NCLT Bengaluru Holds Bank Cannot Retain Title Deeds After Full Payment of Resolution Plan Dues

The National Company Law Tribunal (NCLT) at Bengaluru has held that a bank that has received the full amount payable under an approved resolution plan cannot continue withholding a corporate debtor's title deeds and security documents.

The tribunal held that the pendency of an appeal concerning an interest dispute is not, by itself, a valid reason to retain those documents.

A bench of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada directed Kotak Mahindra Bank to hand over the original title deeds, security papers and charge release documents relating to the Arun Aurovilla project within 15 days.

“The respondent bank having received full payment under the approved resolution plan has no basis to retain custody of title documents and other securities of project Arun Aurovilla of CD. Only because the issue of payment of interest is still live in an appeal, does not provide foothold to the respondent not to part with the custody and control of vital documents unto the applicant,” the tribunal held.

The insolvency proceedings against Arun Shelters commenced in January 2020 on Kotak Mahindra Bank's application. A resolution plan submitted by the successful resolution applicant was later approved by the committee of creditors.

The tribunal approved the plan in November 2022.

While approving the plan, the tribunal recorded that the bank would retain charge over the land and building of the Arun Aurovilla project. It also recorded that the charge would be released once full payment was made under the plan.

According to the successful resolution applicant, it paid ₹53.42 crore to creditors, including the bank. There was, however, a dispute regarding the applicability of interest under the resolution plan.

To avoid any default in implementation of the plan, the applicant also remitted about ₹4.55 crore towards interest. The payment was made under protest.

After making the payments, the applicant sought release of the title deeds and security documents. The bank declined to hand over the papers. It maintained that proceedings concerning the interest dispute and a challenge to the resolution plan were still pending.

The tribunal noted that the disputed interest amount had already been paid to the bank. It further noted that the payment had been made under protest while the appeal on the issue remained pending before the appellate tribunal.

“Whatever be the outcome of appeal, the respondent bank will have to return the title documents and other securities papers along with charge release report over the land and building of project of Corporate Debtor, with or without the component of interest. Given this proposition the respondent is not going to be prejudiced in any manner on the Title papers being released to the applicant, the rightful holder thereof by virtue of acceptance of his Resolution Plan, after receiving its shareunder the plan,” it observed.

Allowing the application, the tribunal directed Kotak Mahindra Bank to hand over the original title deeds, other security documents, and charge release papers pertaining to the Arun Aurovilla project. The exercise must be completed within 15 days.

For Applicant: Advocate Srinandan K

For Respondent: Advocate V.J Achalanand