2021 (12) TMI 360 - Tri - Insolvency and Bankruptcy

Presumption of Security Interest - Adjudication of cost, pendente lite and future interest and Penal Interest over the documented rate in respect of its Credit Facility together with interest, further interest, Liquidated Damages and other charges at the contractual rates on the footing of the compound interest till payment and/or realization in full - permission to sale of Agricultural Land - hand over physical possession of the Agricultural Land - permission to sell/realize the above-mentioned Mortgaged Property - contention raised by the Applicant is that as there is no claim received from the workmen and as per the Regulation 21A of the Liquidation Regulations - HELD THAT - On conjoint reading of Regulation 21A (2) and the Regulation 4 (2) (b) Clarification of the Liquidation Regulations, it is evident that when a secured creditor realizes its security interest, it shall pay the liquidation costs which includes the liquidator's fees. Further, in the case where a liquidator distributes any amount, which is not realised by him, he shall be entitled to a fee corresponding to the amount distributed by him. As to the facts of the present case, it is seen that the Respondent has no objection in allowing the application subject to compliances of Liquidation Regulations. Petition disposed off.

Summary

Issues:
1. Relief sought by State Bank of India under the Insolvency & Bankruptcy Code, 2016.
2. Conditions imposed by the Liquidator regarding the sale of Agricultural Land.
3. Dispute over payment obligations of the Applicant related to liquidation costs and fees.
4. Interpretation of Liquidation Regulations and relevant provisions of the Code.
5. Compliance with Liquidation Regulations and Code provisions.

Analysis:
1. The State Bank of India filed an application seeking relief under the Insolvency & Bankruptcy Code, 2016 to ascertain the claim amount payable by the Corporate Debtor, including interest and liquidated damages. The application also aimed to set aside certain conditions imposed by the Liquidator regarding the sale of Agricultural Land and requested permission to sell the mortgaged property.

2. The Liquidator had initially permitted the Applicant to realize the security interest subject to specific conditions related to workmen's dues and liquidation costs. Subsequently, the Liquidator informed the Applicant about the need to pay the liquidator's fee as per the Liquidation Regulations. The Applicant contested this requirement, arguing that only the liquidation costs were payable due to the absence of workmen's claims.

3. The main contention revolved around the Applicant's obligation to pay the liquidator's fee in addition to the liquidation costs. The Applicant proposed to cover the liquidation costs and workmen dues from the sale proceeds of the mortgaged property, emphasizing that the liquidator's fee should not apply since the Applicant was realizing its asset independently.

4. The Tribunal referred to Regulation 21A (2) and Regulation 4 (2) (b) of the Liquidation Regulations to clarify the payment obligations of a secured creditor realizing its security interest. The regulations stipulated that the secured creditor must pay the liquidation costs, including the liquidator's fees, upon realizing the security interest. Additionally, the liquidator was entitled to a fee corresponding to the amount distributed by him.

5. Given the Respondent's lack of objection to the application, the Tribunal disposed of the matter by directing the Applicant to make payment of the liquidator's fees and ensure compliance with the Liquidation Regulations and relevant provisions of the Code. The decision emphasized adherence to the law and regulatory requirements in the realization of security interest by the Applicant.