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 becomes part of the liquidation estate does not automatically apply; the liquidator must notify any willing-buyer price to the secured creditor under the liquidation regulations, and the secured creditor is obliged to sell to that buyer if so informed. If no sale to such buyer occurs, the secured creditor may proceed with sale but must comply with payment and deposit obligations under the liquidation rules. The secured creditor need not surrender flats but must provide the liquidator access for relevant purposes.

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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.

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