Liquidation estate presumption follows failure to timely elect non-relinquishment of security interest under liquidation regulations.

A secured creditor that failed to intimate within thirty days of the liquidation commencement date that it would not relinquish its security interest was treated as having its asset fall within the liquidation estate under Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016. An application seeking condonation of delay and directions concerning the secured asset was dismissed for default when no appearance was made, and the record showed the asset had already been sold in liquidation. In the absence of substitution by the assignee or any demonstrated procedural error, no appellate interference was warranted.

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Issues: Whether the order dismissing the application for default called for appellate interference, and whether the secured creditor's failure to intimate its decision within the stipulated time under the liquidation regulations resulted in the assets being treated as part of the liquidation estate.

Analysis: The liquidation order had already been passed and the secured creditor did not intimate, within thirty days of the liquidation commencement date, that it intended not to relinquish its security interest. Under Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, the assets covered by the security interest were therefore presumed to form part of the liquidation estate. The application before the Adjudicating Authority sought condonation of delay in communicating non-relinquishment and consequential directions regarding the secured asset, but it was dismissed for default when no appearance was made. The record also showed that the asset had already been dealt with in liquidation and sold, and the assignee did not take steps to substitute itself or seek recall of the dismissal order.

Conclusion: No error was found in the impugned order, and no appellate interference was warranted. The challenge failed.

Ratio Decidendi: Where a secured creditor does not intimate its election regarding relinquishment or realisation of security interest within the period prescribed under the liquidation regulations, the secured asset is presumed to be part of the liquidation estate, and an appeal against dismissal for default will not succeed absent any demonstrated error or procedural irregularity warranting interference.

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