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TMI Blog2020 (7) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured creditors, i.e. Respondent. It is pertinent to mention that the facts of the present case are different from that in the case of JM FINANCIAL ASSET RECONSTRUCTION COMPANY LTD. VERSUS FINQUEST FINANCIAL SOLUTIONS PVT. LTD., MR. RAVI SHANKAR DEVARAKONDA, EDELWEISS ASSET RECONSTRUCTION COMPANY, L T FINANCE LIMITED, BANK OF INDIA, UNION BANK OF INDIA, PUNJAB NATIONAL BANK, ASSET RECONSTRUCTION COMPANY (INDIA) LTD. [ 2020 (1) TMI 275 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] because in this case, the Liquidator has already concluded that the respondents charge on the Secured Assets is not exclusive. Therefore, the Respondent can realise a Security Interest as per provision Section 13(9) of the SARFAESI Act. Since the Respondent does not have a requisite 60% value in Secured Interest, therefore, the Respondent does not have right to realize its security interest, because it would be detrimental to the Liquidation process and the interest of the remaining ten Secured Creditors. The Appellant/Liquidator is directed to complete the Liquidation Process - Appeal allowed. - Company Appeal (AT) (Insolvency) No. 1510 of 2019 - - - Dated:- 18-6-2020 - Venugopal M., J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lingness to relinquish their Security Interest in the Asset of the Corporate Debtor. Further, all the Secured Creditors have relinquished their Security Interest into the liquidation estate of the Corporate Debtor except the Respondent. Consequently, the Secured Creditors with a value of 73.76% of the secured assets have relinquished the Security Interest into the liquidation estate. However, the Liquidator was unable to proceed with any further sale of assets without the receipts of relinquishment of Security Interest from all the Secured Creditors to whom the said assets are charged. In the circumstances, as stated above, the Liquidator filed a Misc. Application No. 1052 of 2019 seeking permission from the Adjudicating Authority to sell the assets of the Corporate Debtor. The said Application was rejected by the Adjudicating Authority by the Impugned Order, feeling aggrieved by this Order; this Appeal has been preferred. 5. This Appeal has been filed mainly on the ground that: (i) That the Adjudicating Authority has failed to appreciate that ten out of eleven Secured Creditors, representing together 73.76% (in value of the admitted claims) of the total Secured assets have r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of asset filing under section 52 in the manner as specified under section 53 of the Code unless the charge holder relinquishes the Security Interest. 8. It is essential to point out that all the Secured Creditors having a value of 73.76% in the Secured Assets have relinquished their Security Interest to the liquidation estate to the Corporate Debtor, to enable the Liquidator to proceed under Regulation 32 of the IBBI (Liquidation Process), Regulations, 2016 and dispose of the assets of the Corporate Debtor. However, on account of the Respondent refusal to relinquish its Security Interest and in the light of the proviso to Regulation 32, the Liquidator can sell the Assets on the receipt of the relinquishment of Security Interest by all the Secured Creditors having charge over the Secured Assets. 9. Appellant further contends that due to Respondent refusal to relinquish their Security Interest deadlock situation is created wherein the Appellant is not able to sell the Secured Creditors due to the legal bar of the proviso to Regulation 32 of the Liquidation Process Regulations, which requires the relinquishment from all the Secured Creditors before proceeding with the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). [Provided that- (i) the requirement of classification of secured debt as non-performing asset under this sub-section shall not apply to a borrower who has raised funds through issue of debt securities; and (ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the same manner as provided under this section with such modifications as may be necessary and in accordance with the terms and conditions of security documents executed in favour of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the secured creditor, so much of the money as is sufficient to pay the secured debt. (5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower. (5-A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorized by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale. (5-B) Where the secured creditor, referred to in sub-section (5-A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under sub-section (4) of Section 13. (5-C) The provisions of Section 9 of the Banking Regulation Act, 1949 (10 of 1949) shall, as far as may be, apply to the immovable propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on a record date and such action shall be binding on all the secured creditors: Provided that in the case of a company in liquidation, the amount realized from the sale of secured assets shall be distributed in accordance with the provisions of Section 529-A of the Companies Act, 1956 (1 of 1956): Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such Company, who opts to realize his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of Section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with the Liquidator in accordance with the provisions of Section 529-A of that Act: Provided also that Liquidator referred to in the second proviso shall intimate the secured creditor the workmen's dues in accordance with the provisions of Section 529-A of the Companies Act, 1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the Liquidator shall intimate the estimated amount or workmen's dues under that section to the secured creditor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditor having only 26.24% share (in value), in the secured assets. The Respondent does not hold a superior charge from the rest of the Secured financial creditors in the secured Assets. The above provision of SARFAESI Act will be applicable in this case to end this deadlock, and the decision of 73.76% of majority Secured Creditors, who have relinquished the Security Interest shall also be binding on the dissenting secured creditors, i.e. Respondent. 17. Learned Counsel for the Respondent has placed reliance on the decision of the Hon'ble Tribunal passed in case of JM Financial Asset Reconstruction Company Ltd. Vs. Finquest Financial Solutions Pvt. Ltd. and Others 2019 SCC OnLine NCLAT 918. 18. In the above mention case, this Appellate Tribunal has held that: 27. Section 52(1)(b) allows a 'Secured Creditor' during liquidation proceeding to realize 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, realizes its 'security interest' under clause (b) of sub-section (1), is required to inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of 'security interest' under sub-section (4) of Section 52, if an amount by way of proceeds is in excess of the debts due to the 'Secured Creditor', the 'Secured Creditor' is required to deposit the same in the account of the Liquidator. 34. Therefore, it is clear that after enforcement of right under section 52 by one of the 'Secured Creditor', no other 'Secured Creditor' can enforce his right subsequently for realization of the amount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security interest' and opt to realize their 'security interest' against the same very asset in terms of Section 52(1)(b) r/w Section 52(2) (3), the Liquidator will act in terms of Section 52(3) and find out as to who has the 1st charge ('security interest') from the records as maintained by an information utility or as may be specified by the Board and pass an appropriate order. If any dispute is pending before the Court of Law, the question as to who has the exclusive 1st charge, the Liquidator may inform the same to the parties and may proceed as per Section 52(3) of the I B Code. The Appeal is allowed with the aforesaid observations and directions. No costs. 19. It is pertinent to mention that the facts of the present case are different from that in the case of JM Financial Asset Reconstruction Company Ltd. (supra) because in this case, the Liquidator has already concluded that the respondents charge on the Secured Assets is not exclusive. Therefore, the Respondent can realise a Security Interest as per provision Section 13(9) of the SARFAESI Act. Since the Respondent does not have a requisite 60% value in Secured Interest, therefore, the Respondent doe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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