Amount lying in No Lien Account is asset of corporate-debtor if OTS not materialized-NCLAT Rules Against BOI

Bank of India Vs Naren Sheth (NCLAT Delhi)

In a recent ruling, the Delhi bench (NCLAT) while dismissing the appeal of the bank have held that Once the CIRP was initiated, the amount lying in the “No Lien Account”, is an asset of the Corporate Debtor if OTS did not materialize.

The application for initiation of CIRP was allowed and the Corporate Debtor, M/s Jaybharat Textiles & Real Estate Ltd. was admitted into CIRP on 03.01.2020. The IRP called for the claims and thereafter constituted COC (Committee of Creditors).  IRP initiated steps to takeover the assets of the Corporate Debtor as per section 18 IBC. The IRP corresponded with the Appellant bank to allow the operation of “No Lien Account” and requested to release of the amount of Rs. One crore held in the said account for the purpose of CIRP, but the Appellant refused to release it.

The Appellant-bank filed its claim as a Financial Creditor which was admitted by the IRP. Since the Appellant was not releasing the said amount and was not allowing operation of the Bank account, the RP filed IA for release of the said amount lying in “No Lien Account” which was allowed by the Adjudicating Authority. Bank being part of COC has put forth its claims which were admitted. It was not shown that claim which is made before COC is minus this amount received by way of OTS. Thus, when the claim of the members has already been considered during the CIRP period by the COC, under such circumstances, the Bank of India cannot claim or detain this amount paid against the OTS by the Corporate Debtor. In that event, the Bank would be doubly benefited.