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Issues: (i) Whether the vehicle was to be treated as part of the liquidation estate of the corporate debtor or as an asset exclusively belonging to the borrower. (ii) Whether the respondent, having filed a claim in liquidation, was required to proceed under the liquidation framework for realisation of security interest and bear the applicable costs under the Code.
Issue (i): Whether the vehicle was to be treated as part of the liquidation estate of the corporate debtor or as an asset exclusively belonging to the borrower.
Analysis: The disputed vehicle was examined with reference to the registration certificate, the loan documentation, the hypothecation entry, and the liquidation records. The registration particulars showed the vehicle in the name and address connected with the corporate debtor, and the asset memorandum also treated it as an asset of the corporate debtor. The fact that the borrower was shown as co-borrower in the loan arrangement did not displace the ownership indicators relied upon by the Tribunal. The Tribunal applied the principle that assets over which the corporate debtor has ownership rights are to be taken control of in insolvency and liquidation proceedings.
Conclusion: The vehicle was held to be a liquidation asset of the corporate debtor, not an asset to be excluded on the respondent's asserted ownership theory.
Issue (ii): Whether the respondent, having filed a claim in liquidation, was required to proceed under the liquidation framework for realisation of security interest and bear the applicable costs under the Code.
Analysis: The Tribunal read Sections 52 and 53 of the Insolvency and Bankruptcy Code, 2016 as creating two distinct options for a secured creditor in liquidation: relinquish security and participate in distribution, or realise security in the manner prescribed by law. It held that realisation of security interest is directly linked to the secured asset and must be carried out through the statutory procedure. It also noted that a secured creditor realising security must account for the insolvency resolution process costs and related liquidation expenses in the manner contemplated by the statutory framework. Since the respondent had submitted a proof of claim in liquidation, it was bound to follow the prescribed procedure.
Conclusion: The respondent was required to proceed under the liquidation procedure and the liquidator was directed to deal with the respondent's claim in accordance with the Regulations.
Final Conclusion: The application was disposed of with directions to the liquidator to follow the prescribed liquidation procedure and respond to the respondent's claim, while treating the vehicle as part of the liquidation estate.
Ratio Decidendi: In liquidation, a secured creditor's right to realise security interest operates only in relation to the secured asset and must yield to the statutory procedure governing verification, costs, and distribution under the insolvency framework.
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