Pranav B Prem

The National Company Law Tribunal, Hyderabad Bench, comprising Justice Rajeev Bhardwaj (Judicial Member) and Sanjay Puri (Technical Member), has held that lease rentals and processing fees accruing during the Corporate Insolvency Resolution Process (CIRP) prior to the vesting date belong to the financial creditor and cannot be claimed by the Successful Resolution Applicant (SRA). The Tribunal clarified that such dues, being part of the corporate debtor’s CIRP-period income, must be paid to the secured financial creditor—here, State Bank of India (SBI)—in accordance with the terms of the approved resolution plan.

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The proceedings arose from a loan of ₹33.5 crore granted by SBI to the corporate debtor, which secured the loan by leasing its marine processing unit to Sumit Marine Exports Pvt. Ltd. under a lease agreement and Memorandum of Understanding. The agreement required payment of monthly lease rentals of ₹2,00,000 and processing fees of ₹43,00,000, with a 5% annual escalation. These amounts were required to be deposited directly into SBI’s account and were duly adjusted towards outstanding dues until June 2022.

Once CIRP began, the Resolution Professional opened a separate account in the corporate debtor’s name at SBI, and Sumit Marine continued depositing lease payments until July 2023. The resolution plan was approved on 13 October 2023, making Sumit Marine the Successful Resolution Applicant and the plan’s vesting date.

SBI subsequently filed an application seeking payment of ₹74,56,673, reflecting lease rentals for the period 1 August 2023 to 13 October 2023, contending that these dues formed part of CIRP-period income payable to the financial creditor. SBI argued that the obligation to remit lease rentals continued until the plan’s approval, and nothing in the change of legal position of the lessee removed this obligation. It added that the resolution plan expressly provided that all balances lying in the corporate debtor's account on the vesting date must be handed over to SBI.

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The SRA, however, contended that once the plan was approved, all balances in the corporate debtor’s bank account vested in the SRA and that any claim not expressly included in the resolution plan stood extinguished under the Supreme Court’s ruling in Ghanshyam Mishra & Sons v. Edelweiss ARC (2019). The SRA argued that lease rentals payable to SBI were not specifically mentioned in the plan and thus stood wiped out.

Rejecting these arguments, the Tribunal observed that the resolution plan explicitly provided that the balance in the corporate debtor’s account as on the vesting date must be transferred to SBI, leaving no ambiguity regarding entitlement. The Tribunal emphasized that the claim pertained to income earned during the CIRP period and that the SRA could not retain this amount without causing unjust enrichment, especially because the SRA had themselves admitted liability for the lease dues in their affidavit.

The Bench relied on key rulings, including CoC of Essar Steel v. Satish Kumar Gupta (2019) and JSW Steel Ltd. v. Mahender Kumar Khandelwal (2020), reiterating that profits or income earned during CIRP—including operational revenues like lease rentals—must be distributed in accordance with the Resolution Plan and the Request for Resolution Plan (RFRP).

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The Tribunal further warned that accepting the SRA’s position would create a loophole, allowing incoming resolution applicants to manipulate the timing of payments during CIRP to wrongfully appropriate money belonging to creditors. Such an outcome would undermine the structure of the IBC and the purpose of CIRP. Holding that the dues indisputably arose during the CIRP and before the vesting date, the Tribunal ruled that the entire amount of ₹74,56,673 belongs to SBI, and the SRA is obligated to remit it accordingly. The application was thus allowed in SBI’s favour.

Appearance

For the Applicant: Mr. GP Yash Vardhan and Mr. G. Srikanth

For Respondent No.1 & 3: Mr. Y. Suryanarayana

Cause Title: State Bank of India v. Summit Marine Exports Pvt. Ltd. & Ors.

Case No: IA (IBC)/1025/2024 in CP (IB)/320/9/HDB/2021

Coram: Justice Rajeev Bhardwaj (Judicial Member), Sanjay Puri (Technical Member)