16/09/2022

Distribution under Section 53(1) of IBC on basis of value of security of Financial Creditor or on basis of debt owed to Secured Creditor? – Small Industries Development Bank of India (SIDBI) Vs. Vivek Raheja, RP, M/s. Gupta Exim (India) Pvt. Ltd. – NCLAT New Delhi

In this case NCLAT after analyses various judgments on payment to dissenting secured creditors under resolution plan. NCLAT held that submission of the Appellant that he is entitled to distribution of the proceeds of the plan value as per value of security possessed by him is not in accord with the legislative scheme as delineated in Section 53(1) of the Code. The Committee in its report (February, 2020) nowhere even suggested that secured financial creditor is entitled to distribution as per value of security. It affirmed decision of NCLT and held that the decision of the Committee of Creditors and the Adjudicating Authority deciding to distribute the proceeds of the plan value as per voting share of the secured creditor in no manner contravenes the provisions of Section 30(2)(b) of the Code.

Distribution under Section 53(1) of IBC on basis of value of security of Financial Creditor or on basis of debt owed to Secured Creditor? – Small Industries Development Bank of India (SIDBI) Vs. Vivek Raheja, RP, M/s. Gupta Exim (India) Pvt. Ltd. – NCLAT New Delhi Read Post »

Whether margin money deposited by way of an FDR against a Letter of Credit (LC) construes, a ‘Security’ as provided for under the Code and Whether this margin money can be appropriated by the Bank during the period of Moratorium on the ground that it does not form a part of the asset of the Corporate Debtor – Punjab National Bank Vs. Supriyo Kumar Chaudhuri RP For JVL Agro Industries Ltd. – NCLAT New Delhi

NCLAT held that margin money is construed as substratum of a Trust created to pay to the beneficiary to whom Bank Guarantee is given. Once any asset goes into trust by documentation for the benefit of beneficiary, the original owner will not have any right over the said asset unless it is free from the Trust. As we observe that margin money has the character of Trust for the benefit of the beneficiary, it cannot be said to be an asset of the Corporate Debtor. In terms of its functions, a Performance Guarantee is similar to that of an LC. This Tribunal is of the earnest view that LC is basically akin to a contract of Guarantee, as it a contingent liability of the Corporate Debtor which gets crystallized on the happening of a future event. Section 14(1)(c) prohibits any action to foreclose, recover or ensure any ‘Security Interest’ created by the Corporate Debtor in respect of its property. As we hold that no ‘Security Interest’ was created by the Corporate Debtor with respect to the margin money that was deposited by the Corporate Debtor Company towards the opening of the LC in the Appellant Bank, we are of the considered view that the Banks having appropriated this money during the period of Moratorium is justified as we hold that the amount is not an asset of the Corporate Debtor.

Whether margin money deposited by way of an FDR against a Letter of Credit (LC) construes, a ‘Security’ as provided for under the Code and Whether this margin money can be appropriated by the Bank during the period of Moratorium on the ground that it does not form a part of the asset of the Corporate Debtor – Punjab National Bank Vs. Supriyo Kumar Chaudhuri RP For JVL Agro Industries Ltd. – NCLAT New Delhi Read Post »

Mohanlal Ayyapan Pillai Founder and Manging Director Virgo Marine Shipyards Pvt. Ltd. Vs. Virgo Marine Shipyards Pvt. Ltd. Through its IRP, Shivam Raju Palvesam & Ors. – NCLAT New Delhi

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Mohanlal Ayyapan Pillai Founder and Manging Director Virgo Marine Shipyards Pvt. Ltd. Vs. Virgo Marine Shipyards Pvt. Ltd. Through its IRP, Shivam Raju Palvesam & Ors. – NCLAT New Delhi Read Post »

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