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2022 (1) TMI 17 - Tri - Insolvency and BankruptcySeeking for relinquishment of security interest and making the assets part of the Liquidation Estate - non-compliance of Regulation 21A(2) of IBBI (Liquidation Process) Regulation, 2016 - HELD THAT - From the reading of the provisions contained in regulation 21A(2) of Liquidation Process Regulations, it is very clear that the secured Creditor is required to realize the security interest within stipulated time as prescribed in the regulation and in case, the secured creditor fails to comply with the sub-regulation (2) then as per sub-regulation (3) of 21A of liquidation process regulation the asset, which is subject to security interest, shall become the part of the liquidation estate. In the present case, the respondent has failed to comply with the sub-regulation (2), therefore, as per sub-regulation 3 of regulation 21 A, the asset shall become the part of the liquidation estate. Hence, the respondent is directed to immediately handover the possession of the aforesaid asset to the liquidator - Application allowed.
Issues:
Application for seeking directions from the Tribunal against the Respondent for relinquishment of security interest and making assets part of the Liquidation Estate due to non-compliance with Liquidation Regulations. Analysis: 1. The Liquidator filed an Application seeking directions against the Respondent, a secured creditor, for relinquishment of security interest and inclusion of assets in the Liquidation Estate. The Respondent had decided not to relinquish its security interest over a car and opted to realize on its own. The Liquidator requested the Respondent to pay towards insolvency process costs and liquidation costs as per Regulation 21A(2) of Liquidation Process Regulations. 2. Despite reminders and emails from the Applicant, the Respondent denied the claim, stating that the CoC and stakeholders were not informed, and the Liquidator had not taken steps against them. The Respondent argued that it had paid its share of liquidation costs. The Tribunal considered the provisions of Section 52 of the IBC, which allows a secured creditor to either relinquish security interest or realize it, and Regulation 21A of Liquidation Process Regulations. 3. Section 52 of the IBC outlines the procedures for secured creditors in liquidation proceedings, emphasizing the options available to them and the obligations regarding realization of security interest. Regulation 21A of Liquidation Process Regulations presumes security interest decisions and mandates secured creditors to comply with payment timelines. Failure to comply results in the asset becoming part of the liquidation estate. 4. The Tribunal noted that the Respondent failed to comply with Regulation 21A(2) by not paying the required amounts within the stipulated time. Consequently, as per Regulation 21A(3), the asset subject to security interest, an Audi Q8, was directed to become part of the liquidation estate. The Respondent was instructed to hand over possession of the asset to the Liquidator promptly. 5. The judgment was pronounced by the Tribunal through virtual mode, emphasizing the legal obligations and consequences of non-compliance with the Liquidation Regulations. The detailed analysis considered the provisions of the IBC and the Liquidation Process Regulations to ensure adherence to the statutory framework governing insolvency proceedings.
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