Prior enforceable lien in liquidation allows secured creditor to realise security and resist sale by liquidator.

A secured creditor with a prior enforceable lien over identified machinery and related assets may invoke section 52 of the Insolvency and Bankruptcy Code, 2016 to realise its security in liquidation. The lien, supported by an unchallenged arbitral award, was treated as distinct from the corporate debtor's hypothecation in favour of bankers, to which the respondent was not a party. The liquidator's pari passu distribution argument failed because the respondent's secured position could not be displaced or treated as equal to the bankers' charge without evidence that both interests stood on the same footing. The machinery was therefore excluded from the general liquidation pool unless the security interest was relinquished.

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Issues: Whether the respondent, as a secured creditor with a lien over the machinery and related assets, was entitled to proceed under section 52 of the Insolvency and Bankruptcy Code, 2016 and resist sale of the assets by the liquidator under the liquidation provisions.

Analysis: The asset in question was machinery installed by the respondent, and an arbitral award recognising the respondent's lien and charge over the equipment and erected facilities had not been challenged. The creation of hypothecation in favour of the bankers by the corporate debtor did not bind the respondent, since the respondent was not a party to that hypothecation. A lien was treated as a superior enforceable right against the asset, distinct from hypothecation, and the liquidator's plea of pari passu treatment could not displace the respondent's secured position. The liquidator had not established that the respondent's lien and the bankers' hypothecation stood on the same footing for distribution under section 53.

Conclusion: The respondent was entitled to invoke section 52 to realise its security interest, and the liquidator could not sell the asset under section 53 unless the charge holder relinquished the security interest.

Final Conclusion: The liquidator's request to treat the disputed machinery as part of the distributable liquidation estate was rejected, and the respondent's secured right over the asset was upheld.

Ratio Decidendi: A secured creditor with a prior enforceable lien over identified assets may realise its security under section 52 in liquidation, and such security cannot be overridden by the liquidator's attempt to distribute the asset as part of the general liquidation pool unless the security interest is relinquished.

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