The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) has held that a Resolution Professional can only exercise control over the bank accounts of a corporate debtor, and not otherwise. [Beauty Etiole Pvt Ltd v. C Sanjeevi & 2 Ors]
The Bench of Justice M Venugopal and Kanthi Narahari thus set aside an order of the National Company Law Tribunal (NCLT) Chennai which allowed the RP to freeze the accounts of the appellant, a real estate developer. It held,
“....this ‘Tribunal’ is constrained to interfere with the said order, and sets aside the same because of the fact that the Respondent No.1/Resolution Professional, in Law has only an authority to exercise control over Bank Accounts operated by the ‘Corporate Debtor’ and not otherwise."
The corporate debtor had taken a loan from a bank to complete a real estate project. Due to default in payment, an RP was appointed, who ordered the bank to freeze all the bank accounts of the appellant, who was a third party developer, and deny him of any access.
The NCLT Chennai had partly accepted the appellant's point of view, but ordered the release 50% of the amount available in the bank accounts of the appellant without delving into the question of law as to whether the RP could order for freezing of such accounts, who was a third party developer appointed by the corporate debtor.
On appeal before the NCLAT, counsel for the appellant argued that the RP had issued a letter ordering the freezing of its bank accounts under the mistaken impression that the accounts in question belonged to the corporate debtor. It was also argued that the RP does not have any authority to freeze the bank accounts of the appellant.
Under Section 18(1)(f) of the Insolvency and Bankruptcy Code, 2016, an Interim Resolution Professional can take control and custody of assets over which the corporate debtor has ownership rights.
In view of this provision, the NCLAT set aside the order of the NCLT.
Senior Advocate Ramakrishnan Viraraghavan along Advocate Chetan Sagar represented the appellant. Advocate M Savitha Devi represented the respondent.
[Read the order]