Liquidation estate prevails over conflicting recovery actions; attached assets must be released and creditor claims pursued in insolvency.

On commencement of liquidation, assets forming part of the liquidation estate, including encumbered property, must be administered under the Insolvency and Bankruptcy Code, 2016, and inconsistent attachment or recovery steps under other laws cannot continue. The attached property was therefore required to be released to the liquidator for realisation and distribution under the statutory priority. The electricity distribution company, treated as an operational creditor and, on the facts, a secured operational creditor, was required to lodge its claim in the liquidation process and could not enforce recovery outside the insolvency framework. Its dues were accordingly directed to be dealt with through the liquidation waterfall.

---

---

Issues: (i) Whether the property attached by revenue authorities could continue to remain under attachment after commencement of liquidation when it formed part of the liquidation estate under the Insolvency and Bankruptcy Code, 2016. (ii) Whether the electricity distribution company was required to submit its claim in the liquidation process and could enforce recovery of outstanding electricity dues outside the liquidation framework.

Issue (i): Whether the property attached by revenue authorities could continue to remain under attachment after commencement of liquidation when it formed part of the liquidation estate under the Insolvency and Bankruptcy Code, 2016.

Analysis: The assets of the corporate debtor, including encumbered assets, form part of the liquidation estate under the insolvency regime. The liquidator is required to collect and realise the estate for the benefit of all creditors and to distribute the proceeds in the statutory order of priority. The attachment created under the electricity recovery and revenue recovery framework would prevent sale of the assets and would conflict with the liquidation scheme. The insolvency statute, containing an overriding provision, prevails over inconsistent recovery measures under the other laws referred to in the order.

Conclusion: The attachment could not continue and the attached property had to be released in favour of the liquidator.

Issue (ii): Whether the electricity distribution company was required to submit its claim in the liquidation process and could enforce recovery of outstanding electricity dues outside the liquidation framework.

Analysis: The electricity distribution company was treated as an operational creditor and, on the facts found, as a secured operational creditor because the agreement created a charge on the assets. Its claim had to be lodged before the liquidator and dealt with under the statutory distribution waterfall. Recovery outside the liquidation process would disturb the statutory priority and could not be permitted once liquidation had commenced.

Conclusion: The electricity distribution company was required to pursue its dues through the liquidation process by submitting its claim to the liquidator.

Final Conclusion: The company application succeeded, the attached property was ordered to be released to the liquidator, and the electricity dues were directed to be dealt with under the liquidation process in accordance with the insolvency law.

Ratio Decidendi: On commencement of liquidation, assets forming part of the liquidation estate must be administered under the Insolvency and Bankruptcy Code, 2016, and any inconsistent attachment or recovery action under other laws yields to the Code's overriding effect; secured creditors must seek satisfaction through the statutory liquidation waterfall.

---