Prospective operation of liquidation amendments and limited enforcement of secured assets confined possession to proved charged property.

Amended liquidation regulations are prospective unless the text expressly provides retrospective effect, so Regulation 21A could not govern a liquidation that had already commenced before the amendment. A secured creditor enforcing security under the insolvency code may realise only the assets over which an enforceable charge is actually established; it cannot demand possession of property beyond the secured portions proved on record. On the facts, possession was confined to the identified assets subject to exclusive charge or sole first charge, while assets under second charge or pari passu charge remained in the liquidation estate.

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Issues: (i) Whether the amended Regulation 21A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which came into force on 06.01.2020, could be applied retrospectively to a liquidation that had commenced earlier. (ii) Whether a secured creditor claiming security interest only over identified portions of Unit VII could demand possession of the entire Unit VII.

Issue (i): Whether the amended Regulation 21A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which came into force on 06.01.2020, could be applied retrospectively to a liquidation that had commenced earlier.

Analysis: The governing principle applied was that legislation and subordinate legislation are prospective unless retrospective operation is expressly provided. The liquidation regulations had undergone multiple amendments, and the circular issued by the insolvency board clarified that amended regulations would apply only to liquidation processes commenced on or after the relevant amendment. Since liquidation in the present matter had commenced on 25.04.2018, the amendment introducing Regulation 21A could not govern that liquidation.

Conclusion: The amended Regulation 21A could not be applied retrospectively to the present liquidation.

Issue (ii): Whether a secured creditor claiming security interest only over identified portions of Unit VII could demand possession of the entire Unit VII.

Analysis: A secured creditor electing to proceed under section 52(1)(b) of the insolvency code may realize security through enforcement of the secured asset, but the right is confined to the property over which the creditor has an enforceable charge. On the material before it, the specific security documents and charge registrations were not produced to establish which portions were subject to exclusive charge, first charge, or pari passu charge. The secured creditor was therefore not entitled, on the present record, to possession of the entire unit. The liquidator was directed to identify the properties over which the creditor had exclusive charge or sole first charge and hand over possession of those properties alone, while properties under second charge or pari passu charge would remain in the liquidation estate.

Conclusion: The request for possession of the entire Unit VII was declined, but possession of the identified secured portions was directed to be handed over for enforcement of security interest.

Final Conclusion: The liquidation amendment could not be invoked against the earlier commenced process, and the secured creditor obtained only limited relief confined to the secured assets actually established on record, with the balance remaining within the liquidation estate.

Ratio Decidendi: Amended liquidation regulations operate prospectively unless expressly made retrospective, and a secured creditor seeking to enforce security under section 52 can obtain possession only of the assets over which its enforceable charge is established.

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