Bank Cannot Retain OTS Earnest Money After Accepting Insolvency Resolution Plan: NCLT Mumbai

The National Company Law Tribunal (NCLT) Mumbai ruled that Bank of India cannot retain ₹1.51 crore deposited as earnest money under a failed One-Time Settlement (OTS), once it has accepted the approved resolution plan and issued a No-Dues Certificate for the corporate debtor. 

Tribunal Orders Return of ₹1.51 Crore Post Resolution Approval 

In the matter involving Pranav Constructions System Pvt Ltd, the NCLT held that Bank of India must return ₹1.51 crore that had been deposited as OTS earnest money.  

The decision was based on the fact that the bank accepted full consideration under the resolution plan submitted by J Kumar Infraprojects Ltd, the successful resolution applicant (SRA), and later issued a No-Dues Certificate in April 2024. 

The amount in question had been deposited during February and March 2021 in a no-lien account. However, the OTS did not proceed due to the initiation of the Corporate Insolvency Resolution Process (CIRP) on March 11, 2022. 

Moratorium Prevents Bank from Holding Additional Debtor Funds 

Having voted in favour of the resolution plan and accepted ₹20.80 crore as settlement, the bank was found to be estopped from asserting any further rights to the ₹1.51 crore post-CIRP commencement. The tribunal observed that any pre-existing arrangements like the OTS became ineffective once the moratorium under Section 14 took effect. 

The bench comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar emphasised that the resolution plan binds all parties and precludes any subsequent claims not resolved under it. 

Read More: India Electronics Manufacturing Grows Sixfold in 11 Years, Exports Eightfold to ₹3.26 Lakh Crore! 

Fixed Deposits for Employee Dues Remain with Bank 

The tribunal also examined 2 fixed deposits, ₹55 lakh and ₹1.08 crore respectively, created during the CIRP to provision for provident fund and gratuity liabilities. While ordering the earnest money to be refunded within 4 weeks with accrued interest, the tribunal allowed the bank to retain these fixed deposits until the respective dues are fully verified and discharged. 

Conclusion 

The NCLT decision underscores that once a resolution plan is implemented and duly accepted, no further independent claims by financial creditors over the corporate debtor’s assets are permissible, reaffirming Section 14 moratorium provisions. 

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