2022 (2) TMI 145 - Tri - Insolvency and Bankruptcy

Tribunal includes mortgaged properties in Liquidation Estate, supports Liquidator's application for asset maximization

The Tribunal reaffirmed its decision to include mortgaged leasehold lands into the Liquidation Estate, emphasizing the importance of maximizing asset ... Possession and addition of mortgaged leasehold and implied lease lands to liquidation estate - inclusion of third-party assets in liquidation estate - estoppel of guarantors - liquidator's duty to realise liquidation assets - rights of secured creditors under SARFAESI - compliance with Liquidation Process RegulationsPossession and addition of mortgaged leasehold and implied lease lands to liquidation estate - inclusion of third-party assets in liquidation estate - estoppel of guarantors - compliance with Liquidation Process Regulations - Whether the mortgaged leasehold land (express and implied leases) mortgaged by promoters/guarantors can be taken into physical possession and added to the liquidation estate of the Corporate Debtor and whether personal guarantors are estopped from opposing such inclusion. - HELD THAT: - The Tribunal considered that the hospital building and its utilities are constructed on the leasehold portion and that the land and building are effectively inseparable for realisation purposes; sale of the assets separately would be infeasible and would prejudice realisation for stakeholders. Both primary secured creditors did not oppose handing over possession to the liquidator (the second respondent conditionally agreed subject to protection of its interests). The personal guarantors, having granted lease and mortgaged their properties and permitted use by the Corporate Debtor, cannot claim third party protection to thwart liquidation; they are estopped from asserting that such properties are not part of the liquidation estate. The Tribunal observed that the liquidator must be able to take possession and dispose of liquidation assets to conclude the liquidation process and to realise value for claimants. Accordingly, the Tribunal affirmed its earlier order allowing the liquidator to take physical possession and to add the specified mortgaged lands (both express and implied leases) to the liquidation estate, while directing strict adherence to the procedures prescribed in the Liquidation Process Regulations. The Tribunal rejected the contention that inclusion would improperly circumvent rights of secured creditors, noting that protections for their claims will be considered by the liquidator in accordance with the Code and Regulations. [Paras 21, 22, 23]Application allowed; respondents directed to hand over physical possession of the mortgaged leasehold and implied lease lands to the liquidator and the lands are permitted to be added to the liquidation estate, subject to compliance with the Regulations.Final Conclusion: The Tribunal affirmed its earlier order dated 01.02.2021 and allowed the liquidator to take possession of, and to add, the mortgaged leasehold (express and implied) lands to the liquidation estate, directing the liquidator to follow the Liquidation Process Regulations; M.A.76/KOB/2020 is disposed of accordingly. Issues Involved:1. Inclusion of mortgaged leasehold land into the Liquidation Estate.2. Rights and objections of the Respondents regarding the mortgaged properties.3. Jurisdiction and powers of the Liquidator and Tribunal under the Insolvency and Bankruptcy Code (IBC), 2016.4. Objections from Personal Guarantors regarding their properties being included in the Liquidation Estate.Issue-wise Detailed Analysis:1. Inclusion of mortgaged leasehold land into the Liquidation Estate:The Applicant, Liquidator of the Corporate Debtor, sought directions to include mortgaged leasehold lands (Express Lease-100.16 Ares & Implied Lease-78.45 Ares) into the Liquidation Estate. The Tribunal initially allowed this inclusion on 01.02.2021, directing the Respondents to hand over possession of these lands to the Liquidator. The Tribunal reaffirmed its decision on 21.01.2022, emphasizing the necessity of including the land and building together in the Liquidation Estate to realize better value for stakeholders.2. Rights and objections of the Respondents regarding the mortgaged properties:Respondent No. 1 (Union Bank of India) and Respondent No. 2 (Meenachil East Urban Co-operative Bank Limited) are secured creditors with mortgaged interests in the properties. Respondent No. 1 supported the Liquidator's application, while Respondent No. 2 initially objected but conditionally agreed to relinquish possession if their claims were prioritized under Section 53(b) of the IBC. The Tribunal noted that both Respondents were willing to cooperate, ensuring that their claims would be addressed as per the IBC regulations.3. Jurisdiction and powers of the Liquidator and Tribunal under the Insolvency and Bankruptcy Code (IBC), 2016:The Tribunal highlighted the Liquidator's duty to include all relevant assets in the Liquidation Estate to settle claims of creditors. The Tribunal has the authority to direct the inclusion of mortgaged properties into the Liquidation Estate under Section 36 of the IBC. It was noted that the properties mortgaged by the Promoters/Directors (Personal Guarantors) to secure loans for the Corporate Debtor could be included in the Liquidation Estate, given their integral role in the Corporate Debtor's operations.4. Objections from Personal Guarantors regarding their properties being included in the Liquidation Estate:The Personal Guarantors objected to their properties being included in the Liquidation Estate, arguing that these were personal assets and not part of the Corporate Debtor's estate. They contended that the lease agreements were void and that the properties could not be used to discharge the Corporate Debtor's liabilities. However, the Tribunal rejected these arguments, stating that the Personal Guarantors had leased their properties to the Corporate Debtor for business purposes and had mortgaged them to secure loans. Thus, these properties were rightly included in the Liquidation Estate to maximize asset realization for creditors.Conclusion:The Tribunal reaffirmed its order from 01.02.2021, directing the Respondents to hand over the mortgaged leasehold lands to the Liquidator for inclusion in the Liquidation Estate. The Liquidator was instructed to follow the necessary procedures as per the IBC regulations. The objections from the Personal Guarantors were dismissed, and the Tribunal emphasized the need to include the properties in the Liquidation Estate to ensure a comprehensive and fair liquidation process. The intervention petitions were also disposed of, as the primary issue had been resolved.