NCLAT (28.09.2021) In Dhanlaxmi Bank Ltd. Vs. Techno Fab Manufacturing Ltd. & Ors. [Company Appeal (AT) (Ins) No. 777 of 2021] held that;
In the present case, the order of liquidation was passed on 05.09.2018, three years has been lapsed and the liquidation proceeding could not be completed and after granting ample opportunity the Appellant has failed to realize its security interest. Therefore, Ld. Adjudicating Authority has rightly directed the Appellant to handover the asset in possession back to the liquidator within 7 days.
We have gone through the impugned order and relevant provisions. We find no legal flaw in the impugned order. Thus, the Appeal is dismissed summarily.
Excerpts of the order;
28.09.2021: Heard Ld. Counsel for the Appellant. He submits that the Appellant being a secured creditor in the liquidation process of the Corporate Debtor has intimated to the Liquidator to realize its asset over which it has exclusive first charge under Section 52(1) (b) of the IBC and in physical possession of the asset. The Liquidator has asked the Appellant to vacate its physical possession and to return back asset to the liquidation estate. However, the Appellant intends to put further efforts to realize its security and accordingly, need a further time period of 6 months. But Ld. Adjudicating Authority has dismissed the Application. Therefore, this Appeal is filed.
2. Ld. Counsel appearing on behalf of the Liquidator vehemently opposes the prayer and submits that the order of liquidation was passed on 05.09.2018 and the physical possession of the secured asset was handed over to the Appellant by the liquidator on 03.09.2019. The first auction of the secured asset was made on 03.09.2019 and second on 06.01.2021, this clearly shows that no steps were taken by the Appellant for auction for about 15 months. Thereafter, about 8 months have been lapsed but, no steps have been taken by the Appellant to realize its security interest.
3. It is further submits that Sub Regulation (2) of Regulation 21-A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 provides that a secured creditor has to realize its security interest in time bound manner and has to relinquish the security interest to the liquidator within 90 days from the liquidation commencement date and the secured creditor shall pay the excess of the realized value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within one hundred and eighty days from the liquidation commencement date. Sub Regulation (3) of Regulation 21A provides that where a secured creditor fails to comply with sub-regulation (2), the asset, which is subject to security interest, shall become part of the liquidation estate.
4. In the present case, the order of liquidation was passed on 05.09.2018, three years has been lapsed and the liquidation proceeding could not be completed and after granting ample opportunity the Appellant has failed to realize its security interest. Therefore, Ld. Adjudicating Authority has rightly directed the Appellant to handover the asset in possession back to the liquidator within 7 days.
5. We have gone through the impugned order and relevant provisions. We find no legal flaw in the impugned order. Thus, the Appeal is dismissed summarily.
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Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
# Regulation 21A. Presumption of security interest.
(1) A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II:
Provided that, where a secured creditor does not intimate its decision within thirty day from the liquidation commencement date, the assets covered under the security interest shall be presumed to be part of the liquidation estate.
(2) Where a secured creditor proceeds to realise its security interest, it shall pay -
(a) as much towards the amount payable under clause (a) and sub-clause (i) of clause (b) of sub-section (1) of section 53, as it would have shared in case it had relinquished the security interest, to the liquidator within ninety days from the liquidation commencement date; and
(b) the excess of the realised value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within one hundred and eighty days from the liquidation commencement date:
Provided that where the amount payable under this sub-regulation is not certain by the date the amount is payable under this sub-regulation, the secured creditor shall pay the amount, as estimated by the liquidator:
Provided further that any difference between the amount payable under this subregulation and the amount paid under the first proviso shall be made good by the secured creditor or the liquidator, as the case may be, as soon as the amount payable under this sub-regulation is certain and so informed by the liquidator.
(3) Where a secured creditor fails to comply with sub-regulation (2), the asset, which is subject to security interest, shall become part of the liquidation estate.
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