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TMI Blog2021 (12) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... s specified that the CIRP cost due from the secured creditors who realize the security interest in the manner provided in Section 52 has to deduct the proceeds from the sale of the asset and shall transfer such amounts to be included in the liquidation estate. In this case the respondent has submitted Form D to realize his claim from the asset of the Corporate Debtor through Liquidation Proceedings. Thus, we are constrained to believe that the respondent has admitted themselves as the Financial Creditor and submitted the claim before the Liquidator and that the Liquidator considered the claim of the Respondent. Therefore, the Respondent is liable to follow the procedures prescribed under the I B Code - Since we found that the asset in question is registered in the name of the Managing Director of Corporate Debtor and in the address of M/s. Adhils Builders and Developers Pvt. Ltd, it is to be taken as a Liquidation asset of the Corporate Debtor. Application disposed off. - IA(IBC)/145/KOB/2021 IN MA/100/KOB/2020 IN IBA/45/2019 - - - Dated:- 21-12-2021 - Shri Ashok Kumar Borah, Hon ble Member (Judicial) And Shri. Anil Kumar B, Hon ble Member (Technical) For the Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset is deteriorating its value. 5. It is also stated that the stakeholder s consultative committee in the meeting held on 17th May 2021 decided to continue the asset as a part of Liquidation Estate and all the security interest of the Respondent stands relinquished in favour of the liquidation estate. 6. It is further stated that thereafter, the Respondent came with a fresh objection stating that the owner of the vehicle is the borrower i.e., Mr. Muhammed Kunju Asharaf, and the Corporate Debtor is a co-borrower in the arrangement between the borrower and the Financial Creditor. 7. In view of the aforesaid facts, Liquidator sought a direction of this Tribunal in the matter to enable him to decide on the sale of the asset without any hassle. 8. Respondent filed a reply and stated that Mr. Mohammed Kunju Ashraf had approached the Respondent intending to avail financial assistance to purchase the Vehicle Mercedes Benz-CLA 200 CDI, bearing registration No.PYO1CQ4876 at a cost of ₹ 33,00,834/- (Rupees Thirty-Three Lakh Eight Hundred and Thirty-Four only). For the purchase of the said Vehicle, the initial down payment of ₹ 3,00,834/- (Rupees Three Lakh Eight Hundr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld only be traced through the name of the borrower. The Interim Resolution Professional appointed did not verify the Assets of the Corporate Debtor thoroughly nor did he intimate the Respondent about the same. 12. Thereafter, this Tribunal passed an order dated 28.08.2020 for commencement of the Liquidation Process. A public announcement was made by the Liquidator for inviting claims from the creditors. Pursuant to the order dated 28.08.2020 in MA/100/KOB/2020 and the public announcement dated 11.09.2020, the Respondent filed a claim for ₹ 25,82,475/- (Rupees Twenty-Five Lakh Eighty-Two Thousand Four Hundred Seventy-Five only) towards the Security interest of the Vehicle in the prescribed Form D under Regulation 18 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The claim of the Respondent was admitted on 07.10.2020 and the Stakeholders Consultation Committee (SCC in short) was formed as per the provisions of Regulation 31A of the Liquidation Process Regulations, 2016 with the Respondent being one of the members of the SCC. Subsequently, in the meeting of SCC that was held on 07.01.2021, the representative of the Respondent request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the Liquidation process in respect of securities. 18. Under such circumstances, Respondent has requested the Liquidator to reconsider the decision taken in the SCC meeting held on 17.05.2021 vide letter dated 24.05.2021. However, the Liquidator did not accept their request. Hence, the Respondent has approached this Tribunal to direct the Liquidator to give back the Asset of the Borrower because the Corporate Debtor has no right on the same. Further, as the Vehicle has already been hypothecated by the Respondent, it has an exclusive right over the said Vehicle, and the same can be ascertained from various documents and notices sent to the Borrower. 19. It is also pointed that at the time of filing of the proposal for obtaining the loan towards the Vehicle, the Borrower in this case i.e. Mohammed Kunju Ashraf was made the Borrower and the Corporate Debtor was made the Co-Borrower. since the Corporate Debtor was neither the Borrower nor the lawfully recognized owner, therefore, the Vehicle in dispute cannot be considered as an Asset of the Corporate Debtor. Consequently, the Vehicle in dispute cannot become part of the Liquidation pool. 20. The Hon'ble National C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC Code, 2016, as soon as CIRP is initiated, the IRP is duty-bound to take control and custody of assets over which the Corporate Debtor has ownership rights. It appears from the records that the owner s name and address in the Certificate of Registration, confirms the ownership of the car to be that of the Corporate Debtor. This being so, reference to the loan agreement showing the corporate debtor as the co-borrower has no relevance. However, in the Registration Certificate, the address is shown as M/s. Adhils Builders and Developers Pvt Ltd. Therefore, we are of the view that the vehicle is purchased in the name of the suspended Managing Director for the Corporate Debtor. Therefore, the company is the owner of the vehicle. 23. In Report No.125/2020 filed by the Liquidator in the asset memorandum under the column tangible fixed assets Mercedes Benz is considered as an asset of the Corporate Debtor. 24. We have considered the issue of whether the respondent is a Secured Creditor entitled to realize the security interest in accordance with Section 52(1)(b) of the Code? 25. The relevant portions of Sections 52 and 53 of the I B Code is reproduced below: - 52. Secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors who realise their security interests in the manner provided in this section, shall be deducted from the proceeds of any realisation 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. 53. Distribution of assets. (1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force, the proceeds from the sale of the liquidation assets shall be distributed in the following order of priority and within such period and in such manner as may be specified, namely: - (a) the insolvency resolution process costs and the liquidation costs paid in full; (b) the following debts which shall rank equally between and among the following: - (i) workmen s dues for the period of twenty-four months preceding the liquidation commencement date; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it. It is abundantly clear that the realization of a security interest is directly linked with the asset subject to such security interest to be realized. 28. On the other hand, Section 53 deals with the distribution of assets by providing that the proceeds from the sale of liquidation assets shall be distributed in the order of priority laid down in the Section. The provision engrafted in Section 53 has an overriding effect over all other laws in force. The vital distinction between the two provisions viz. Section 52 and Section 53 lies in regard to the realisation of interest with Section 52 providing the option to the Secured Creditor in liquidation proceedings to choose between relinquishment of its security interest and realisation of its security interest while Section 53 is confined to the mode of distribution of the proceeds from the sale of the liquidation assets. While the realisation of the security interest can be exercised only qua the asset which is subject to such realizable security interest, relinquishment of security interest to the liquidation estate would leave the Secured Creditor entitled to claim distribution in the proceeds from the sale of the liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has been pronounced in several judgments wherein, the Hon'ble Tribunal has affirmed that the CoC has to bear the cost of the CIRP. 31. At this juncture, it is also noted that the Respondent has filed Schedule II Form D under Regulation 18 of the IBBI (Liquidation Process) Regulations,2016 on 17.12.2020. Regulation 18 of the IBBI (Liquidation Process) Regulations, 2016 reads: - Claims by financial creditors (1) A person claiming to be a financial creditor of the corporate debtor shall submit proof of claim to the liquidator in electronic means in Form D of Schedule II. (2) The existence of debt due to the financial creditor may be proved on the basis of- (a) the records available in an information utility if any; or (b) other relevant documents which adequately establish the debt, including any or all of the following- (i) a financial contract supported by financial statements as evidence of the debt; (ii) a record evidencing that the amounts committed by the financial creditor to the corporate debtor under a facility has been drawn by the corporate debtor; (iii) financial statements showing that the debt has not been repaid; and (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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