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TMI Blog2020 (1) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... cord to suggest that 1st Respondent has moved before the Liquidator in terms of sub-section (2) of Section 52 for realizing the security interest . It is also not clear whether the records of such security interest has been maintained by an information or utility or in the manner as specified by the Board or verified by the Liquidator. In absence of any allegation that there is resistance in recovering the secured assets, the question of entertaining the application by the Adjudicating Authority under sub-section (6) of Section 52 does not arise. Therefore, except the manner as prescribed under sub-section (2), (3) and (4) of Section 52, if a Secured Creditor directly applies before the Adjudicating Authority for allowing it to recover the secured assets under sub-section (6) of Section 52, such application is not maintainable. As in the present case, all the Secured Creditors have claimed right over the same secured asset, which is 91% of the total secured asset and particularly when a suit is pending for declaration, as to which Secured Creditors has the first charge, in such a case, it was not open to the Adjudicating Authority to allow the application filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the symbolic possession of the fixed assets of the Corporate Debtor to Finquest Financial Solutions Pvt. Ltd. (Applicant) with observation that the said Applicant is entitled to realize the security interest as provided under Section 52(1)(b) r/w Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016. JM Financial Asset Reconstruction Company Limited, one of the Secured Financial Creditor of the same very asset has challenged the impugned order dated 10th May, 2019. 3. Learned Counsel for the Appellant submitted that the Adjudicating Authority failed to consider that 1st Respondent sought to exclusively realize its alleged security interest under Section 52 of the I B Code by standing outside the liquidation process to the exclusion of other Secured Creditors of the same very asset. It was submitted that the Adjudicating Authority has passed the order without appreciating the fact that 1st Respondent - Finquest Financial Solutions Pvt. Ltd. proceeded on the mistaken belief that it has an exclusive first charge over the secured assets mentioned in Schedule-1 and that it is legally entitled to enforce the alleged security inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 52(7) of the I B code would be tendered to the Liquidator. 7. The details in respect of the claims admitted for Financial Creditors during the Liquidation period and the corresponding security available for realization as has been shown, are as follows: - Finquest Other FCs Admitted claim in Liquidation INR 1141.24 Cr INR 3735.07 Cr Value of assets that are available for realization INR 165.51 Cr (Value of immovable and movable fixed assets as per Letter received from Finquest intimating price at which it proposes to realise the assets (INR 165.51 Cr) ~INR 2 Cr (Realizable value Current assets Non-moving and slow-moving inventory, netted off with any advance received against sale/ jobwork. Receivable from debtors age over 1 year and company has negligible amount of cash and cash equivalents) 8. It is informed that admitted Liquidation claim of Finquest Financial So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and Respondent No.4 L T Finance Limited alleged first charge was subject to NOC from R1- Finquest Financial Solutions Pvt. Ltd. 12. Learned Counsel for the Appellant placed reliance on Section 52(1) of the I B Code, which provides for two routes to realise security interest as mentioned in clauses (a) and (b) therein. It was submitted that 1st Respondent Finquest Financial Solutions Pvt. Ltd. did not relinquish its security interest as per Section 53 of the Code, but chose to enforce it under Section 52(1)(b) by filing a Miscellaneous Application. According to him, Section 52(1)(b) provides for a mechanism where a Financial Creditor can enforce the security interest , which is undisputed and is prior/ superior to the claims of other Secured Creditors holding charge over the subject assets. To enforce the security interest under Section 52(1)(b), the Creditor must either have exclusive charge or sole first charge , which would enable it to enforce its security interest . 13. Reliance has also been placed on Transfer of Property Act, 1881, which recognizes the principle of first charge . Section 48 of the Transfer of Property Act s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction Company Limited), Lakshmi Vilas Bank and ICICI Bank, held the security interest on a pari passu charge basis and was duly recorded in the Memorandum of Entry dated 16th June, 2012 by the Corporate Debtor in favour of IDBI Trusteeship Services Ltd. 1st Respondent was not entitled to be given possession of the security interest for being appropriated towards its dues for the reason that such action would give undue advantage to one of the Secured Creditor over the other and would lead to a situation where the consortium funding would become difficult and futile. 18. We have heard learned Counsel for the parties and perused the record. 19. The Adjudicating Authority in impugned order dated 10th May, 2019, while giving details of list of fixed assets of the Corporate Debtor as shown in Annexure-1 and Annexure-2 has also noticed the Memorandum of Entry dated 12th June, 2009 and Assignment Deed dated 31st August, 2016 as executed between IDM (Assignor) and Finquest Financial Solutions Private Limited (Assignee), other records including Assignment Agreement dated 10th October, 2016 executed between ICICI Bank Limited and Finquest Financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : - 3(31) Security Interest means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee; 26. Therefore, it is clear that a Creditor in whose favour right of security interest has been created, i.e., right, title or interest or a claim to property, which includes mortgage, charge, hypothecation or assignment from relinquish its security interest or may claim under Section 52 of the I B Code, which reads as follows: - 52. Secured creditor in liquidation proceedings.--(1) A secured creditor in the liquidation proceedings may- (a) relinquish its security interest to the liquidation estate and receive proceeds from the sale of assets by the liquidator in the manner specified in section 53; or (b) real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation by such secured creditors, and they shall transfer such amounts to the liquidator to be included in the liquidation estate. (9) Where the proceeds of the realisation of the secured assets are not adequate to repay debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquidator in the manner specified in clause (e) of sub-section (1) of section 53. 27. Section 52(1)(b) allows a Secured Creditor during liquidation proceeding to realise its security interest in the manner specified in the said Section. 28. If Section 52 is read in its totality, then it will be evident that a Secured Creditor as per sub-section (2) of Section 52, realises its security interest under clause (b) of sub-section (1), is required to inform the Liquidator of such security interest and identify the asset subject to such security interest to be realized. 29. As per sub-section (3) of Section 52, before any security interest is realized by the Secured Creditor under Section 52, on receipt of application, the Liquidator is required to verify such security interes t and per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount for the same secured assets, as the excess amount by way of proceeds pursuant to the first enforcement is deposited in the account of the Liquidator. 35. In view of the above position, we hold that only one Secured Creditor can enforce his right for realization of its debt out of the secured assets as per Section 52. 36. There is nothing on record to suggest that 1st Respondent has moved before the Liquidator in terms of sub-section (2) of Section 52 for realizing the security interest . It is also not clear whether the records of such security interest has been maintained by an information or utility or in the manner as specified by the Board or verified by the Liquidator. 37. It is not the case of 1st Respondent, who as Secured Creditor , who wanted to realize, settle, compromise or deal with the secured assets or applied to proceed with recovery of the debts due to it in accordance with law. 38. In absence of any allegation that there is resistance in recovering the secured assets, the question of entertaining the application by the Adjudicating Authority under sub-section (6) of Section 52 does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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