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2023 Supreme(Online)(NCLT) 1033
NATIONAL COMPANY LAW TRIBUNAL
HARNAM SINGH THAKUR, SUBRATA KUMAR DASH, JJ
TBEA Energy India Private Limited – Appellant
Versus
M/s. Isolux Corsan India Engineering and Construction Private Limited – Respondent
CA No.552/2019 | CA No. 555/2019 | IA No. 1002/2023 | CP (IB) No. 97/Chd/Hry/2018
For the Appellants/Petitioners:Mr. Abhinav Mishra, Advocate, Ms. Nivedita Chauhan, Advocate, Ms. Jagriti Dosi, Advocate, Ms. Komal Singh, Advocate
For the Respondents:Mr. Vipul Joshi, Advocate, Mr. Vinam Gupta, Advocate
Funds in an Escrow Account are not part of the corporate debtor's liquidation estate and must be returned to the beneficial owner upon fulfilling contractual obligations.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 60(5), 17, 18, 20, 25, 33, 35 - Applications concerning the release of funds from an Escrow Account - TBEA claims entitlement to INR 67,49,465 from the Escrow Account post the Corporate Debtor’s liquidation - The judgment clarifies that the funds in the Escrow Account are held in trust and therefore not part of the liquidation estate - Obligations under the Supply Agreement and Escrow Agreement specified - Liquidator directed to verify the claims of TBEA within 30 days. (Paras 7, 19, 20)
(B) The nature of the Escrow Account - Funds become part of the Escrow only upon compliance with conditions defined in the agreement - Principle established that moneys held in escrow are not included in the debtor's estate due to a lack of equitable interest. (Paras 29, 30)
(C) Section 53 of the Code - Jurisdiction of liquidator only extends to assets within the liquidation estate; assets in escrow agreements belong to the beneficial owner upon completion of contractual obligations. (Paras 19, 26)
| Table of Content |
|---|
| 1. arguments regarding the claims on the escrow account. (Para 4 , 5) |
| 2. clarification of procedural issues raised by parties. (Para 6) |
| 3. hdfc's obligations as escrow agent. (Para 8) |
| 4. arguments from tbea regarding escrow account handling. (Para 10) |
| 5. application filed for additional submissions. (Para 11) |
ORDER
CA Nos. 552/2019 and 555/2019 are applications filed by the Corporate Debtor (M/s. Isolux Corsan India Engineering and Construction Private Limited,) and the EPC contractor (TBEA), with both laying claim on the amount lying in the Escrow account maintained with the HDFC Bank. Subsequently, IA No. 1002/2023 was filed to place on record certain facts connected with the aforementioned two applications These applications, being interconnected, are taken up together for discussion.
CA No.552/2019, 555/2019 &
IA No. 1002/2023 CA No. 552/2019
2. The instant Application has been filed u/s 60(5) of the Insolvency and Bankruptcy Code (Hereinafter referred to as “the Code”) read with Rule 11 of the National Company Law Tribunal Rules, 2016, seeking the declaration from this Tribunal that the applicant, i.e, TBEA (Hereinafter referred to as “TBEA”), be allowed to receive the amount to the extent of INR 67,49,465 which is lying in the Escrow Amount created under the Escrow Agreement dated 18.03.2016.
3. A summary of the facts as stated by the applicant is as below;
3.1 M/s Isolux Corsan India Engineering & Construction Pvt Ltd, i.e., the Corporate Debtor (for brevity hereinafter referred to “Isolux” or the “CD”) was engaged as an EPC (E ngineering, Procurement, and Construction) Contractor qua the construction and execution of the UP-BOOT Project wherein Isolux came into a contract with SEUPPTCL (South East U. P. Power Transmission Company Limited) on “BOOT” basis (Build, Own, Operate, Transfer) to establish the transmission system for 765 KV S/C Mainpuri- Bara Line with 765 KV/400 KV AIS at Mainpuri and Associated Works.
3.2 In furtherance of the EPC Contract, the Corporate Debtor and TBEA entered into an agreement for the Supply of 765 KV 80 MVAR Single Phase Shunt Reactors for the Mainpuri Sub-Station Project under the mentioned UP-BOOT Project on 30.10.2014 (hereinafter referred to as the “Supply Agreement”).
3.3 Post the execution of the Supply Agreement, the Corporate Debtor issued 2 (two) Work Orders dated 11.10.2014 and 30.10.2014 to CA No.552/2019, 555/2019 &
IA No. 1002/2023 TBEA, one for Civil Works and the other qua Erection, Testing, and Commissioning Services, respectively.
3.4 Subsequently, the parties mutually agreed to open an Escrow Account by entering into an Escrow Agreement dated 18.03.2016, being a Tripartite Agreement between the Corporate Debtor, TBEA, and HDFC Bank (being the Escrow Agent) in order to discharge the payment obligations of the Corporate Debtor, wherein it was agreed that the Corporate Debtor would deposit an amount of INR 25, 59, 41, 202/- (Indian Rupees Twenty-Five Crores Fifty-Nine Lakh Forty One Thousand Two Hundred and Two Only) in the Escrow Account, which shall be payable upon receipt of release notices in terms of Article 4 of the Escrow Agreement.
3.5 A sum of INR 23,03,06,428/- (Indian Rupees Twenty-Three Crores Three Lakh Six Thousand Four Hundred and Twenty-Eight Only) out of the total amount of INR 25, 59, 41, 202/- has been duly paid by the Corporate Debtor to the TBEA for the execution of works under the Supply Agreement.
3.6 After the initiation of CIRP on 11.10.2018 the RP issued a recovery notice to TBEA demanding payment of INR 1, 02, 09, 042/, claiming the same to be the assets of the Corporate Debtor as being reflected in its books of accounts.
4. In its reply to the above notice TBEA claimed that an amount of INR 67, 49, 465/- belonging to TBEA has been withheld in an Escrow account bearing No.
04290310000385 in its name, maintained with the HDFC Bank Limited.
CA No.552/2019, 555/2019 &
IA No. 1002/2023 a. It is submitted that the RP in terms of the discussion and decision
