Secured creditor enforcement rights prevail in liquidation when security is not relinquished, limiting the liquidator's control.

A secured creditor that has not relinquished its security interest may enforce and realise the secured assets under the applicable enforcement law, and the liquidator cannot compel surrender of those assets or the escrow account during liquidation. The liquidator's powers under the Insolvency and Bankruptcy Code do not override a secured creditor's election to proceed outside the liquidation process, especially where enforcement has already been initiated under SARFAESI. The moratorium under the Code does not continue after liquidation begins, and the liquidation estate covers only assets in which security has been relinquished. The liquidator may still verify accounts and protect statutory priorities, including workmen's dues, but cannot displace the creditor's control over the secured assets.

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Issues: Whether the liquidator could compel a secured creditor to hand over control of the secured assets and the escrow account to the liquidator during liquidation, despite the secured creditor's election to enforce its security interest outside the liquidation process.

Analysis: The liquidator's authority under Section 35 of the Insolvency & Bankruptcy Code, 2016 was considered alongside the secured creditor's rights under Section 52 of the Insolvency & Bankruptcy Code, 2016. The secured assets were exclusively charged to the bank, and the bank had already initiated enforcement under Section 13 of the SARFAESI Act, 2002. The reasoning proceeded on the basis that a secured creditor may enforce, realise, settle or otherwise deal with secured assets in accordance with the applicable law, and that such enforcement cannot be obstructed by conditions imposed by the liquidator. The moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 was held to be inapplicable once the insolvency resolution process had concluded and liquidation had commenced. The liquidation estate under Section 36(3)(g) includes only assets in which the secured creditor has relinquished its security interest, and priority under Section 53 arises only upon such relinquishment. Since the bank had chosen to remain outside liquidation and had not relinquished its security interest, the liquidator could not claim control over the secured assets, though the liquidator retained the right to verify accounts and safeguard workmen's dues.

Conclusion: The request to direct the bank to hand over control of the secured assets and escrow account to the liquidator was rejected.

Final Conclusion: A secured creditor that elects to enforce its security interest outside liquidation cannot be compelled to surrender control of the secured assets to the liquidator, subject to the liquidator's right of verification and protection of statutory priorities.

Ratio Decidendi: Where a secured creditor has not relinquished its security interest and proceeds under the applicable enforcement law, the liquidator cannot displace that enforcement right by seeking custody or control of the secured assets.

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