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TMI Blog2024 (3) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... he liquidation commencement, Alliance having not intimated its decision, filed the application under Regulation 21-A for presuming the assets covered under the security interest to be part of the liquidation estate - irrespective of the claim of Alliance to the pledged shares being sub judice in a separate suit, the fact remains that the effect of the order under Regulation 21-A is that the assets covered under the security interest that is the said shares, are presumed to be part of the liquidation estate. By virtue of the order passed under Regulation 21-A treating the assets covered under the alleged security interest of Alliance (the shares-in-question) to be part of the liquidation estate, the interest of the secured creditors, be it the petitioner or others, cannot be adversely affected in any manner; rather, such order can only enure to the benefit of the secured creditors. The effect of the order is that, despite the claim of security interest of Alliance in the said shares, those are made a part of the liquidation assets, thereby subjecting the sale proceeds obtained after sale of such shares to the rigours of Section 53 of the IBC - Section 53 provides the order of priori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending suit. The argument of the petitioner that the order is devoid of reasons is entirely misplaced. In the absence of any adjudication on the issue of Alliance s rights to the pledged shares, there arises no question of any reason being provided for such non-existent adjudication - there is no scope of interference in the present writ petition. Petition dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... , for which a writ petition lies. 9. It is also argued by the petitioner that the utter lack of reasoning in the impugned order makes it amenable to the writ jurisdiction. Hence, the petitioner does not have any effective right of appeal before the National Company Law Appellate Tribunal (NCLAT). 10. It is further argued that Sony, the petitioner, was not a party before the NCLT and the impugned order was passed behind the back of the petitioner, affecting the rights of the petitioner. 11. Although a recall application in respect of the order was filed by the petitioner, it is argued that the same operates on a different footing than the present challenge inasmuch as the powers of the NCLT of recall of its order is limited, primarily to technical, clerical and arithmetical errors. 12. Learned counsel for the petitioners also hints at collusion between the Liquidator and Alliance on such count. 13. It is argued that the Stakeholders' Consultation Committee (SCC) was not consulted before passing the impugned direction of sale of the assets and issuing the direction that the shares of Manthan allegedly pledged with Alliance were to be part of the liquidation estate. Thus, Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the number of challenges to the self-same order to three, before different fora. 21. It is argued that respondent no. 3-Alliance filed the insolvency petition under Section 7 of the IBC in the capacity of Secured Financial Creditor of the CD, giving rise to CP(IB)/1634/KB/2018 in the month of December, 2018. In March, 2019, Alliance also filed a civil suit being CS No. 54 of 2019 inter alia seeking declaration of pledge in respect of the pledged equity shares of Alliance, which were pledged by the CD to Alliance itself. A declaration was also sought by Alliance in the suit that it is entitled to sell the shares towards satisfaction of its claim against the CD. 22. The insolvency petition was admitted on September 18, 2019 and upon failure of the resolution process the Committee of Creditors (CoC) of the CD decided to liquidate the CD (Manthan) at the CoC meeting held on March 8, 2021, upon which the NCLT directed liquidation by its order dated April 6, 2022. The promoters and suspended Directors of Manthan have also challenged the liquidation order before the NCLAT which was dismissed by an order dated September 20, 2022. The said order was challenged before the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of liquidation proceeds. Under sub-clause (b)(ii) of the said Section, debts owed to a Secured Creditor in the event such creditor had relinquished security is mentioned. A composite reading of sub-clauses (d) and (e)(ii) indicates that the petitioner shall come under Section 53(1)(e)(ii) of the IBC which is below the category of Alliance whether as secured or unsecured financial creditor as per Section 53(1), sub-clauses (b)(ii) and (d). Hence, the impugned order does not affect the position of Sony vis-à-vis the admitted position of Alliance under Section 53. 28. No consultation is required with the SCC before selling assets the CD. The liquidation process is time-bound, it is argued. Under Regulation 31-A, the Liquidator is required to place before the SCC only the recommendation of sale of the CD as a going concern to take advice which is not binding. 29. Learned senior counsel highlights the objection as to maintainability by placing reliance on Indian Oil Corporation Limited Vs. Union of India and others, reported at 2019 SCC OnLine Del 11911, where a Division Bench of the Delhi High Court held that in view of a statutory appeal under Section 61, unless special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudication, for which the alleged security interest forms a part of the liquidation estate. 36. Moreover, the Liquidator, being governed by the statutory mandate of completing the liquidation process in a time-bound manner, has published the Sale Memorandum for the auction sale to be conducted in respect of the shares along with the requisite disclosure on the subject. 37. Thus, the impugned order was passed directing the sale of the said shares and the requisite disclosure was also given by the Liquidator in the Sale Memorandum for auction, citing pendency of the proceedings relating to the title to the alleged pledge of shares. 38. In the light of the above observations, learned counsel for the Liquidator submits that the writ petition is not maintainable in view of the availability of an appeal against the impugned order. 39. In any event, the writ petitioner is a non-party to the subject-applications, for which there is no bar to the petitioner to prefer an appeal even as a non-party. The Liquidator relies upon the judgment of the Supreme Court in State of Andhra Pradesh and others Vs. S. Pitchi Reddy, reported at (2022) 2 SCC 569 on such score. 40. Moreover, the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 25 of the IBC imposes a duty on the Resolution Professional (in the present case the Liquidator) to preserve and protect the assets of the Corporate Debtor, sub-section (2)(a) empowers the said professional to take immediate custody and control of all the assets of the Corporate Debtor. 48. In the present case, there is a dispute as to the entitlement of Alliance (respondent no. 3) to the 77,500 equity shares of the CD which were pledged with Alliance. 49. The Liquidator himself disputes the interest of Alliance in the said shares. 50. In such context, the provisions of Regulation 21-A of the 2016 Regulations are to be examined. Clause (1) of the same provides that a Secured Creditor shall inform the Liquidator of its decision to relinquish its security interest to the liquidation estate or realize its security interest as the case may be. Alliance has filed a Form-D application expressing its interest to realize its security interest. The Liquidator, upon expiry of 30 days from the liquidation commencement, Alliance having not intimated its decision, filed the application under Regulation 21-A for presuming the assets covered under the security interest to be part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets. Only if a secured creditor in the liquidation proceedings realizes its security interest in the manner specified in section 52 of the IBC, under sub-section (1)(b) of the said Section, he shall inform the Liquidator of such security interest and identify the assets subject to such security interest to be realized, as per the provisions of sub-section (2) of Section 52. Only in such a case, under Section 52(3), the Liquidator shall verify such security interest before it is realized by the Secured Creditor under the said Section and permit the Secured Creditor to realize only such security interest, the existence of which may be proved either by the records of such security interest maintained by an information utility or by such other means as may specified by the Board. 56. Hence, the scope of an adjudication of the security interest during a liquidation process is provided only in Section 52(3). If Alliance had succeeded in having its way under Section 52(1)(a), it would not be the bounden duty of the Liquidator to adjudicate on the said rights under sub-section (3) of Section 52. However, since such bid of Alliance has failed by way of the impugned order under Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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