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2020 (1) TMI 275
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....aneous Application was filed by Finquest Financial Solutions Pvt. Ltd. under Section 60(5) r/w Section 52 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'I&B Code') and Regulation 37 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 before the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench in the Liquidation proceeding against Reid and Taylor India Limited ('Corporate Debtor') with prayer to permit it (Applicant) to sell/ dispose of the secured assets of the 'Corporate Debtor', more particularly the assets mentioned in Annexure 1 and 2 therein to realize its 'security interest' in accordance with the provisions of the I&B Code. 2. The Adjudicating Authority (National Company Law Tribunal), Mumbai Bench by impugned order dated 10th May, 2019 directed the 'Liquidator' to handover the symbolic possession of the fixed assets of the 'Corporate Debtor' to Finquest Financial Solutions Pvt. Ltd. (Applicant) with observation that the said Applicant is entitled to realize the 'security interest' as provided under Section 52(1)(b) r/w Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016. ....
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....red Creditor' has relinquished 'security interest'. Therefore, where any 'Secured Creditor' does not relinquish or realizes the 'security interest' over an asset in terms of Section 52 of the I&B code, the said asset shall not form part of the liquidation estate. It was mentioned that the asset in question, i.e., the Mysore Plant, which 1st Respondent sought to realize its 'security interest' over, amounts to approximately 91% of the total assets of the 'Corporate Debtor'. Therefore, liquidation estate in the present case, would comprise of the remaining 9% of the total assets of the 'Corporate Debtor'. The sale proceeds to be generated from the sale of Mysore Plant would likely to be substantially less than the debt amount due towards 1st Respondent, hence, no excess amount/ surplus fund in terms of Section 52(7) of the I&B code would be tendered to the Liquidator. 7. The details in respect of the claims admitted for 'Financial Creditors' during the 'Liquidation' period and the corresponding security available for realization as has been shown, are as follows: - Finquest Other FCs Admitted claim in Liquidation INR 1141.24 Cr INR 3735.07 Cr Value of a....
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.... 10th October, 2016 to 1st Respondent- Finquest Financial Solutions Pvt. Ltd. and also to the Index of Charges of the 'Corporate Debtor' as per records of the Ministry of Corporate Affairs website. 11. Therefore, according to the learned Counsel for the 1st Respondent- Finquest Financial Solutions Pvt. Ltd., Respondent Nos.3 to 8 are holders of 'Second or Subservient Charges' over the assets of the 'Corporate Debtor'. Respondent No.3-Edelweiss Asset Reconstruction Company and Respondent No.4-L&T Finance Limited alleged first charge was subject to NOC from R1- Finquest Financial Solutions Pvt. Ltd. 12. Learned Counsel for the Appellant placed reliance on Section 52(1) of the I&B Code, which provides for two routes to realise 'security interest' as mentioned in clauses (a) and (b) therein. It was submitted that 1st Respondent-Finquest Financial Solutions Pvt. Ltd. did not relinquish its 'security interest' as per Section 53 of the Code, but chose to enforce it under Section 52(1)(b) by filing a Miscellaneous Application. According to him, Section 52(1)(b) provides for a mechanism where a 'Financial Creditor' can enforce the 'security interest', which is undisputed and is prior/....
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....rd support the claim of 1st Respondent as first charge holder of all immovable properties of the 'Corporate Debtor'. Ministry of Corporate Affairs' portal depicts the register of charges created in favor of 1st Respondent way back in 17th September, 2009. 17. It was submitted that 1st Respondent along with Member Banks namely - UCO Bank (assigned to Appellant - JM Financial Asset Reconstruction Company Limited), Lakshmi Vilas Bank and ICICI Bank, held the 'security interest' on a pari passu charge basis and was duly recorded in the Memorandum of Entry dated 16th June, 2012 by the 'Corporate Debtor' in favour of IDBI Trusteeship Services Ltd. 1st Respondent was not entitled to be given possession of the 'security interest' for being appropriated towards its dues for the reason that such action would give undue advantage to one of the 'Secured Creditor' over the other and would lead to a situation where the consortium funding would become difficult and futile. 18. We have heard learned Counsel for the parties and perused the record. 19. The Adjudicating Authority in impugned order dated 10th May, 2019, while giving details of list of fixed assets of the 'Corporate Debtor' as....
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....uch secured creditor has relinquished security in the manner set out in section 52'. 24. "Secured Creditor" is defined in Section 3(30) means "a creditor in favour of whom security interest is created'. 25. "Security Interest" is defined in Section 3(31) means as follows: - "3(31) "Security Interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee;" 26. Therefore, it is clear that a 'Creditor' in whose favour right of 'security interest' has been created, i.e., right, title or interest or a claim to property, which includes mortgage, charge, hypothecation or assignment from relinquish its 'security interest' or may claim under Section 52 of the I&B Code, which reads as follows: - "52. Secured creditor in liquidation proceedings.--(1) A secured creditor in the liquidati....
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....urity interests in the manner provided in this section, shall be deducted from the proceeds of any realisation by such secured creditors, and they shall transfer such amounts to the liquidator to be included in the liquidation estate. (9) Where the proceeds of the realisation of the secured assets are not adequate to repay debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquidator in the manner specified in clause (e) of sub-section (1) of section 53." 27. Section 52(1)(b) allows a 'Secured Creditor' during liquidation proceeding to realise its 'security interest' in the manner specified in the said Section. 28. If Section 52 is read in its totality, then it will be evident that a 'Secured Creditor' as per sub-section (2) of Section 52, realises its 'security interest' under clause (b) of sub-section (1), is required to inform the Liquidator of such 'security interest' and identify the asset subject to such 'security interest' to be realized. 29. As per sub-section (3) of Section 52, before any 'security interest' is realized by the 'Secured Creditor' under Section 52, on receipt of application, the Liquidator is ....
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....secured assets, as the excess amount by way of proceeds pursuant to the first enforcement is deposited in the account of the Liquidator. 35. In view of the above position, we hold that only one 'Secured Creditor can enforce his right for realization of its debt out of the secured assets as per Section 52. 36. There is nothing on record to suggest that 1st Respondent has moved before the Liquidator in terms of sub-section (2) of Section 52 for realizing the 'security interest'. It is also not clear whether the records of such 'security interest' has been maintained by an information or utility or in the manner as specified by the Board or verified by the Liquidator. 37. It is not the case of 1st Respondent, who as 'Secured Creditor', who wanted to realize, settle, compromise or deal with the secured assets or applied to proceed with recovery of the debts due to it in accordance with law. 38. In absence of any allegation that there is resistance in recovering the secured assets, the question of entertaining the application by the Adjudicating Authority under sub-section (6) of Section 52 does not arise. Therefore, we hold that except the manner as prescribed under sub-sec....