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2025 Supreme(Online)(NCLAT) 411
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
ASHOK BHUSHAN, J
Cosmos Co-Operative Bank Ltd. – Appellant
Versus
CS Anaghaanasingaraju, Liquidator for Pandit Automotive Pvt. Ltd. – Respondent
Company Appeal (AT) (Insolvency) No. 67 of 2025
For the Appellants/Petitioners: Mr. Ramchandra Madan, Mr. Tushar Nigam
For the Respondents: Mr. Avinash R. Khanolkar, Ms. Surekha Yadav, Ms. Khushbu Bhanushali, Mr. V. Deshpande
Secured creditors are statutorily required to contribute towards workmen’s dues when realizing security interest, as per the IBC, even if liquidation commenced before related regulations were amended.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 52, Companies Act, 2013 - Section 326 - Secured creditor's obligation for contribution towards workmen’s dues - Liquidator directed secured creditors to contribute from amounts realized under Section 52 towards workmen’s dues; applicability of Regulation 21A considered; ruling that secured creditors must comply with statutory obligations under relevant acts for workmen’s dues, even when security interest is realized independently. (Paras 3, 12, 27)
(B) Appeals - Provisions of IBC - The court highlighted that when the liquidation process commenced prior to the amendment of Liquidation Regulations, the provisions introduced thereafter do not apply retroactively. (Paras 7, 19, 26)
(C)
Ratio Decidendi: The adjudicating authority's directive for contribution towards workmen's dues was upheld based on the statutory obligations while the direction for liquidation costs was set aside as unsupported by the IBC. (Par. 27)
Facts of the case:
The corporate debtor mortgaged property to the appellant. After liquidation proceedings commenced, a liquidator issued an application for contributions. The appeal challenged the authority's order regarding workmen's dues and liquidation costs.
Findings of Court:
The court found that while contributions for workmen's dues stand, those for liquidation costs do not.
Issues: Whether the appellant is liable to contribute towards workmen’s dues and liquidation costs under the regulations after realizing security interests on its own.
Ratio Decidendi: Adjudicating authority correctly applied the obligation on secured creditors to ensure workers’ dues are paid prior to realization of any benefits gained during liquidation processes according to the IBC framework and Section 13(9) of the SARFAESI Act.
Result: Appeal partly allowed; contribution for workmen's dues upheld, but costs for liquidation set aside.
| Table of Content |
|---|
| 1. facts of the case relating to secured creditor and corporate debtor liquidation. (Para 1 , 2) |
| 2. court observations on the applicability of regulations and statutory requirements. (Para 3 , 8) |
| 3. arguments presented by both parties regarding statutory obligations. (Para 4 , 5 , 6) |
| 4. legal reasoning behind the court's decision. (Para 12 , 19) |
| 5. final decision regarding appeals and contributions. (Para 27) |
JUDGMENT
ASHOK BHUSHAN, J.
This appeal by a secured creditor of the corporate debtor M/s. Pandit Automotive Private Ltd. has been filed challenging the order dated 14.11.2024 passed by the adjudicating authority (National Company Law Tribunal, Mumbai Bench, Court – II) allowing the I.A. No.4873/2023 filed by the liquidator. By the impugned order, adjudicating authority has directed the appellant to make a contribution out of the amount realised by it under Section 52 of the Insolvency and Bankruptcy Code, 2016 , (for short the ‘Code’ or the ‘IBC’), proportionately towards workmen’s dues in accordance with the Section 226(1)(b) of the Companies Act, 2013 and also towards liquidation cost in terms of the Section 52 (8) of the IBC. Aggrieved by the order impugned, this appeal has been filed.
2. Brief facts of the case necessary to be noticed for deciding the appeal are:
i. The corporate debtor mortgaged its immovable property with the appellant as a guarantor to two borrower companies namely M/s. Pandit Automotive Sangli Private Limited and M/s. Pandit Automotive Satara Private Ltd.
ii. The appellant issues notice under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the ‘SARFAESI Act, 2002), calling upon the borrower companies and the corporate debtor to repay the amount mentioned therein with interest.
iii. On account of failure of borrower companies and corporate debtor, appellant issued notice under Section 13 (4) and took symbolic possession on 18.10.2017.
iv. On an application filed under Section 7 by Reliance Commercial Finance Limited, Corporate Insolvency Resolution Process (CIRP) against the corporate debtor commenced on 12.03.2018.
v. Committee of Creditors (CoC) on 09.07.2018 decided to proceed with the liquidation of the corporate debtor. Adjudicating Authority passed an order on 09.08.2018, directing for liquidation of the corporate debtor. Liquidator on 13.08.2018 published notice inviting claim from stakeholders of the corporate debtor.
vi. On 04.09.2018, appellant filed its claim that is of ₹60,50,002,003/-. Appellant also sent a letter dated 22.11.2018, intimating liquidator that appellant shall realise its security interest under Section 52 (1) of the IBC.
vii. On 25.07.2019, Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016 (for short the “Liquidation Regulations, 2016”) was amended by inserting Regulation 21A in the Liquidation Regulation.
viii. On 26.08.2019, IBBI issued a circular clarifying that provisions of the Amendment Regulations 2019 are applicable only to liquidation process which commenced on or after 25.07.2019.
ix. Liquidator verified the claim of the appellant on 04.12.2020 as well as the security interest in parcel 1 and parcel 2 of the plot of land and permitted the appellant to realise its security.
x. On 28.04.2022, IBBI Liquidation Process Amendment Regulation, 2002 was issued clarifying that Regulation 21A would apply only to liquidation process commencing on or after date of commencement of IBBI Liquidation Process Amendment Regulation, 2019.
xi. One Shah Lagoo Properties LLP purchased the assets of the corporate debtor, which were mortgaged with the appellant for total consideration of ₹21,35,00,000/- which was accepted by appellant on 20.01.2023. Sale certificate was also issued on 23.03.2023 after deposit of the entire amount. Appellant informed the liquidator on 23.03.2023 about the sale of its asset by private treaty for consideration of ₹21,35,00,000/-.
xii. Liqu
