Secured creditor realisation in liquidation fails without timely asset identification and compliance with section 52

A secured creditor seeking to realise security interest in liquidation must timely identify the secured asset and comply with section 52 of the Insolvency and Bankruptcy Code, 2016. Where the vehicles had already been sold during the corporate insolvency resolution process, no objection was raised at the relevant time, and the alleged charged vehicles were identified only after liquidation commenced, the creditor could not later claim separate appropriation of the sale proceeds from the liquidation estate. The distribution already made to secured financial creditors, including the appellant's share, confirmed that the belated claim was not sustainable.

---

---

Issues: Whether the appellant secured creditor was entitled to claim the sale proceeds of the vehicles said to be subject to its security interest and to exclude those proceeds from distribution in the liquidation estate.

Analysis: The appellant's claim was examined against the statutory scheme governing liquidation. Under section 52 of the Insolvency and Bankruptcy Code, 2016, a secured creditor who elects to realise security interest must inform the liquidator and identify the asset over which such interest is claimed. The record showed that the vehicles had already been sold pursuant to decisions taken in the corporate insolvency resolution process, that the appellant did not raise timely objection when the sales were being coordinated, and that the specific vehicles allegedly charged to it were identified only after liquidation had commenced. The proceeds had already been distributed among secured financial creditors and the appellant had received its share. In these circumstances, the claim to segregate the proceeds from the liquidation estate was not sustainable.

Conclusion: The appellant was not entitled to insist on separate appropriation of the sale proceeds, and its claim was rightly rejected.

Ratio Decidendi: A secured creditor can realise security interest in liquidation only by timely identification of the secured asset and compliance with section 52; once the asset has been sold and the proceeds distributed in accordance with the liquidation framework, a belated claim to those proceeds is barred.

---