Secured creditor rights in liquidation, distribution of sale proceeds, and statutory limitation were decided under the insolvency framework.

A secured creditor's right to stand outside liquidation under Section 52 is conditional and must be exercised in strict compliance with the liquidation framework; where the alleged pari passu security arrangement was incomplete and the creditor failed to act within the prescribed regulatory steps, inclusion of the asset in the liquidation estate was upheld and the liquidation sale remained undisturbed. Distribution of sale proceeds under Section 53 had to be determined first by the Adjudicating Authority, so that issue was remitted for first-instance adjudication. A third appeal filed beyond the statutory outer limit under Section 61 was held barred by limitation, and delay could not be condoned beyond that limit.

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Issues: (i) Whether the secured creditor's asserted security interest could be compelled into the liquidation estate and the liquidation sale as a going concern sustained; (ii) whether the dispute on distribution of liquidation sale proceeds should be decided at the appellate stage or remitted to the Adjudicating Authority; (iii) whether the third appeal was barred by limitation.

Issue (i): Whether the secured creditor's asserted security interest could be compelled into the liquidation estate and the liquidation sale as a going concern sustained.

Analysis: The Appellant claimed a right to realise its security interest independently under Section 52 of the Insolvency and Bankruptcy Code, 2016 and challenged the assumption that its security stood relinquished. The record, however, showed that the alleged pari passu charge was conditional, dependent on inter se arrangements and reciprocal documentation that were never completed. The Appellant also did not take effective steps to realise the security within the statutory framework, did not comply with the payment obligations contemplated by Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 within time, and did not intimate a realisation value under Regulation 37. In a consortium structure, the majority of secured creditors had relinquished security and the applicable law under Section 52(4) read with Section 13(9) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 supported that collective decision.

Conclusion: The challenge to inclusion of the asset in the liquidation estate failed, and the liquidation sale process was upheld.

Issue (ii): Whether the dispute on distribution of liquidation sale proceeds should be decided at the appellate stage or remitted to the Adjudicating Authority.

Analysis: The sale had already been concluded and the sale certificate had been issued, but the question of how the sale proceeds should be distributed among stakeholders had not attained finality. Distribution under Section 53 of the Insolvency and Bankruptcy Code, 2016 requires first-instance determination of claims, classification, priorities, and inter se entitlements by the Adjudicating Authority. The appellate forum found it inappropriate to decide that factual and legal question for the first time and held that the issue required adjudication below.

Conclusion: The matter on distribution of sale proceeds was remitted to the Adjudicating Authority for decision in accordance with Section 53.

Issue (iii): Whether the third appeal was barred by limitation.

Analysis: The third appeal was filed beyond the statutory period prescribed under Section 61 of the Insolvency and Bankruptcy Code, 2016. The delay exceeded the outer limit that can be condoned under the Code, and the plea that it formed part of a continuing cause of action did not extend limitation. The tribunal therefore held that it had no jurisdiction to condone the delay beyond the prescribed limit.

Conclusion: The third appeal was held to be barred by limitation and was dismissed as not maintainable.

Final Conclusion: The first appeal and the third appeal failed, while the second appeal resulted in a remand limited to distribution of sale proceeds, leaving the concluded liquidation sale undisturbed and the stakeholder distribution question open before the Adjudicating Authority.

Ratio Decidendi: A secured creditor's right to stand outside liquidation under Section 52 is conditional and must be exercised strictly in compliance with the liquidation regulations and the collective framework governing consortium security; failure to do so permits inclusion in the liquidation estate, while distribution disputes under Section 53 must first be determined by the Adjudicating Authority and limitation under Section 61 cannot be extended beyond the statutory outer limit.

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