2025 (2) TMI 593 - AT - IBC

Ownership of machinery in the context of insolvency proceedings - It is alleged that the machinery was given on lease to the CD and since it was only a transfer of interest therefore it does not amount to transfer of ownership - HELD THAT - It is pertinent to mention that CD had already executed hypothecation cum loan agreement on 06.06.2014 with the FC whereby the machinery alongwith other machines were hypothecated. The FC had created charge over machinery much prior to the hypothecation in favour of IndusInd Bank by the Appellant which is otherwise not permissible much less without making intimation or taking approval from the FC because such hypothecation was clearly bad in law. It is also pertinent to note that application under Section 7 for initiation of CIRP had been filed by FC on 04.02.2019 and after its filing the Appellant designedly included a journal entry dated 31.03.2020 on the basis of which the machinery was taken out from the books of the CD to avoid the asset going to the hands of the creditors of the CD and as soon as the RP came to know about it the application bearing I.A No. 787 of 2023 was filed. The basic argument of the Appellant is that the machinery was leased out to the CD has to be established by way of a lease deed because it is a transaction between two companies and the lease amount has also to be mentioned but neither the lease deed nor the amount of lease has seen the light of the day rather the CD had hypothecated the machinery with the FC while securing the loan in terms of the loan agreement dated 06.06.2014 and in terms of clause 5(a)to(c) of the said hypothecation agreement CD has created charge in respect of the machinery and a declaration has been made by the CD that the machinery has already been acquired and shall form part of prompters contribution to the loan sanctioned by FC. The last but not the least the CD had admittedly claimed depreciation on the machinery as an owner because a lessee cannot claim depreciation. Conclusion - i) The machinery rightfully belonged to the CD and should be included in the resolution plan. ii) The depreciation benefits under income tax law are applicable to asset owners not lessees. There are no error in the impugned order which calls for any interference by this Court in this appeal. Hence both the appeals are found to be devoid of merit and the same are hereby dismissed.

Summary

The National Company Law Appellate Tribunal, in a judgment delivered by Justice Rakesh Kumar Jain, considered two appeals related to the ownership of machinery in the context of insolvency proceedings. The appeals involved disputes between Saturn Ventures & Advisors Pvt. Ltd., Satish Gopinath, and the Resolution Professional (RP) regarding the inclusion of machinery in the resolution plan of Agrasen Engineering Industries Pvt. Ltd. (SRA).**Issues Presented and Considered:**1. Whether the machinery owned by Saturn Ventures & Advisors Pvt. Ltd. can form part of the resolution plan submitted by SRA.2. Dispute over ownership of the machinery and its inclusion in the Information Memorandum (IM) and resolution plan.**Issue-Wise Detailed Analysis:**- The Appellant claimed ownership of the machinery based on purchase invoices and loan agreements.- The RP argued that the machinery was hypothecated by the Corporate Debtor (CD) and included in its balance sheet.- The Tribunal examined evidence including financial statements, loan agreements, and transaction audit reports.- The Appellant's contention of leasing the machinery to the CD was refuted due to lack of lease deed and accounting disclosures.- The Tribunal found that the machinery belonged to the CD based on the RP's evidence and reversed a fraudulent journal entry removing the machinery from CD's books.- The Tribunal highlighted discrepancies in the Appellant's claims and upheld the RP's arguments regarding ownership.**Significant Holdings:**- The Tribunal dismissed both appeals, concluding that the machinery rightfully belonged to the CD and should be included in the resolution plan.- The judgment emphasized the importance of documentary evidence and adherence to legal requirements in determining ownership rights.- The decision reaffirmed the principle that depreciation benefits under income tax law are applicable to asset owners, not lessees.In summary, the Tribunal's judgment resolved the ownership dispute over the machinery, affirmed the RP's position, and dismissed the appeals for lack of merit. The case underscores the significance of proper documentation and compliance with legal standards in insolvency proceedings.