2022 (5) TMI 1367 - AT - Insolvency and Bankruptcy

Distribution of sale proceeds from liquidation estate - priority of charges over the assets - relinquishment of security interest - seeking direction to liquidator to distribute the entire sale proceeds of the liquidation estate to Punjab National Bank since the same has exclusive charge over the property of the corporate debtor which has been sold by the Liquidator - condonation of delay in filing application - HELD THAT - The Appellant had opted to relinquish its security exercising its right under Section 52 of the Code. After it relinquished the security, the secured creditors are entitled for receiving payment as per Section 53. The issue is no more res integra in view of the judgment of the Hon ble Supreme Court in India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Anr. 2021 (6) TMI 684 - SUPREME COURT . In the case before Hon ble Supreme Court, Appellant was Dissenting Financial Creditor and it challenged the distribution of the assets under the Resolution Plan. The argument was raised that the Dissenting Financial Creditor was entitled to receive the payment as per their secured interest - It was held in the case that It has not been the intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby bring about an inequitable scenario, by receiving excess amount, beyond the receivable liquidation value proposed for the same class of creditors. The issue is no more res integra and no error is committed by the Adjudicating Authority in rejecting the Application filed by the Appellant - appeal dismissed.

Summary

Issues:
1. Appeal against rejection of I.A (I.B.C)/101(KB)2022 by the Adjudicating Authority.
2. Entitlement of the Appellant to receive payment realized from secured assets.
3. Application of Section 53 of the Insolvency and Bankruptcy Code, 2016.
4. Interpretation of the judgment in "Technology Development Board vs. Mr. Anil Goel & Ors."
5. Impact of the judgment in "India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Anr."
6. Comparison with the judgment in "Indian Bank vs. Charu Desai, Erstwhile Resolution Professional & Chairman of Monitoring Committee of GB Global Ltd. & Anr."

Issue 1:
The appeal was filed against the rejection of I.A (I.B.C)/101(KB)2022 by the Adjudicating Authority, which was based on the Appellant's claim to receive the entire sale proceeds of the liquidation estate due to its exclusive charge over the property of the corporate debtor.

Issue 2:
The Appellant contended that as the first charge holder over the assets, it should receive the payment realized from the secured assets, emphasizing its entitlement to the entire amount realized from its secured assets.

Issue 3:
The Appellant had opted to relinquish its security under Section 52 of the Code, thereby entitling the secured creditors to payment as per Section 53, which governs the distribution of assets in insolvency proceedings.

Issue 4:
Reference was made to the judgment in "Technology Development Board vs. Mr. Anil Goel & Ors.," where it was held that secured creditors relinquishing security interest would be governed by the waterfall mechanism under Section 53, rather than claiming amounts realized from secured assets.

Issue 5:
The judgment in "India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Anr." was cited to establish that dissenting secured creditors could not claim a higher amount based on the value of security interest, emphasizing the commercial wisdom of the Committee of Creditors in asset distribution.

Issue 6:
In the recent judgment of "Indian Bank vs. Charu Desai, Erstwhile Resolution Professional & Chairman of Monitoring Committee of GB Global Ltd. & Anr.," a similar contention by a dissenting financial creditor was rejected, aligning with the principles laid down by the Supreme Court regarding the extent of value receivable by creditors under Section 53.

In the detailed analysis, the Tribunal examined the Appellant's arguments, emphasizing that after relinquishing security, the Appellant's entitlement to payment was governed by Section 53. The Tribunal referenced the Supreme Court's judgment in "India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Anr." to establish that dissenting creditors could not claim higher amounts based on security interest value. Additionally, the Tribunal highlighted the recent judgment in "Indian Bank vs. Charu Desai, Erstwhile Resolution Professional & Chairman of Monitoring Committee of GB Global Ltd. & Anr.," where a similar contention was dismissed, reinforcing the application of Section 53 in determining creditor entitlements. Ultimately, the Tribunal found no merit in the Appellant's submissions, upholding the Adjudicating Authority's decision to reject the application and dismissing the appeal.