2021 (9) TMI 1552 - AT - Insolvency and Bankruptcy

Direction to vacate its physical possession and to return back asset to the liquidation estate - delay in auctioning the secured asset - Appellant intends to put further efforts to realize its security and accordingly, need a further time period of 6 months - HELD THAT - In the present case, the order of liquidation was passed on 05.09.2018, three years has been lapsed and the liquidation proceeding could not be completed and after granting ample opportunity the Appellant has failed to realize its security interest. Therefore, Ld. Adjudicating Authority has rightly directed the Appellant to handover the asset in possession back to the liquidator within 7 days. There are no legal flaw in the impugned order. Thus, the Appeal is dismissed summarily.

Summary

Issues:
1. Appellant's request for further time to realize secured asset in liquidation process.
2. Liquidator's opposition to the appellant's request based on delay in auctioning the secured asset.
3. Compliance with regulations regarding realization of security interest by secured creditors in liquidation process.
4. Adjudicating Authority's direction for the appellant to return the asset to the liquidator.

Analysis:
1. The Appellant, a secured creditor in the liquidation process, sought additional time to realize its asset, emphasizing its exclusive first charge under Section 52(1)(b) of the IBC. Despite being in physical possession of the asset, the Liquidator instructed the Appellant to vacate the possession and return the asset to the liquidation estate. The Appellant's plea for a 6-month extension was dismissed by the Adjudicating Authority, leading to the filing of this Appeal.

2. The Liquidator contested the Appellant's request, highlighting the delay in auctioning the secured asset. The Liquidator pointed out that the first auction took place after a significant delay, and subsequent steps were not taken promptly by the Appellant to realize its security interest. The Liquidator relied on regulations mandating secured creditors to relinquish security interest within specific timeframes, failing which the asset becomes part of the liquidation estate.

3. The discussion revolved around Regulation 21-A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, emphasizing the time-bound nature of realizing security interest by secured creditors. Non-compliance with these regulations can result in the asset subject to security interest becoming part of the liquidation estate. The Adjudicating Authority, after considering the prolonged duration since the liquidation order and the Appellant's failure to act promptly, directed the Appellant to return the asset to the liquidator within seven days.

4. Upon reviewing the impugned order and relevant provisions, the Tribunal found no legal flaw and summarily dismissed the Appeal. The decision was based on the Appellant's extended delay in realizing its security interest, as highlighted by the Liquidator and supported by the regulatory framework governing secured creditors in the liquidation process. The direction to return the asset to the liquidator was upheld, affirming the Adjudicating Authority's decision.