NCLT Directs Bank of India to Release Withheld Funds Post-Resolution Plan Approval

Mumbai Bench Orders Return of Rs. 1.51 Crore to J Kumar Infraprojects Ltd. While Retaining Fixed Deposits for Statutory Dues

In a significant ruling, the National Company Law Tribunal's (NCLT) Mumbai Bench directed the Bank of India to release Rs. 1,51,10,000/- held in a No-Lien account to J Kumar Infraprojects Ltd., the Successful Resolution Applicant for Pranav Construction System Private Limited, following the approval of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal emphasized that post-approval of the Resolution Plan, all assets of the Corporate Debtor must vest with the Successful Resolution Applicant, and any retention of such assets by creditors is against the IBC framework.

The judgment came in response to an interlocutory application filed by J Kumar Infraprojects Ltd. and its associates, seeking the release of financial assets belonging to Pranav Construction Systems Pvt. Ltd., which were retained despite the complete implementation of the Resolution Plan. The Tribunal found that the Bank of India’s retention of Rs. 1.51 crore, placed in a No-Lien account during a failed One-Time Settlement proposal, was contrary to the provisions of the IBC.

The Bench, comprising Shri Prabhat Kumar and Shri Sushil Mahadeorao Kochey, clarified that the approval of the Resolution Plan extinguishes all past claims and that creditors cannot assert rights over additional funds post-plan approval. The Tribunal cited precedents from the Supreme Court, including the landmark case of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, reinforcing the binding nature of an approved resolution plan on all stakeholders.

However, the Tribunal upheld the retention of two Fixed Deposits, amounting to Rs. 1,63,57,718/-, created during the Corporate Insolvency Resolution Process (CIRP) to safeguard statutory dues related to Provident Fund and gratuity. The funds will be retained until the dues are settled as per the approved Resolution Plan and statutory determinations.

This ruling underscores the "clean slate" principle in insolvency proceedings, ensuring that successful resolution applicants receive all assets of the corporate debtor free from pre-CIRP claims, thereby facilitating the revival of the debtor company.

Bottom Line:

Insolvency and Bankruptcy Code - Assets of Corporate Debtor, post-approval of Resolution Plan, must be transferred to the Successful Resolution Applicant, and any retention of such assets by creditors without valid justification is not permissible under the IBC framework.

Statutory provision(s): Section 31, Section 14 of the Insolvency and Bankruptcy Code, 2016

J Kumar Infraprojects Limited v. Bank of India, (NCLT)(Mumbai Bench) : Law Finder Doc Id # 2819327