TMI Blog2017 (10) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... ove. In view of the above observations, the application is disposed of. The amount to the extent of 98.181879% lying in the escrow account be released to the applicant within a period of four weeks from today. - CO.PET. 329/2013, CA Nos.36/2016, 419/2016, 931/2016, 1622/2016, 2119/2016, 2421/2016, 2423/2016, 3733-3735/2016, 4075/2016, 4623/2016, 38/2017, 1065/2017, 1071/2017, 1456/2017, OLR Nos. 134/2016, 220/2016, 254/2016, 160/2017 - - - Dated:- 17-10-2017 - MR. YOGESH KHANNA J. Petitioner Through: Mr. L.K. Bhushan, and Ms.Raashi Beri, Advocates. Respondents Through: Ms. Diya Kapur, Mr. Rishabh Sharma, Advocate for ex-management. Mr. Harpreet Singh, Senior Advocate with Ms. Namrata Bharti, advocate for service tax department. Ms. Nidhi Jain Advocate for respondent no.2. Ms. Usha Singh advocate in CA No.1071/2017. Mr. Anil K Batra, Mr. Lakhi Singh, Advocate in CA No. 419/2016. Mr. John Mathew, Advocate in CA No. 1456/2017. Mr. Sahil, Advocate for Bank of Baroda. Mr. Vipin Jai, Advocate for PNB. Mr. Avnnish Kumar, Advocate for Andhra Bank. Mr. Jaswinder Singh, Advocate for Central Bank of India. Mr. Kunal Sharma, Advocate for Official Liquidator. Mr. Atul Sharma, Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Account Bank to receive the collections into the Escrow Account and transfer the clear credit balance at the end of Business Hours on each Business Day as per the written instructions given by the authorized signatories of Tulip and Vayam jointly. g) the applicant has filed the statement of escrow account along with its application showing the amount so received in the Escrow account from MPED was distributed between the parties in the ratios agreed; h) the parties have been distributing the money coming to their escrow account in the manner stated above, but in the year 2013, a liquidation petition came to be filed against the respondent company wherein on 12.02.2015 provisional liquidator seized the assets including the escrow account which has an amount of ₹ 3,02,32,817/- as on 01.01.2016; i) the agreement between the MPED and the respondent stood completed and a completion certificate dated 17.07.2015 was issued by the Excise Commissioner, Madhya Pradesh, Gwalior; j) a copy of a letter dated 20.11.2014 of the Income Tax Department also notes the modes of distribution of the money lying in Escrow Account; k) on 09.01.2017 the Official Liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide this controversy one need to know the nature of Escrow Account, for which, one may refer to Homer City Generation, L.P. v. EME Homer City Generation L.P. decided by United States Bankruptcy Court for the Northern District of Illinois Eastern Division in case No.12-49219 decided on 16.02.2014 wherein the nature of escrow account was discussed:- III. Even If EMEHC Holds An Interest In The Surety Cash Which It Does Not The Cash Is Still Not Property Of EMEHC S Estate. Even if this Court were to decide that EMEHC held some sort of legal interest in the Surety Cash (a conclusion that HCG strenuously disputes), EMEHC does not have an equitable interest in the Surety Cash, and thus the Surety Cash is not properly part of EMEHC s estate. Section 541(d) of the Bankruptcy Code provides that property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest becomes property of the estate only to the extent of the debtor s legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold. 11 U.S.C. 541(d) EMEHC conveyed all of its right, title and interest in the Sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfy certain requirements in order to create a valid escrow. First, the parties must agree to the terms that govern the use of the particular account. In re Royal Business School, Inc., 157 B.R. at 939. Second, the funds must be delivered to a third party with transfer to the grantee conditioned upon the performance of some act or the occurrence of some event. Id. Third, [i]n order to effectuate the escrow, the agreed-upon conditions must be fulfilled. Id. Finally, after the requisite conditions are satisfied, an escrow can be fully transferred to the grantee. Il. Funds become part of the escrow, and cease to be property of the debtor, when the debtor deposits funds into the account. See In re Anthony Sicari, Inc., 144 B.R. at 661. 6. In Reserve Bank of India V. Bank of Credit and Commerce International, Overseas Ltd. and Anr. 1992 SCC Online Bom 528 it was held as under:- 33. In my judgment, the following propositions of law clearly emerge from the relevant case-law cited by learned counsel and on a study of the relevant legal literature with the assistance of learned counsel: (a) Ordinarily, there is a relationship of debtor and creditor between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a charitable society had been merged 8. The judgments cited above would reveal the nature of the funds kept in Escrow Account. The bank in such cases only act as a trustee and once the fund become a part of Escrow the debtor holds on to the money only to the extent of its legal title and not to the extent of any equitable interest in such property which the debtor does not hold. 9. Now, the liquidator was appointed in this case in February, 2015 but whereas the parties have been working since 2009. Though the contract, undoubtedly, was offered to the respondent company but was to be completed by the applicant as is revealed by the fund sharing agreement. On 3.11.2009 the respondent company had entered into a contract with MP Government, but two months prior thereto on 3.9.2009 it had a teaming contract with applicant herein and then on 25.09.2010 executed an escrow agreement. Both the parties have been sharing the funds since 2009 as per the agreement(s). Admittedly, funds lying in the Escrow Account till February, 2015 were disbursed amongst the respondent and the applicant herein in the manner agreed upon. The company though went in liquidation but the applicant still w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Project may be continued to be made to the Escrow Account as' per this Agreement according to which Vayam Technologies ltd is entitled to receive its share. 14. Needless to say vide its letter dated February, 2017 (Annexure AR/2) the MP Government has now awarded the further contract to applicant herein for 12 months. 15. The circumstances reveal the work was actually completed by the applicant herein and the role of the respondent company was merely to obtain the contract from Madhya Pradesh Government and to hand it over to the applicant. The principal employer recognized the applicant to be responsible for completion of the contract and even the Income Tax Authority did not attach the share of the applicant lying in the escrow account as the respondent could hold on to the money lying in the escrow account only to the extent of its legal title being 1.181821%; the Axis Bank being a trustee was thus obliged to release the balance amount lying in the escrow account in favour of the applicant herein. The liquidation would not come in the way of the applicant to receive the amount to the extent of its share to which it is entitled, per the teaming agreement(s) referred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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