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2024 Supreme(Online)(NCLAT) 1070
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Ashok Bhushan, J
Suraksha Asset Reconstruction Ltd. – Appellant
Versus
Varsha Bagri, Liquidator of Bharat NRE Coke Ltd. – Respondent
I.A (I.B) No.1069/KB/2023 in C.P. (IB) No.1340/KB/2018
For the Respondent:Mr. Joy Saha, Sr. Advocate with Mr. Shamboo Nandy and Ms. Anoushka Dey, Advocates.
The court held that failure to pay liquidation costs as mandated by regulations leads to relinquishment of security interest, emphasizing the importance of compliance with statutory obligations in liquidation proceedings.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 52 - Liquidation Process - The Appellant challenged the decision to relinquish security interest due to non-payment of costs, contending that it had informed the liquidator of its intention to realise its security interest. The Respondent asserted that the Appellant had failed to pay liquidation costs, leading to the relinquishment under Regulation 21A(2) and (3) of the Liquidation Process Regulations. The Adjudicating Authority's order was upheld due to the Appellant's inaction and failure to meet its obligations. (Paras 10, 11, 12, 16)
(B) Regulatory Compliance - The Appellant's delayed payments mandated by the regulations resulted in the loss of security status. The regulations set forth clear stipulations for maintaining security interest in liquidation proceedings, requiring timely compliance. (Paras 10, 16)
Facts of the case:
Liquidation of Bharat NRE Coke Ltd. was initiated on 11.12.2019, and the Appellant sought to realise security interests without paying the requisite liquidation costs, which was questioned by the Respondent.
Findings of Court:
The Appellant's security interest was rightfully deemed relinquished due to its failure to comply with the regulatory payment obligations.
Issues: The core issue was whether the Appellant's failure to pay liquidation costs and adherence to the regulations affected its ability to maintain security interest.
Ratio Decidendi: The court determined that adherence to the IBC's regulations is critical to retaining security interests, and the Appellant's non-compliance resulted in its interest being subsumed into the liquidation estate.
Result: The Appeal is dismissed.
| Table of Content |
|---|
| 1. overview of the appeal and background of liquidation. (Para 2 , 3) |
| 2. arguments regarding security interest and liquidation costs. (Para 4 , 5) |
| 3. court's reaffirmation of regulatory compliance for security interest. (Para 6 , 11 , 16) |
JUDGMENT
(09th December, 2024)
Ashok Bhushan, J.
This appeal by a Financial Creditor has been filed challenging the order dated 13.03.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Special Bench, Court No.II, Kolkata in I.A (I.B) No.1069/KB/2023. By the impugned order, I.A (I.B) No.1069/KB/2023 filed by the Appellant has been disposed of refusing the prayer made in the application. Appellant aggrieved by the order has come up in this Appeal.
2. Brief facts of the case necessary to be noticed for deciding the Appeal are:-
2.1. In the CIRP process of the Corporate Debtor- Bharat NRE Coke Limited, there being no resolution, order of liquidation was passed by the Adjudicating Authority on 11.12.2019. On 10.01.2020, the Appellant- Suraksha Asset Reconstruction Ltd. informed the liquidator of its intention to realise its security interest under SARFAESI Act, 2002. On 22.02.2020, Appellant issued notice under Section 13(2) of the SARFAESI Act for total claim of Rs.141 Crores. IA No.40/KB/2021 was filed by the Appellant seeking direction to liquidator to handover the possession of 47.07 acres of land mortgaged with Suraksha Asset Reconstruction Ltd. Adjudicating Authority vide order dated 07.01.2021 directed the Block and Land Development Officer of Dharwad to carry out a survey to demarcate the land hypothecated to Appellant, and upon such demarcation, the Liquidator of BNCL had to hand over the land to Appellant. Demarcation report was filed on 07.08.2021, thereafter the Appellant issued notice under Section 13(4) of the SARFAESI Act, 2002 on 20.08.2021. The Respondent- Varsha Bagri was appointed by the NCLT as liquidator of the corporate debtor. Appellant intimated the liquidator vide e-mail dated 04.04.2023 that it has taken symbolic possession of the assets. Liquidator on 07.04.2023 wrote back to the Appellant that steps taken by the Appellant is without process of law. On 29.05.2023, liquidator sent an e-mail informing that security interest of the Appellant stood relinquished in terms of Regulation 21A (2) (a) and 21 (3) of the IBBI (Liquidation Process) Regulation, 2016 on the ground of Appellant having failed to pay liquidation costs. Appellant thereafter filed IA No.1069 of 2023 praying for quashing the e-mail dated 29.05.2023. IA filed by the Appellant was opposed by the liquidator. Liquidator pleaded that as far back as 16.02.2023 the liquidator had demanded payment of Rs.20 lakhs towards CIRP costs and liquidation costs, till date the said amount has not been paid. Appellant’s case that it has taken symbolic possession is incorrect since the actual possession was one with Jeju Metals Private Limited. Adjudicating Authority heard the parties and by impugned order dated 13.03.2024 held that the Appellant having failed to discharge its obligations under Regulation 21A within 90 days, Security interest shall become part of the liquidation estate. Aggrieved by the order dated 13.03.2024, this Appeal has been filed.
3. We have heard Shri Abhijeet Sinha, Learned Senior Counsel for the Appellant and Shri Joy Saha, Learned Senior Counsel for the Liquidator.
4. Counsel for the Appellant challenging the order submits that the Appellant immediately after liquidation commencement on 11.12.2019 has submitted Form D on 09.01.2020 asserting its security interest in the assets. It was followed by an intimation dated 10.01.2020 that the Appellant intended to enforce its security interest under SARFAESI Act, 2002. Liquidator never handed over possession of the assets to the Appellant. Demarcation exercise was completed and report was submitted on 07.08.2021 on the basis of which Appellant had issued notice under Section 13(4) of the SARFAESI Act, 2002. Parties were directe
