The Hon’ble National Company Law Appellate Tribunal (NCLAT), New Delhi in a matter, upheld the order of the National Company Law Tribunal (NCLT), whereby the Punjab National Bank which holds a voting share of 0.58% in the Committee of Creditors (CoC) was directed to credit to the Corporate Debtor’s account amount of Rs 17,95,04,271.79 that was meant to settle the liability on account of the Letter of Credit facilities opened during pre-Corporate Insolvency Resolution Process (CIRP) period. [REED 2021 NCLAT Del 06512]
Bhatia Coke & Energy Ltd. (Corporate Debtor/Respondent) availed various credit facilities like Term loan, Cash Credit, Bank Guarantee including Letter of Credit (LC) facilities from the Punjab National Bank (Appellant) in consortium. In 2015, the account was restructured and the Appellant came out of consortium. It is however pertinent to mention that the Appellant was issuing the LCs regularly to the Corporate Debtor and were making payment to the concerned parties by debiting the cash credit account of the Corporate Debtor. In the meanwhile, the NCLT on 22 May 2019, initiated CIRP against the Corporate Debtor, on an application filed by State bank of India under section 7 of the Insolvency and Bankruptcy Code (IBC), and Mr. Motappa Thimmaraya Swamy was appointed as Interim Resolution Professional (IRP).
The due date of the LCs was informed by the Appellant to the IRP and the IRP vide several emails categorically permitted to the Appellant to keep the Corporate Debtor as a going concern. Subsequently, the Appellant issued one new LC for Rs. 2,38,46,467 on 1 June 2019 after approval was obtained from the aforesaid IRP on 30 May 2019. The Appellant upon the instruction with the prior approval of the IRP, made payment of LCs by debiting the cash credit account of Corporate Debtor, by which the adjustment of the amount of Rs. 17,95,04,271.79 was done.
Later, the CoC replaced the IRP and Mr. Subrata M Maity was appointed as the Resolution Professional (RP). The RP of the Corporate Debtor filed an Application against the Appellant under section 60(5) of the IBC for seeking directions to reverse the amount of Rs. 17,95,04,271.79 lying with the Appellant and also to remit the balance in the account of the Corporate Debtor. The NCLT allowed the Application filed by Corporate Debtor and hence, this Appeal was filed by the Appellant.
The NCLAT noted that the LC amount which the Appellant debited from the cash credit account of the Corporate Debtor upon the permission of the erstwhile IRP was not maintainable as it went against the principle of moratorium enshrined under section 14 of IBC. Further, in the 4th CoC meeting held on 7 January 2020, it was decided that the Appellant would remit within seven days an amount of Rs. 17,95,04,271.79 to the Corporate Debtor. The minutes of the meeting also reveal that the Appellant agreed to revert the aforesaid amount but later retracted from doing it. In view of the foregoing, NCLAT concluded that there was no illegality in the impugned order passed by NCLT and the present appeal filed by the Appellant was accordingly dismissed