Extinguishment of unasserted claims: failure to record a lien or lodge claim extinguishes rights and vests the asset in the resolution applicant.

Fixed deposits shown as current investments in the Information Memorandum form part of the corporate debtor's estate absent a recorded security interest; where no lien is marked on the instrument and the claimant failed to lodge a claim during CIRP, the claim is extinguished and the asset vests in the successful resolution applicant. The note applies statutory rules obliging reliance on the Information Memorandum and approved resolution plan contents and affirms that recorded security interests alone can override vesting, placing onus on secured parties to establish a valid, registered lien to protect their rights.

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Issues: Whether the fixed deposit dated 09.03.2017 formed part of the assets of the corporate debtor and whether the Adjudicating Authority was justified in refusing to direct liquidation of the fixed deposit and transfer of proceeds to the successful resolution applicant.

Analysis: The appeal arises under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the Adjudicating Authority's refusal to direct liquidation of a fixed deposit claimed by the successful resolution applicant. The Information Memorandum (prepared under Regulation 36 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016) and the audited balance sheet showed fixed deposits as current investments, and the Bank of Baroda filed an affidavit stating no lien had been created on the specific fixed deposit. The Debenture Trustee failed to produce evidence of a marked lien on the fixed deposit and did not lodge a claim during the corporate insolvency resolution process. Under the statutory scheme (including Sections 30(2) and 31 of the Insolvency and Bankruptcy Code, 2016 and the principle affirmed in Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.), claims not made and not included in the approved resolution plan stand extinguished; the successful resolution applicant is entitled to the assets shown in the Information Memorandum unless a valid, recorded security interest exists. On the facts, the fixed deposit was reflected within the corporate debtor's investments, no lien was marked on the instrument, and the trustee did not assert the claim within CIRP; therefore the trustee's claim was extinguished and the asset vested as part of the corporate debtor's estate available to the successful resolution applicant.

Conclusion: The appeal is allowed; the Adjudicating Authority's order is set aside and the Bank of Baroda is directed to liquidate the fixed deposit dated 09.03.2017 and transfer Rs. 42,00,000 along with accrued interest to the successful resolution applicant.

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