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TMI Blog2024 (9) TMI 1604X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 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 prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of Haldia property and to direct the liquidator not to interfere in respect of Haldia property. 2. The prayer in the captioned IA reads thus: a) pass an order there by quashing and setting aside sale notice dated 19.07.2023, issued by the Respondent/Liquidator in respect of Haldia property which is exclusively charged to the Applicant/Secured Creditor/Phoenix ARC and the security interest in respect of which has not been relinquished towards the liquidation estate, and; b) pass an order there by quashing and setting aside the communications dated 14.07.2023 sent by Respondent/Liquidator and any consequential action taken by the Respondent/Liquidator in respect of Haldia property which is exclusively charged to the Applicant/Secured Creditor/Phoenix ARC and the security interest in respect of which has not been relinquished towards the liquidation estae, and; c) direct the Respondent/Liquidator, not interfere with the right of Applicant/Phoenix ARC to enforce its security interest on the Haldia property as only Applicant/Phoenix ARC has the exlusive right to realise its security interest through Haldia Property, and; d) restrain the Respondent/Liquidator from dealing in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corporate debtor. The appeal was allowed vide order dated 16.03.2021 and the RP was appointed as liquidator of the corporate debtor. (vi) Following the liquidation order, the applicant, in respect of debt assigned by ICICI Bank filed its claim on 14.04.2021 in Form D for an amount of Rs. 793,45,16,428/- and the same was duly admitted. The said debt assigned by ICICI Bank was secured by exclusive first charge on Haldia Property in favor of ICICI Bank. In terms of rights under Section 52(1)(b) and 52(2) the applicant did not relinquish its security interest in Haldia Property and specifically mentioned the same in Form D. In respect of debt assigned by Axix Bank the applicant filed its claim on 14.04.2021 in Form D for an amount of Rs. 15,45,64,37,776/- and the same was also duly admitted. (vii) Meanwhile, The liquidator made paper publication on 26.03.2021 and 06.10.2021 inviting Scheme of compromise/arrangement (scheme) under section 230 of the Companies Act, 2013 (Act) for revival of the corporate debtor. Subsequently, one Jammu Pigments Limited submitted the scheme dated 30.11.2021 which was revised from time to time. However, failed to submit final scheme with in the stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 06.01.2023 passed by this Adjudicating Authority. The Hon ble NCLAT vide order dated 17.02.2023 granting one more opportunity to Jammu Pigments for approval of the scheme from the SCC. Pursuant to the said order the SCC in its meeting held on 28.02.2023 again rejected the revised scheme of Jammu Pigments and therefore, the said appeal before the Hon ble NCLAT was dismissed vide its order dated 17.03.2023. The workman of the corporate debtor also filed an appeal bearing No. Comp App (AT) (Ins) No. 195 of 2023 before Hon ble NCLAT against the order dated 06.01.2023 passed by this Adjudicating Authority. However, the said appeal was dismissed by the Hon ble NCLAT vide its order dated 20.03.2023. (xiii) On 12.06.2023, the Refex group offered Rs. 265,50,00,000 (Rupees Two Hundred Sixty Five Crore Fifty Lakhs) to purchase the corporate debtor as going concern excluding Haldia Property since the security interest over the said property was with the applicant and the same was not relinquished to the liquidation estate. (xiv) The applicant also received expression of interest for purchase of Haldia Property from EMCO Limited on 12.06.2023 and from Neptune Barter Private Limited o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to Regulation 21A(1) of Liquiadation Process Regulations, a secured creditor is required to inform to the liquidator within 30 days from the liquidation commencement date of its decision to relinquish its security interest to the liquidation estate or realize its security interest , failing which the assets covered under the security interest are presumed to be part of the liquidation estate. For ready reference Regulation 21A(1) of Liquidation Process Regulations is reproduced here under: 21A (1) A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II: Provided that, where a secured creditor does not intimate its decision with in thirty days from the liquidation commencement date, the assets covered under the security interest shall be presumed to be part of the liquidation estate. v. The 30 days time period referred to in the above said Regulation expired on 15.04.2021 and there fore, the remaining Haldia Land (8.04 acres) and buildings and machinery thereon became part of the liquidation estate from the said date by op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit and buildings and machinery there on, and, further that it would not be relinquishing the same in favour of the liquidation estate. However, the same is time barred and cannot be entertained by the Liquidator since as per Regulation 21A the applicant was required to inform the Liquidator of its decision to relinquish the security interest to the liquidation estate or not with in 30 days of the liquidation commencement date, i.e. by 15.04.2021. xi. Moreover, the applicant has failed to realize the security interest over the Haldia Property which was kept out of the liquidation estate (12.84 acres) with in the timeline as specified in Regulation 21A of the Liquidation Process Regulation. Hence, the said asset has become part of the liquidation estate. The relevant part of the Regulation is reproduced here under: 21A (2)(b) the excess of the realized value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator with in one hundred and eighty days from the liquidation commencement date: xii. The mandatory time limit of 180 days as provided in Regulation 21A of Insolvency and Bankruptcy Board of India (Liquidation Process) Regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by this Adjudicating Authority, 15th meeting of Stakeholder's Consultation Committee ( SCC ) was convened on 12.09.2023 wherein Applicant was also present. In the said meeting, SCC unanimously advised the Liquidator to sell the Subject Property in a separate block by reducing the price by 10% than last auction price. The meeting was also attended by representative of Applicant who had unequivocally and categorically agreed to such a suggestion. xviii. During the subsequent hearing dated 14.09.2023 of this matter by this Adjudicating Authority, the liquidator pointed out this fact before this Adjudicating Authority and the same was also recorded in the order. However, the Applicant had, immediately there after, through its email dated 14.09.2023 at 2:00 PM stated that it has not given any consent for the reduction of price of the Subject Property and through its another email on the same date at 3:04 PM stated that his consent in the minutes was recorded wrongly though the applicant has objected to the inclusion of Subject Property in Liquidation Estate. xix. No such objection was made in the SCC meeting by the applicant. Moreover, pursuant to the above emails of the Applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant filed its claim in Form- D on 14.04.2021 for 12.84 acres of land and buildings and machinery thereon of Haldia Unit. 6. It is further noted that pursuant to the order of liquidation the liquidator invited a Scheme of compromise/arrangement (scheme) under section 230 of the Companies Act, 2013 (Act) for the revival of the corporate debtor. One Jammu Pigments Limited submitted the scheme which was revised time after time, however, the scheme was not found acceptable. Thereafter, the liquidator published the notice for e-auction of the assets of the corporate debtor in newspaper on 21.12.2021. Jammu Pigments Limited submitted another revised scheme on the same day i.e. 21.12.2021. Even though the said scheme was submitted after the expiry of the time prescribed, the liquidator and the members of the SCC discussed and considered the scheme in their 9th 10th meeting held on 25.01.2022, 28.01.2022, 01.02.2022 23.02.2022. The scheme was however rejected by 74% of the secured financial creditors (Phoenix ARC Private limited, State Bank of India, IDBI Bank Limited and LIC of India) and 94% of unsecured financial creditors (SREI Infrastructure Limited). 7. Subsequently, Jammu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess) Regulations, 2016. For ready reference the same is reproduced here under: Presumption of security interest. 21A (1) A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II: Provided that, where a secured creditor does not does not intimate its decision within thirty days from the liquidation commencement date, the asset coered under the security interest shall be presumed to be part of liquidation estate. (2) Where a secured creditor proceeds to realise its security interest, it shall pay- (a) as much towards the amount payable under clause (a) and sub- clause (i) of clause (b) of sub-section (1) of section 53, as it would have shared in case it has relinquished the security interest, to the liquidator with in ninety days from the liquidation commencement date; and (b) the excess of realized value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator with in one hundred and eighty days from the liquidation commencement date: Provided that where the amount payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uing the proviso 91. Provisos in a statute have multi-faceted personalities. As interpretational principles governing statutes have evolved, certain basic ideas have been recognised, while heeding to the text and context. Justice G.P. Singh, in his seminal text, Principles of Statutory Interpretation [Justice G.P. Singh, Principles of Statutory Interpretation, (14th Edn. , Lexis Nexis, 2016) pp. 215-234.] formulates the governing principles of interpretation which have been adopted by courts while construing a statutory proviso. The first rule of interpretation is that: The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. 15. We have considered these judgments and have also perused the provision contained in Regulation 21A of the IBBI (LP) Regulations 2016. 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. In this regard we may refer to Judgment of 5 Judges of the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liquidator. Further, the IBBI (LP) Regulations, 2016 have been framed in exercise of power conferred under the IBC, 2016. Regulation 44 provides for the timeline with in which the liquidation process has to be completed. If we accept the contention of the Applicant, then the liquidation process cannot be completed within the stipulated/ reasonable period. Such an interpretation as suggested by the Applicant would defeat the objective of the IBC i.e. Resolution/liquidation in a time-bound manner. 18. As per the above 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 remai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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