NCLAT (18.06.2020) in Srikanth Dwarakanath Liquidator of Surana Power Limited Vs. Bharat Heavy Electricals Limited [Company Appeal (AT) (Insolvency) No. 1510 of 2019] held that;
The Respondent does not hold a superior charge from the rest of the Secured financial creditors in the secured Assets. The above provision of SARFAESI Act [Section 13(9)] will be applicable in this case to end this deadlock, and the decision of 73.76% of majority Secured Creditors, who have relinquished the Security Interest shall also be binding on the dissenting secured creditors, i.e. Respondent.
Liquidator has already concluded that the respondents charge on the Secured Assets is not exclusive. Therefore, the Respondent can realise a Security Interest as per provision Section 13(9) of the SARFAESI Act. Since the Respondent does not have a requisite 60% value in Secured Interest, therefore, the Respondent does not have right to realize its security interest, because it would be detrimental to the Liquidation process and the interest of the remaining ten Secured Creditors.
Excerpts of the order;
This Appeal emanates from the Impugned Order dated 20th November 2019 passed by the Adjudicating Authority/National Company Law Tribunal, Chennai Bench, Chennai, whereby the Adjudicating Authority has dismissed the Miscellaneous Application No.1052 of 2019 in Company Petition (IB) No. CP/646/CB/2017 for seeking permission to cause the sale of assets of the Surana Power Limited in Liquidation under Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016, based on the consent given by a majority of Secured creditors. The Parties are represented by their original status in the main petition for the sake of convenience.
# 2. Brief facts of the case are as follows:
The Adjudicating Authority has admitted the Company Petition mentioned above under Section 9 of the Insolvency and Bankruptcy Code, 2016 (in short 'I&B Code') for initiation of CIRP vide Order dated 20th January 2019. When no resolution was approved, then Corporate Debtor was ordered to be liquidated, and Appellant was appointed as Liquidator. After that during liquidation, the Respondent succeeded in Arbitration proceeding against the Corporate Debtor and ex parte award was passed in favour of the Respondent. Based on the Arbitral Award the Respondent had been granted lien over the equipment and goods lying at the site of the Corporate Debtor (Secured Assets) and charged over its entirely or partially erected facilities at the site of the Corporate Debtor was created. The Secured Assets, on which the Respondent had been granted lien or a charge is the one which is already hypothecated to all other Secured Creditors vide Hypothecated Deed dated 24th September 2010.
# 3. The Liquidator could not commence a liquidation process on account of the some of the secured lenders not intimating in time about their decision concerning relinquishment of their securities. The Respondent is one of the last Secured Creditor who remain to intimate about the decision on relinquishment.
# 4. After that vide letter dated 23rd August 2019 the Respondent informed about unwillingness to relinquish their Security Interest in the Asset of the Corporate Debtor. Further, all the Secured Creditors have relinquished their Security Interest into the liquidation estate of the Corporate Debtor except the Respondent. Consequently, the Secured Creditors with a value of 73.76% of the secured assets have relinquished the Security Interest into the liquidation estate. However, the Liquidator was unable to proceed with any further sale of assets without the receipts of relinquishment of Security Interest from all the Secured Creditors to whom the said assets are charged. In the circumstances, as stated above, the Liquidator filed a Misc. Application No.1052 of 2019 seeking permission from the Adjudicating Authority to sell the assets of the Corporate Debtor. The said Application was rejected by the Adjudicating Authority by the Impugned Order, feeling aggrieved by this Order; this Appeal has been preferred.
# 5. This Appeal has been filed mainly on the ground that:
i) That the Adjudicating Authority has failed to appreciate that ten out of eleven Secured Creditors, representing together 73.76% (in value of the admitted claims) of the total Secured assets have relinquished their Security Interest into the liquidation estate and only because of the Respondent, who has decided not to relinquish its Security Interest, the Liquidator is unable to proceed any further with the sale of assets.
ii) The Adjudicating Authority has further failed to appreciate that the Secured Creditors other than the Respondent had a prior charge over the Secured Assets by a deed of hypothecation executed in the year 2010 i.e. much before the Arbitral Award dated 24th January 2018.
iii) It is further contended that the Adjudicating Authority has failed to consider that the Secured Assets on which the Respondent has a lien or a charged are also hypothecated to all other Secured Creditors vide Clause 3(vii) of the Deed of Hypothecation dated 24th September 2010.
iv) The Adjudicating Authority has failed to appreciate that the Code does not provide for different categories of Secured Creditors neither based on nature of Charge/Security Interest nor based on the ranking of the respective charge.
v) The Adjudicate Authority has also failed to appreciate that the Appellant/Liquidator is to attempt to undertake the sale of the Corporate Debtor on a slump sale basis, which is not possible if the Security Interest of the Respondent is not relinquished.
vi) The Respondent in its Written Submissions contends that the Respondent has exercised its rights in terms of Section 52 of the Code. Under Section 52(1)(b) Respondent chose to realize its security interest as per provision of Section 52(iv) of the Code. The Respondent’s right under Section 52 is unqualified and unbridled. It is further contended that exercise of the Respondent's right under Section 52 cannot be subjected to the majority of the Secured Creditors, who have relinquished their Security Interest. It is also contended that the Corporate Debtor never acquired unencumbered right, title or interest in the goods. Consequently, the hypothecation of the goods by the Corporate Debtor to the Banks would always be subject to the Respondent's lien.
# 7. The Learned Adjudicating Authority has rejected the Application mainly on the ground that BHEL is a Secured Creditors, entitle to proceed under Section 52 to realize its Security Interest. The Appellant Liquidator cannot cause the sale of asset filing under Section 52 in the manner as specified under Section 53 of the Code unless the charge holder relinquishes the Security Interest.
# 8. It is essential to point out that all the Secured Creditors having a value of 73.76% in the Secured Assets have relinquished their Security Interest to the liquidation estate to the Corporate Debtor, to enable the Liquidator to proceed under Regulation 32 of the IBBI (Liquidation Process), Regulations, 2016 and dispose of the assets of the Corporate Debtor. However, on account of the Respondent refusal to relinquish its Security Interest and in the light of the proviso to Regulation 32, the Liquidator can sell the Assets on the receipt of the relinquishment of Security Interest by all the Secured Creditors having charge over the Secured Assets.
# 10. The Adjudicating Authority has held that the Respondent's lien has a preference over the charge created in favour of the remaining Secured Financial Creditors.
# 14. In this case, the Respondent happens to be a Secured Operational Creditor by an Arbitral Award dated 24th January 2018 by which the Respondent claims lien over the supplied equipment and goods lying at the site of the Corporate Debtor. It is important to mention that soon after passing this Award, CIRP started against the Corporate Debtor. Admittedly, all other Secured Creditors (Financial Creditors) relinquished their Security Interest to the liquidation estate. But a deadlock situation is created because the Respondent refuses to relinquish its Security Interest. Therefore, in the light of proviso to Regulation 32 to the Liquidation Process Regulation, the Liquidator cannot proceed to sell the assets of the Corporate Debtor, despite more than 73% of the Secured Creditors having relinquished their Security Interest.
# 15. It is pertinent to mention that the Respondent is also a Secured Creditor at par with the remaining ten other Secured Creditors. Enforcement of security interest is governed by the SEC 13 of the SARFAESI Act. As per terms of Section 13(9) of the SARFAESI Act, 2002 any steps about the realization of assets by the Secured Creditors requires confirmation from the Creditors having at least 60% of the value of total debt. The relevant provision is as under:
9) Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than [sixty per cent] in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors:
# 16. In the present case, the Secured Creditors which 73.76% in value have already relinquished the Security Interest into the liquidation estate. Thus, it would be prejudicial to stall the liquidation process at the instance of a single creditor having only 26.24% share (in value), in the secured assets. The Respondent does not hold a superior charge from the rest of the Secured financial creditors in the secured Assets. The above provision of SARFAESI Act will be applicable in this case to end this deadlock, and the decision of 73.76% of majority Secured Creditors, who have relinquished the Security Interest shall also be binding on the dissenting secured creditors, i.e. Respondent.
# 17. Learned Counsel for the Respondent has placed reliance on the decision of the Hon'ble Tribunal passed in case of JM Financial Asset Reconstruction Company Ltd. Vs. Finquest Financial Solutions Pvt. Ltd. and Others [Company Appeal (AT) (Insolvency) No. 593 of 2019].
# 18. In the above mention case, this Appellate Tribunal has held that:
33. Sub-section (7) of Section 52 provides that after enforcement of 'security interest' under sub-section (4) of Section 52, if an amount by way of proceeds is in excess of the debts due to the 'Secured Creditor', the 'Secured Creditor' is required to deposit the same in the account of the Liquidator.
34. Therefore, it is clear that after enforcement of right under Section 52 by one of the 'Secured Creditor', no other 'Secured Creditor' can enforce his right subsequently for realization of the amount for the same secured assets, as the excess amount by way of proceeds pursuant to the first enforcement is deposited in the account of the Liquidator.
42. The matter is remitted to the Liquidator to proceed in accordance with law, following Section 53 r/w Section 52 of the I&B Code. If one or more 'Secured Creditors' have not relinquished the 'security interest' and opt to realize their 'security interest' against the same very asset in terms of Section 52(1)(b) r/w Section 52(2) & (3), the Liquidator will act in terms of Section 52(3) and find out as to who has the 1st charge ('security interest') from the records as maintained by an information utility or as may be specified by the Board and pass an appropriate order. If any dispute is pending before the Court of Law, the question as to who has the exclusive 1st charge, the Liquidator may inform the same to the parties and may proceed as per Section 52(3) of the I&B Code. The Appeal is allowed with the aforesaid observations and directions. No costs."
19. It is pertinent to mention that the facts of the present case are different from that in the case of JM Financial Asset Reconstruction Company Ltd. (supra) because in this case, the Liquidator has already concluded that the respondents charge on the Secured Assets is not exclusive. Therefore, the Respondent can realise a Security Interest as per provision Section 13(9) of the SARFAESI Act. Since the Respondent does not have a requisite 60% value in Secured Interest, therefore, the Respondent does not have right to realize its security interest, because it would be detrimental to the Liquidation process and the interest of the remaining ten Secured Creditors.
-----------------------------------------------
No comments:
Post a Comment