar Das, Advocate, appearing on behalf of the Applicant/Resolution Professional Mr. Ram Ratan Modi:-

  • xxxxxxx

  • c. Mr. Modi intimated the Respondent - ICICI bank, regarding initiation of the CRIP against the Corporate Debtor through emails. The Respondent was further advised not to allow any debut transaction in the account of the corporate debtor. A copy of the said email is placed on record as Annexure A-3 at pages 35 and 36 of the application.

  • d. On 28.10.2020, Mr. Modi wrote another email to the Respondent seeking their cooperation by removing the lien/attachment from the current account no. 63xxxxxxxxxx8 of the corporate debtor and operationalising it. Healso asked for a list and detail of the statutory authority or financial institution in respect of which lien has been marked. He sent several reminders to the Respondent thereafter, however, no satisfactory response had been received by the Applicant. A copy of the emails dated 28.10.2020 and its follow-ups is placed on record asAnnexure A-4 at page 37 of the application.

  • e. The corporate debtor is in need of working capital to conduct the CIRP. It is also the Applicant’s duty to take control and custody of the assets belonging to the Corporate Debtor for speedy completion of the CIRP. Although the Applicant has made several attempts of raising funds, he has not received any satisfactory response from the Respondent.

  • f. Moreover, after the order of moratorium, the creditor cannot deal with the assets of the corporate debtor, therefore, the order of lien and attachment over corporate debtor’s account is unlawful.


# 5. We have heard the learned counsel appearing on both the sides and have gone through the records.


# 6. The case, simpliciter, is that two accounts of the corporate debtor were marked frozen, admittedly, by the Respondent bank pursuant to the notices (1) dated 17.07.2019 from Deputy Commissioner of Income Tax (TDS) and (2) dated 31.07.2019 and 27.08.2019 from the EPFO. Thereafter, on 05.03.2020 the corporate debtor company was admitted into CIRP. The Applicant is in need of working capital to conduct the CIRP thus, the present application.


# 7. Section 238 of the Code makes it clear that the provision of the Code will override other laws. Moreover, upon enactment of the Code, several statutes were amended to that effect, Income Tax Act, 1962, being one of them, was also amended vide third schedule of the Code.


# 8. Further, during the arguments, the learned counsel appearing for the Applicant had submitted that the authorities, on whose direction the account was frozen, have filed their respective claims before the Applicant and the same has been admitted by him.


# 9. Therefore, in such a scenario, where moratorium has been imposed on the assets of the corporate debtor under the Code and no action can be taken against its assets under any other statute by virtue of section 238 of the Code, and the claims of the authorities having already been admitted by the Applicant, not de-freezing the account of corporate debtor would not only be antithetical to the Code but also averse to the principle of equity. 


# 10. What pains us is to see such applications being filed so often even after the point of law stands settled in this regard. One of the objects of the Code is to conduct the CIRP in a time bound manner, therefore, to save the time, upon coming to knowledge of the order of admission of the corporate debtor into CIRP, the statutory authorities should withdraw their direction of attachment from the assets of the corporate debtor.


# 11. Specially in cases such as this, where the authorities have filed their claims with the Resolution Professional. After filing their claim with the resolution professional, it is only prudent that the authorities withdraw their directions.


# 12. We, therefore, direct the release of attachment and defreezing of accounts of the corporate debtor company bearing  no. 63xxxxxxx68 and the statutory authorities are restrained from levying any further attachment or lien on the account of the corporate debtor company, with immediate effect.


# 13. Although prayer only with regard to account no. 63xxxxxxx368 has been made in the present application, the direction in the immediately preceding para should be applicable for account no. 635405000356 too. 


# 14. Further, the bankers of the corporate debtor company are hereby restrained from giving effect to any attachment order issued by any authority without leave of this Adjudicating Authority, for the duration of the CIRP of the corporate debtor company.


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Disclaimer:

The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.