The New Delhi bench of the National Company Law Appellate Tribunal ( NCLAT) has held that if the secured creditor fails to pay the liquidation costs within 90 days after its intention to realise the security interest, the security interest shall stand relinquished under Regulation 21A(3) of the Liquidation Regulations, 2016.
The Suraksha Asset Reconstruction Ltd, the appellant sought to realise its security interest under the SARFAESI Act in the liquidation process of the corporate debtor but the possession of the assets was denied by the liquidator despite an order passed by the Adjudicating Authority by which the possession of the mortgaged assets was directed.
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A notice under the SARFAESI Act was issued seeking symbolic possession of the assets which was refused by the liquidator on the ground that the appellant failed to pay CIRP and liquidation costs. Thereafter, the security interest of the appellant was declared relinquished under Regulation 21A(2) and (3) of the IBBI (Liquidation Process) Regulations, 2016.
The appellant that Appellant having already intimated intention to realise its security interest vide letter dated 10.01.2020, there is no question of relinquishment of security interest of the Appellant. Appellant has right under Section 52 of the IBC to realise its security interest. Appellant having never refused to pay CIRP/Liquidation costs, there is no question of relinquishment of its security interest.
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It was submitted that Appellant could not proceed to realise its security interest because both the erstwhile liquidator and current liquidator never handed over possession of the mortgaged land and secured assets of the corporate debtor to the Appellant despite clear direction dated 07.01.2021 of the Adjudicating Authority.
On the other hand, it was contended by the liquidator that the Appellant has not paid the amount of CIRP costs and liquidation costs in spite of e-mail sent by the liquidator on 30.01.2020, 30.06.2020, 27.10.2020 and 16.02.2023. Appellant has admitted its liability to make payment of the estimated liquidation costs but has not made any payment.
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The tribunal observed that “when Appellant has proceeded to realise its security interest it was required to pay the amount as referred to in Regulation 21A (2)(a). The Adjudicating Authority thus, has rightly referred to and relied on Regulation 21A (2) & (3).”
The bench of Justice Ashok Bhushan (Judicial Member) and Barun Mitra (Technical Member) observed that the liquidator did not commit any error in communicating decision to the Appellant that on account of non-payment of liquidation costs, security interest of the Appellant stood relinquished in terms of Regulation 21A (2) &(3) of the Liquidation Regulations. The appeal was dismissed.
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