Bank Of India vs Southern Online Bio-Technologies Ltd

PER: BENCH

The Applicant Dr. Devaiah Pagidipati, who has acquired the Corporate Debtor i.e. Southern Online Bio as a going concern under liquidation pursuant to approval by this Tribunal vide order dated 22.06.2020, has filed this Application under Section 60 (5), R/w Section 53 of IBC, 2016, inter-alia, seeking directions to Respondent No.1 to refund the Income Tax Refund to the tune of Rs. 26,30,889/- and interest amounting to Rs. 1,43,438/-.

The gist of the Application in brief are that this Tribunal vide order passed in CP (IB) No. 343/7/HDB/2018 dated 05.10.2018 had admitted the petition filed by Bank of India (Respondent No.1 herein) under Section 7 of IBC. Smt G. Kalpana was appointed as Interim Resolution Professional for conducting the CIRP, who continued as Resolution Professional.

Since the Resolution Professional failed to receive the plans for resolution of the Corporate Debtor, the COC in its 14^th meeting held on 25.06.2019 had resolved for liquidation of the Corporate Debtor. Accordingly, this Tribunal ordered liquidation of the Company vide orders passed in IA 565/2019 dated 16.07.2019 and appointed Smt G. Kalpana as Liquidator. Pursuant to her appointment, the Liquidator had issued Sale Notice dated 13.10.2019 for the sale of the Corporate Debtor as a going concern. The Applicant was declared as successful bidder on 23.10.2019 in the e-auction held on 22.10.2019. The Letter of Intent was issued to the Application on 29.10.2019. Consequent to payment of bid amount of Rs. 51,70,00,000/- as full and final amount, the Applicant took over the Corporate Debtor as a going concern.

Consequently, this Tribunal allowed IA No. 1038 of 2019 filed by the successful bidder, granting a direction that “upon completion of sale of the corporate debtor as a going concern all the claims or demands made by or liabilities or obligations owned or payable to any actual or potential creditors of the corporate debtor including Government dues whether direct or indirect, whether admitted or not, due or contingent, asserted or unasserted, crystallized or uncrystallized, known or unknown, secured or unsecured, disputed or undisputed in relation to any period prior to the e-auction date or arising on account of the acquisition of control by the applicant over corporate debtor pursuance to e-auction, will be written off in full and shall stand permanently extinguished”.

It is averred that this Tribunal further at para 16 of the order dated 26.11.2019 had made it clear that the Applicant shall have the right over any amounts / benefits received by the Corporate Debtor upon payment of the total consideration. Para 16 of the order is as under:-

Thus, the Applicant on payment of total consideration of Rs. 51,70,00,000/- on 04.12.2019 and who is in receipt of the sale certificate on 02.01.2020 from the Liquidator, is the rightful owner of the Corporate Debtor and all the liabilities of the Corporate Debtor got discharged. It is further averred that this Tribunal passed closure of the liquidation process of the Corporate Debtor on 22.06.2020. The Applicant had acquired all the assets which are part of the liquidation assets which are free from all encumbrances.

It is alleged that Respondent No.1, which is the lead member of the consortium, even after receipt of sale consideration is showing the Corporate Debtor as a will defaulter despite requests made by the Applicant to remove from the list of defaulters.

It is averred that the Applicant had sent reply to the demand notice dated 21.08.2020 issued by Respondent No.1 directing the Corporate Debtor to repay the loans, informing Respondent No.1 that he had acquired the Corporate Debtor under IBC in the liquidation process and hence Respondent No.1 cannot claim anything against the Corporate Debtor. When no reply was forthcoming from Respondent No.1, the Applicant herein issued legal notice dated 26.12.2020 asking Respondent No.1 to remove the Corporate Debtor from the defaulters list. In response, Respondent No.1 stated that they would not initiate any action against the Corporate Debtor, but would proceed against the erstwhile promoters of the Corporate Debtor.

It is contended that since the status of the Corporate Debtor is still reflecting as defaulter in the NeSL, the Applicant is unable to secure loans from any banks or financial institutions and start its commercial production.

It is alleged that Respondent No.1 is appropriating the following Income Tax Refunds received on various dates as under, despite requesting Respondent No.1 to refund the same stating the Corporate Debtor has no right over the refunds and receivables:-

It is further alleged that despite this fact being in the knowledge of Respondents 2 to 4, who are members of Stakeholders Committee, nothing was done and indirectly supported the acts of Respondent No.1.

The Applicant stated that all the required information, including KYC as required by Respondent No.1 were provided to facilitate the new management of the Corporate Debtor to operate the bank account maintained with 1^st Respondent. It is also alleged that the Respondents failed to release the mortgage on the assets of the Corporate Debtor even after receipt of the full consideration, which is causing hindrance in securing loans from bank to kick start the business.

It is further contended that the Applicant being an NRI, the Foreign Inward Remittance Certificate and KYC which are required for filing requisite returns with Reserve Bank of India, has not been issued by the 1^st Respondent so far, resulting in non-compliance of FEMA regulations by the Applicant. Thus submitting, the Applicant prayed the Tribunal for the following reliefs.

Per contra, the 1^st Respondent, contends that the Application is not maintainable as this Tribunal allowed closure of liquidation proceedings vide order passed on 22.06.2020 and therefore, this Tribunal has become “functus officio”.

The 1^st Respondent contends that the assets/receivables as claimed by the Applicant are not listed in the current assets of the Company as per the valuation reports and that the amount claimed by the Applicant pertains to Income Tax Refunds, which is prior to the sale of the Corporate Debtor to the Applicant, as such the new management has no right over the said amount and needs to be distributed amongst the financial creditors. Thus submitting, prayed the Tribunal to dismiss the petition.

There was no representation for Respondents 2 to 4. Hence, this Tribunal vide order dated 25.03.2022 have set these Respondents ex-parte.

In the above backdrop, the points that emerge for consideration of the Tribunal are; Whether the reliefs sought for by the Successful Bidder/Applicant herein can be granted?

We heard Shri S. Chidambaram, Ld. PCS for the Applicant and Shri V. Sethu Madhava Rao, Ld. Advocate for the 1^st Respondent Bank, perused the records and case laws.

With regard to the 1^st relief i.e. seeking directions to Respondent No.1 to return the Income Tax Refunds of Rs. 26,30,889/- and Rs. 1,43,438/- to the Applicant, the Ld. Counsel for the 1^st Respondent would contend that since the Tribunal allowed closure of the liquidation proceedings vide order dated 22.06.2020 and the assets/receivables claimed by Applicant are not listed in the current assets of the Company as per valuation report and the amount claimed by the Applicant pertains to the period prior to sale of the Corporate Debtor to the Applicant, as such the said relief cannot be granted. We find force in the said contention. Hence this relief hereby rejected.

In so far as the second relief is concerned, it is on record that the secured creditors pursuant to legal notice dated 26.12.2020 issued by the Applicant have stated that they will not initiate any action against the Applicant and would proceed against the erstwhile promoters. However, the 1^st Respondent has not stated anything as to the release of security interest in the assets of the Corporate Debtor and removal of the Corporate Debtor from NeSL portal and from credit rating agencies i.e. CIBIL, EXPERIAN, CRIF etc. We, therefore find it necessary to allow this reliefs, besides the reliefs sought for at point (iii) and (iv) with regard to issue of FIRC and KYC to Corporate Debtor to enable the Applicant to file returns with RBI and to accept the instructions issued by the duly constituted Board of Directors of the Corporate Debtor with regard to the bank accounts maintained by the Corporate Debtor with the Respondents.

Thus, we partially allow this Application and pass the following orders: