Unclaimed Assets in Approved Resolution Plans Stand Extinguished and Vest Voluntarily in the Successful Resolution Applicant

Mangalam Global Enterprise Limited (the Appellant) is the Successful Resolution Applicant (SRA) of H.M. Industrial Private Limited (Corporate Debtor).

The Corporate Debtor entered CIRP on 07.06.2019, and a Resolution Plan was approved by the Adjudicating Authority (NCLT) on 20.09.2022.

Post-approval, the Appellant discovered a Fixed Deposit (FD) dated 09.03.2017 for Rs. 42 lakhs held with Bank of Baroda (Respondent No. 2) in the joint names of the Corporate Debtor and Catalyst Trusteeship Ltd. (Respondent No. 1/Debenture Trustee).

The Information Memorandum had listed FDRs under "Current Investments".

Respondent No. 1 refused to release the FD, claiming it was security for debentures.

The NCLT rejected the Appellant’s application to liquidate the FD, holding it was akin to "margin money".

The Appellant appealed, arguing that Respondent No. 1 never filed a claim during CIRP and no lien was ever marked on the FD.

The Court primarily applied Section 31 of the Insolvency and Bankruptcy Code, 2016, which mandates that an approved Resolution Plan is binding on all stakeholders.

It relied heavily on the "Clean Slate" doctrine established by the Hon’ble Supreme Court in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021), which holds that all claims not included in the Resolution Plan stand extinguished upon its approval.

Additionally, the court distinguished the principles of "margin money" as trust property, as previously discussed in Punjab National Bank v. Supriyo Kumar Chaudhari.

The Court observed that while the FD was not individually itemized in the Information Memorandum, it was included within the consolidated figure of "Current Investments" in the balance sheets.

Crucially, the Bank of Baroda filed an affidavit confirming that no lien or charge had been marked on the FD, and the physical FD receipt showed the "Lien" columns were blank.

The Court determined the FD was not "margin money" because it was not earmarked for a specific beneficiary or obligation (like a Letter of Credit) but remained an asset of the Corporate Debtor.

Regarding Respondent No. 1's claim, the Court noted they failed to file any claim with the Resolution Professional during the CIRP.

Applying the Ghanashyam Mishra ratio, the Court reasoned that allowing a "surprise claim" over the FD after the Plan’s implementation would defeat the purpose of the IBC, which requires the SRA to start with a "clean slate".

The Court held that the FD constituted an asset of the Corporate Debtor and any security interest claimed by Respondent No. 1 stood extinguished due to their failure to file a claim and the lack of a registered lien.

The Court directed Bank of Baroda (Respondent No. 2) to liquidate the FD dated 09.03.2017 and transfer the principal amount of Rs. 42 lakhs, along with all accrued interest, to the Appellant.