NCLT reserves order on resolution professional plea in Ruchi Soya case

Ruchi Soya Industries, undergoing insolvency proceedings, has filed an application against ICICI Bank at the Bench here of the National Company Law Tribunal (NCLT), seeking to reverse a Rs 480-million debit made by the lender from the company’s current account. 

Ruchi Soya had debt of around Rs 120 billion as of December 31, 2017, and was admitted for the Corporate Insolvency Resolution Process (CIRP) on December 8, under the Insolvency and Bankruptcy Code (IBC). 

Senior counsel Navroz Seerwai, appearing for the Resolution Professional (RP) appointed in the case, told the Bench the debit had been made from the company’s  current account during the moratorium period. 

The bank had then passed the money to third parties without permission of the RP. Financial institutions cannot take such a decision without the Committee of Creditors’ (CoC's) consent to (unilaterally) reduce their exposure. This is restricted by Section 14 of the IBC, he told the Bench. 

The moratorium order was given by the NCLT on December 15.

Section 14 of the Code allows the NCLT to do so, prohibiting an initiation of suits or continuation of pending suits or proceedings against the corporate debtor And, restricting the corporate debtor and its RP from transferring, encumbering, alienating or disposing of any of asset or beneficial interest.

The bone of contention is that Ruchi Soya had approached the bank for fresh Letters of Credit (LCs), honoured by the latter on December 16 and then again on December 18, after the moratorium period commenced. 

Senior counsel Zal Andhyarujina, appearing for the bank, told the bench the lender was not aware of the moratorium order of  December 15 when it had honored the LCs. And, that the RP had only e-mailed the bank on December 19, instructing it to not debit any money from the current account. 

Further, public announcement of the moratorium order only appeared on December 25, he said.

As for Section 14, contended Andhyarujina, it says the moratorium is firmly placed on the corporate debtor only, not on other parties. Additionally, since the money debited belonged to the bank and was passed to a third-party(s), the NCLT’s moratorium and the CIRP of Ruchi Soya did not apply to the case at hand.

ICICI has application for claims of around Rs 4.86 bn to the CoC.

The bench of Ravikumar Duraiswamy and B S V Prakash Kumar reserved their order in the matter, stating they did not want to give a ‘U-turn’ to the proceedings and developments in other IBC cases. At the next hearing, the bench will announce whether ICICI violated the rules of the moratorium and if it should reverse the Rs 480-mn debit.