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SURAKSHA ASSET RECONSTRUCTION LTD VS VARSHA BAGRI, LIQUIDATOR : CASE SUMMARY

The NCLAT in  Suraksha Asset Reconstruction Ltd. Vs. Varsha Bagri, Liquidator  Company Appeal (AT) (Insolvency) No. 650 of 2024 held that once secured creditor has proceeded to realise its security interest, it is required to pay the amount as referred to in Regulation 21A (2) (a) of IBBI (Liquidation Process) Regulations, 2016.

FACTS OF THE CASE

CIRP in the matter of Bharat NRE Coke Ltd. failed as such  Liquidation Order was passed by the Adjudicating Authority on 11.12.2019. The Appellant informed the Liquidator of its intention to realise its security interest under Section 13 (2) of the SARFAESI Act, 2002 for total claim of Rs. 141 Crores. Appellant filed Application before NCLT for handover of mortgage land, which was allowed. The Liquidator demanded payment of Rs. 20 Lakhs towards payment of CIRP Costs and liquidation costs, which was not paid by appellant. On 29.05.2023, the Liquidator sent an e-mail informing the Appellant that security interest stood relinquished in terms of Regulation 21A (2) (a) and 21 (3) of the IBBI (Liquidation Process) Regulation, 2016 on the ground that Appellant had  failed to pay liquidation costs.  The said communication was challenged before NCLT which held that appellant having failed to discharge its obligations under Regulation 21A within 90 days, security interest had become part of liquidation estate.

The appellant challenged the order of the NCLT before NCLAT.

FINDINGS OF THE NCLAT

Section 52 of the IBC empowers secured creditors to relinquish its security interest to the liquidation estates or  to realise its security interest in the manner provided therein. Regulation 21A of  IBBI (Liquidation Process)  Regulations, 2016 provides further procedures in realization of security interest by the secured creditor.

The NCLAT observed that  Liquidation Process Regulation 21A (1) is not applicable in the case as the Appellant has informed the Liquidator its intention to realise its security interest. The Liquidator relied on Regulation 21A (2) and (3). The Appellant, after filing its claim,  has proceeded to realise its security interest by issuing notice under Section 13 (2) of the SARFAESI Act. The Appellant failed to pay Liquidation Cost despite communications dated 16.02.2023 and 29.05.2023 sent by the Liquidator. Readiness of the Appellant  to make payment  shall not make the sub-regulation (3) of the Regulation 21 A inapplicable. When Appellant has proceeded to realise its security interest, it was required to pay the amount as referred to in Regulation 21A (2) (a).  The Appellant failed to pay the amount mentioned in Regulation 21A (2) (a).

The NCLAT also noted that Appellant in joint lenders meeting has agreed for joint sale of assets as such it was not open for it to contend that it shall realise its security.

The NCLAT did not find any infirmities in the order of the NCLT and dismissed the appeal.

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.