2024 (9) TMI 1604 - Tri - IBC

Seeking direction to set aside the sale notice dated 19.07.2023 issued by the liquidator in respect of Haldia property - seeking to set aside the communication dated 14.07.2023 sent by the liquidator any consequential action taken by the liquidator in respect of Haldia property and to direct the liquidator not to interfere in respect of Haldia property. Where the amount payable by the secured creditor under sub- Regulation (2) (a), is not certain, whether liquidator is mandated to inform the secured creditor the estimated amount? - If liquidator has not informed the estimated amount, whether provision of sub-Regulation (3) would apply or not? - Whether first proviso is an exception to sub-Regulation (2) which mandates the secured creditor to pay the amount within 90 days? HELD THAT - It is a settled law that while interpreting a statute, courts have to see the intention of the legislature. Further, when the words of an Act or Regulations are clear and unambiguous, courts are bound to give effect to those words. The language of Regulation 21A is plain and simple. It cast a duty on the secured creditor who proceeds to realise its security interest, it has to pay the liquidator either an amount referred to in sub-Regulation (2)(a), or an amount referred to in first proviso. Failing which, the asset shall become part of the liquidation estate as mentioned in Regulation 21A(3). As per the Regulation 21A(1) a secured creditor is required to inform the liquidator about its decision to relinquish security interest to the liquidation estate or to realize its security interest; the said decision is to be communicated within 30 days from the liquidation commencement date failing which the assets covered under the security interest are presumed to be part of the liquidation estate. Accordingly, 30 days expired on 15.04.2021 and the remaining part of the Haldia Property admeasuring 8.04 acres became part of the liquidation estate. However, the applicant through its revised Form-D dated 28.01.2023 had for the first time claimed its security interest over remaining 8.04 acres of the property. The plea of the applicant that since the estimate was not given by the liquidator and therefore, Regulation 21A is not applicable on it is quite misplaced. Rather the issue of estimate would arise only when the applicant had realized the security interest and inquired the liquidator about the proportionate amount payable by him, however no such steps were ever taken by the applicant. Therefore, the interpretation made by the applicant is not acceptable at all. The law is very clear that the secured creditor has to realise and pay the CIRP cost with in 90 days and also to pay the excess realized value of the asset, if any, within 180 days. Thus the applicant had to complete the entire process within 180 days itself, failing which the entire subject property would form part of liquidation estate as per Regulation 21A(3) of the IBBI (Liquidation Process) Regulations, 2016. As far as claim of the applicant for 8.04 acres is considered we are of the view that the same should also have been communicated with in 30 days from the date of the liquidation commencement order, failing which Regulation 21A(3) would apply and the said part of the property will form part of the liquidation estate. The applicant failed to comply with the requirements of the Regulation and therefore, the decision of the liquidator that the entire property forms part of the liquidation estate is not contrary to law. Application dismissed.

Issues Involved:
1. Whether the liquidator's inclusion of Haldia property in the liquidation estate was lawful.
2. Interpretation and application of Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016.
3. Obligations of the secured creditor under Regulation 21A.
4. Validity of the applicant's claim over the remaining 8.04 acres of Haldia property.

Detailed Analysis:

Issue 1: Liquidator's Inclusion of Haldia Property in the Liquidation Estate

The applicant, Phoenix ARC Private Limited, sought to set aside the liquidator's sale notice and communication regarding Haldia property, claiming exclusive security interest. The liquidator included the property in the liquidation estate, arguing that the applicant failed to realize its security interest within the stipulated period. The Tribunal noted that the applicant informed the liquidator of its decision not to relinquish its security interest over 12.84 acres but did not act to realize the interest within the required timeline. Consequently, the liquidator's action to include the property in the liquidation estate was deemed lawful.

Issue 2: Interpretation and Application of Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016

Regulation 21A mandates secured creditors to inform the liquidator within 30 days of their decision to relinquish or realize their security interest. If not, the asset becomes part of the liquidation estate. The Tribunal emphasized the clear language of Regulation 21A, stating that the applicant's failure to comply with the 30-day notification and 180-day realization periods resulted in the property becoming part of the liquidation estate by operation of law.

Issue 3: Obligations of the Secured Creditor under Regulation 21A

The applicant argued that the liquidator did not provide an estimated amount payable, thus Regulation 21A should not apply. The Tribunal rejected this argument, stating that the obligation to realize the security interest and pay the required amounts within the specified periods lies with the secured creditor. The applicant's failure to take necessary steps within the mandated timeline led to the asset's inclusion in the liquidation estate.

Issue 4: Validity of the Applicant's Claim over the Remaining 8.04 Acres of Haldia Property

The applicant's claim over the remaining 8.04 acres was first communicated in a revised Form-D on 28.01.2023, well beyond the 30-day period from the liquidation commencement date. The Tribunal held that this late claim could not be entertained, and the entire property, including the 8.04 acres, rightfully became part of the liquidation estate.

Conclusion:

The Tribunal concluded that the applicant failed to comply with the requirements of Regulation 21A, and the liquidator's decision to include the entire Haldia property in the liquidation estate was lawful. The application was rejected and dismissed.

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