2026 (3) TMI 415 - AT - IBC

Security interest realisation: liquidator may notify higher willing-buyer price; secured creditor must sell to that buyer or comply with deposit rules.

Regulatory clarification: where a secured creditor has timely elected to realise security and paid its share of costs, the presumption that security ... Condonation of delay - 15 days delay in filing of the appeal - Presumption of security interest and deposit of excess realised value under Regulation 21A - Realisation of security interest and duties of liquidator under Regulation 37. Condonation of delay - HELD THAT:- Sufficient cause has been shown for condonation of delay. - Delay condoned. Realisation of security interest - Presumption of security interest - adjudicating authority has referred to time limit of 180 days which is occurring in Regulation 21A(2)(b), which period according to the liquidator expired on 23.03.2024. - HELD THAT:- It is not the case that liquidator has communicated any amount for which the secured creditor has sell the flats, however, by virtue of Regulation 37 of the Liquidation Regulation, 2016, in event the liquidator informs the secured creditors about a willing buyer at a price higher than the price intimated by the secured creditors, the secured creditor has to sell according to such information. End of justice be served in disposing of the appeal by giving liberty to the liquidator to intimate the financial creditor that is the appellant about the amount on which willing buyer is ready to purchase the flat, in that event appellant is to sell to the said buyer as indicated by the liquidator failing which it shall be open for the appellant to sell the assets and make the deposits as per the Regulation 21A(2)(b) of the Liquidation Regulation, 2016. Liquidator submits that appellant has intimated the proposal for sale of Rs. 1.4 crore for both the flats. The sale of the assets shall be conducted as indicated above and financial creditor is not to surrender the flats as per the impugned order. Secured creditor shall provide access to liquidator for all purposes. The appeal is disposed of accordingly. Final Conclusion: The Tribunal condoned the delay and disposed of the appeal by directing that the liquidator may inform the secured creditor of a willing buyer (in which event the secured creditor must sell to that buyer), and otherwise the secured creditor may realise the assets and comply with Regulation 21A(2)(b); the secured creditor need not surrender the flats but must afford access to the liquidator. Issues: Whether the adjudicating authority's order including certain secured assets into the liquidation estate and directing relinquishment/sale under Regulation 21A(2) of the IBBI (Liquidation Process) Regulations, 2016 and related directions under Regulation 37 should be sustained, and what relief, if any, should be granted to the secured financial creditor regarding sale of the assets and payment/deposit obligations.Analysis: The Court examined Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 which presumes security interest becomes part of the liquidation estate where the secured creditor does not intimate decision within thirty days, and which prescribes payment obligations if a secured creditor elects to realise its security (including payment of amounts under Regulation 21A(2)(a) within 90 days and deposit of excess realised value under Regulation 21A(2)(b) within 180 days). The Court also considered Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016 setting out the liquidator's duty to inform a secured creditor of a willing buyer offering a higher price and the secured creditor's obligation to sell to such buyer. Applying these provisions to the facts, the Court found that the secured creditor had communicated within the 30-day period and had paid the relevant share of costs; there was no communication from the liquidator of an amount payable that would trigger deposit under Regulation 21A(2)(b). The Court concluded that the ends of justice require permitting the liquidator to intimate any willing buyer price to the secured creditor, obliging the secured creditor to sell to such buyer if so informed, and otherwise permitting the secured creditor to proceed with sale and make deposits as required by Regulation 21A(2)(b). The Court clarified that the secured creditor is not to be directed to surrender the flats but must provide access to the liquidator for relevant purposes.Conclusion: The appeal is allowed in part: the impugned order is modified to permit the liquidator to intimate any willing-buyer price under Regulation 37, the secured creditor must sell to such buyer when so informed and, failing that, may sell the assets and comply with deposit obligations under Regulation 21A(2)(b); the secured creditor is not directed to surrender the flats but must provide access to the liquidator. This result is in favour of the Appellant.