Secured creditor loses property claim after missing 30-day deadline under Regulation 21A requirements

NCLT Indore dismissed an application seeking to set aside liquidator's sale notice for a property. The secured creditor failed to communicate its decision regarding security interest realization within the mandatory 30-day period from liquidation commencement date, causing the 8.04-acre property portion to become part of liquidation estate. The creditor's belated claim through revised Form-D after nearly two years was rejected. The tribunal held that Regulation 21A requirements are clear and unambiguous - secured creditors must realize security and pay CIRP costs within specified timeframes, failing which assets become part of liquidation estate.

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Issues Involved:
1. Whether the liquidator's inclusion of Haldia property in the liquidation estate was lawful.
2. Interpretation and application of Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016.
3. Obligations of the secured creditor under Regulation 21A.
4. Validity of the applicant's claim over the remaining 8.04 acres of Haldia property.

Detailed Analysis:

Issue 1: Liquidator's Inclusion of Haldia Property in the Liquidation Estate

The applicant, Phoenix ARC Private Limited, sought to set aside the liquidator's sale notice and communication regarding Haldia property, claiming exclusive security interest. The liquidator included the property in the liquidation estate, arguing that the applicant failed to realize its security interest within the stipulated period. The Tribunal noted that the applicant informed the liquidator of its decision not to relinquish its security interest over 12.84 acres but did not act to realize the interest within the required timeline. Consequently, the liquidator's action to include the property in the liquidation estate was deemed lawful.

Issue 2: Interpretation and Application of Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016

Regulation 21A mandates secured creditors to inform the liquidator within 30 days of their decision to relinquish or realize their security interest. If not, the asset becomes part of the liquidation estate. The Tribunal emphasized the clear language of Regulation 21A, stating that the applicant's failure to comply with the 30-day notification and 180-day realization periods resulted in the property becoming part of the liquidation estate by operation of law.

Issue 3: Obligations of the Secured Creditor under Regulation 21A

The applicant argued that the liquidator did not provide an estimated amount payable, thus Regulation 21A should not apply. The Tribunal rejected this argument, stating that the obligation to realize the security interest and pay the required amounts within the specified periods lies with the secured creditor. The applicant's failure to take necessary steps within the mandated timeline led to the asset's inclusion in the liquidation estate.

Issue 4: Validity of the Applicant's Claim over the Remaining 8.04 Acres of Haldia Property

The applicant's claim over the remaining 8.04 acres was first communicated in a revised Form-D on 28.01.2023, well beyond the 30-day period from the liquidation commencement date. The Tribunal held that this late claim could not be entertained, and the entire property, including the 8.04 acres, rightfully became part of the liquidation estate.

Conclusion:

The Tribunal concluded that the applicant failed to comply with the requirements of Regulation 21A, and the liquidator's decision to include the entire Haldia property in the liquidation estate was lawful. The application was rejected and dismissed.

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