2022 (8) TMI 1113 - AT - Insolvency and Bankruptcy

Seeking a direction to the Liquidator for release of money realized on the sale of vehicles which were stated to be hypothecated to the Appellant Bank - Section 61 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The documentary evidence on record establishes that the Appellant had entered into a Deed of Hypothecation with the Corporate Debtor on 28.01.2019, pursuant to which the charge was registered with the RoC, which describes the charge to be on all vehicle inventory and receivables thereof. There are force in the contention of the Learned Counsel for the Liquidator that in the Books of Account of the Corporate Debtor there is no clarity regarding the particulars of each vehicles and the details of its financing and at any given point of time, there would be finance facilities being utilized from different Financial Institutions and the same was being repaid when the receipts came from the actual buyer of the vehicles and hence the Secured Financial Creditors is construed to have a joint charge over the Sale Proceeds as they have collectively relinquished the Security Interest as there is no discernible way to determine the specific inventory financed by them individually. It is seen from the record that the proof of Claim in Form- D is dated 24.07.2020, whereas the Order of Liquidation was passed, much prior to that on 26.06.2020 and there were no vehicles in existence as on 26.06.2020. Having regard to the fact that, the Corporate Debtor had given its unequivocal assent in the CoC Meetings with respect to sale of vehicles during the CIRP Process without any objection, and has not chosen to realize the Security Interest in accordance with Section 52 of the Code, either through the records of Information Utility or RoC and specifically keeping in view that the subject vehicles are already sold and the proceeds from the sale of the vehicles have already been distributed between the Secured Financial Creditors in proportion to their debt , and the Appellant has already received its share of the proceeds on 01.03.2021 after providing an Affidavit of undertaking dated 23.02.2021, the Appellant is estopped from claiming any part over the asset which has already been sold and therefore we are of the considered view that the Adjudicating Authority has rightly observed the Sale Proceeds ought to be distributed as provided for under Section 53 of the Code. Appeal dismissed.

Summary

Issues Involved:
1. Challenge to the Impugned Order dated 20.11.2020.
2. Distribution of sale proceeds of hypothecated vehicles.
3. Appellant's claim of security interest over specific vehicles.
4. Compliance with Section 52 of the Insolvency and Bankruptcy Code, 2016.
5. Estoppel and waiver of rights by the Appellant.

Issue-wise Detailed Analysis:

1. Challenge to the Impugned Order dated 20.11.2020:
The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the order by the National Company Law Tribunal (NCLT), New Delhi, which dismissed the appellant bank's request for the release of money realized from the sale of vehicles hypothecated to it.

2. Distribution of sale proceeds of hypothecated vehicles:
The appellant bank sought directions for the distribution of sale proceeds from the vehicles sold during the Corporate Insolvency Resolution Process (CIRP) and liquidation period. The Committee of Creditors (CoC) decided to sell the unsold vehicles to avoid depreciation and maximize asset value. The appellant argued that it had not relinquished its security interest and was entitled to the proceeds.

3. Appellant's claim of security interest over specific vehicles:
The appellant claimed a security interest over 12 specific vehicles identified by chassis numbers, arguing that it had not relinquished its security interest and sought an amount of Rs. 1,62,42,003.20/-. The appellant contended that the tribunal erroneously concluded that the appellant waived its right to enforce the security interest by participating in the CIRP process.

4. Compliance with Section 52 of the Insolvency and Bankruptcy Code, 2016:
The appellant argued that the provision to relinquish security interest is only available during the liquidation process and not during CIRP. The respondent countered that the appellant had not proven its security interest through a Certificate of Charge as required by Section 77 of the Companies Act, 2013, and Section 51 of the Motor Vehicles Act, 1988. The tribunal found that the appellant failed to identify the specific assets subject to its security interest as required under Section 52(2) of the Code.

5. Estoppel and waiver of rights by the Appellant:
The respondent argued that the appellant had already received its share of the sale proceeds and was estopped from claiming any further charge over the sold assets. The tribunal noted that the appellant attended CoC meetings and did not object to the sale of assets. The tribunal concluded that the appellant had given its unequivocal assent to the sale during the CIRP process and had not chosen to realize its security interest as per Section 52 of the Code.

Conclusion:
The tribunal dismissed the appeal, holding that the appellant was estopped from claiming any part of the sold assets. The sale proceeds were to be distributed as provided under Section 53 of the Code, and the appellant had already received its share. The tribunal upheld the NCLT's decision, finding no merit in the appellant's arguments.