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2024 (12) TMI 537 - AT - IBCCompliance with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 - agreement for joint sale of the assets by both the liquidators - non-payment of CIRP and liquidation costs by the Appellant. Compliance with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 - HELD THAT - In the present case, there are ample materials to indicate that Appellant has informed the liquidator of its decision to relinquish its security interest. Letter dated 10.01.2020 relied by the Appellant is referred, thus, there is no applicability of Section 21A(1) in the present case. Reliance which has been placed by the liquidator is on sub-regulations (2) and (3) of Regulation 21A - In the present case, the Appellant after informing the liquidator on 10.01.2020 proceeded to realise its security interest by issuing notice under Section 13(2) on 20.08.2021 which was already intimated to the liquidator on 10.01.2020. Present is a case where liquidator has communicated the Appellant twice for payment of proportionate share of the liquidation costs on 16.02.2023 and 29.05.2023 although communication was sent in response to the said letter by the Appellant but fact remains that no payment was made by the Appellant towards liquidation costs. Submission of the Counsel for the Appellant that Appellant is ready and has never denied to make the payment shall not make the sub-regulation (3) of Regulation 21A inapplicable. When Appellant has proceeded to realise its security interest it was required to pay the amount as referred to in Regulation 21A (2)(a). The Adjudicating Authority thus, has rightly referred to and relied on Regulation 21A (2) (3). The submission of the Counsel for the Appellant as well as Counsel for the Respondent agreed upon that present is a case where Appellant has communicated its intention to realise its security interest, hence, there is no applicability of Regulation 21A(1). Appellant in Joint Lenders Meeting has agreed for joint sale of the assets by both the liquidators - HELD THAT - All the stakeholders agreed to the suggestion of the liquidator towards joint sale of the assets. Another Joint Lenders Meeting relied by the Counsel for the Respondent is the Joint Lenders Meeting dated 12.04.2024 where again two representatives of Suraksha were present which is reflected from Annexure R-6 of the reply. In the minutes, it was noted that Suraksha although having agreed in the Joint Lenders Meeting held on 12.04.2024 for joint sale has filed the appeal against the order passed in IA No.1069 of 2023. The representatives of Appellant intimated that they have no instructions from the apposite parties so they are unable to comment on the matter. In the said meeting, even the modalities of the joint sale and appropriation of proceeds to the liquidation estates was mentioned. Non-payment of CIRP and Liquidation Costs by the Appellant - HELD THAT - The submission of the Respondent also noted that certain issues regarding 32 acres of land claimed by Gujarat NRE Coke Ltd. is pending consideration before the Adjudicating Authority. Suraksha has not paid the CIRP costs or the liquidation costs - The liquidator did not commit any error in communicating decision dated 29.05.2023 to the Appellant that on account of non-payment of liquidation costs, security interest of the Appellant stood relinquished in terms of Regulation 21A (2) (3) of the Liquidation Regulations. Adjudicating Authority after considering the submissions of the parties has rightly refused to grant any relief to the Appellant. This is not a fit case to exercise our Appellate jurisdiction in interfering with the impugned order passed by the Adjudicating Authority - The Appeal is dismissed.
Issues Involved:
1. Compliance with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016. 2. Payment of CIRP and liquidation costs by the Appellant. 3. Appellant's right to realize its security interest under Section 52 of the IBC. 4. Appellant's agreement to a joint sale in Joint Lenders' Meetings. 5. Impact of pending issues regarding 32 acres of land on the Appellant's claim. Issue-wise Detailed Analysis: 1. Compliance with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016: The core issue revolves around the compliance with Regulation 21A, which pertains to the presumption of security interest. The Appellant, a Financial Creditor, had informed the liquidator of its intention to realize its security interest under the SARFAESI Act, 2002. However, the liquidator argued that the Appellant failed to comply with Regulation 21A(2), which mandates payment towards CIRP and liquidation costs within ninety days from the liquidation commencement date. The Tribunal found that the Appellant did not make the required payments, leading to the security interest being subsumed into the liquidation estate as per Regulation 21A(3). 2. Payment of CIRP and Liquidation Costs by the Appellant: The liquidator repeatedly requested the Appellant to pay Rs. 20 lakhs towards CIRP and liquidation costs. Despite acknowledging its obligation, the Appellant did not make the payment, citing the lack of a formal invoice from the liquidator. The Tribunal noted that the Appellant's failure to pay these costs resulted in the relinquishment of its security interest, as the Appellant did not fulfill its financial obligations under the liquidation process. 3. Appellant's Right to Realize its Security Interest under Section 52 of the IBC: The Appellant contended that it had the right under Section 52 of the IBC to realize its security interest and had communicated its intention to do so. The Tribunal acknowledged that the Appellant had indeed communicated its intention but emphasized that realization of security interest was contingent upon compliance with the payment obligations under Regulation 21A. The Tribunal concluded that the Appellant's failure to pay the liquidation costs led to the security interest becoming part of the liquidation estate. 4. Appellant's Agreement to a Joint Sale in Joint Lenders' Meetings: The liquidator argued that the Appellant had agreed to a joint sale of the assets in Joint Lenders' Meetings, which was inconsistent with its claim to realize its security interest independently. The Tribunal noted that the Appellant's representatives were present at these meetings and had agreed to the joint sale, which further undermined its position in the appeal. The Tribunal found that the Appellant's actions were inconsistent with its claim to independently realize its security interest. 5. Impact of Pending Issues Regarding 32 Acres of Land on the Appellant's Claim: The Tribunal also considered the pending issues regarding a 32-acre land dispute between Bharat NRE Coke Ltd. and Gujarat NRE Coke Ltd. The liquidator highlighted that the resolution of these issues could impact the Appellant's claim. The Tribunal noted that the Appellant's security interest was subject to the outcome of these pending applications, further complicating its claim to the assets. Conclusion: The Tribunal concluded that the liquidator acted correctly in deeming the Appellant's security interest as relinquished due to non-payment of liquidation costs. The Appellant's failure to comply with the financial obligations under Regulation 21A and its agreement to a joint sale in the Joint Lenders' Meetings were key factors in the Tribunal's decision to dismiss the appeal. The Tribunal upheld the Adjudicating Authority's order, finding no grounds to exercise its appellate jurisdiction. The appeal was dismissed.
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