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TMI Blog2020 (2) TMI 1484X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed by this Adjudicating Authority on 17.01.2018 and Respondent No. 1 was appointed as a liquidator of the Respondent Company. It is further stated Applicant lodged his claim for Rs. 24,78,68,595/- with the liquidator and the liquidator has not called for the meeting of the Creditors for one and half years. However, it is stated that Applicant received E-mail on 07.05.2019 regarding meeting of creditors scheduled on 09.05.2019 however, due to paucity and proximity, the Applicant could not attend the meeting and vide his E-mail dated 08.05.2019 requested for sufficient time by scheduling aforesaid meeting of creditors on some other date. However, there was no response from the Respondent No, 1. The Respondent No. 1 vide his E-mail dated 16.05.2019 sent minutes of the meeting held on 09.05.2019 informing that the sale proceeds has been distributed amongst the Respondent No. 2 and 3 stating them as the Security Charge Holders and distributed Rs. 9.59,03,179/- to Respondent No. 2 and Rs. 1,59,99,480/- to the Respondent No. 3 without considering the claim of the Applicant as secured creditor. 3. The Applicant further states that the said distribution made by the liquidator is done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant submits that Respondent No. 1 is liable to pay interest @18% p.a. from the date Respondent No. 1 had arbitrarily distributed the liquidation proceeds to Respondent No. 2 & 3 on the Applicant's share of liquidation proceeds i.e. Rs. 1,62,70,647/-. 9. The Applicant has prayed for the following relief; (A) Be pleased to direct the Respondent No. 2 and 3 to forthwith deposit the sum received by them from the sale proceeds and further be pleased to direct Respondent No. 1 to allocate corpus of sale proceeds evenly to the Applicant in terms of their shares as the secured creditor i.e. 14.54%. (B) During hearing and pendency of this Application, direct the Respondent No. 2 and 3 to forthwith deposit the sum received by them from the sale proceeds before this Hon'ble Tribunal. (C) Direct Respondent No. 1 to pay interest to Applicant @ 18% from the date of disbursement and encashment of sale share in favor or Respondent No. 2 and 3, qua the amount of the Applicant, in terms of their share as the secured creditor i.e. 14.54%. (D) Be pleased to direct initiation of appropriate proceedings against the erring concern. (E) To pass such other and further orders as this Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing properties: (a) Industrial property situated at Plot No. 631-639, 654-656, 2019-2027, GIDC, Ankaleshwar (b) Residential Flat No. E-9, Amrapali Co-operative Housing Society Pvt. Ltd. GIDC, Ankaleshwar. (c) Residential Flat No. E-17, Amrapali Co-operative Housing Society Pvt. Ltd, GIDC, Ankaleshwar. 16. The Respondent No. 1 further submits that a mail was sent to the stakeholders on 07.07.2018 providing the charge sheet and the amount to be distributed, sheet on sources and uses of funds and liquidator's fee sheet, requiring the stakeholders to provide the objections within 5 days of the receipt of mail. 17. The Respondent No. 1 further submits that since no objections were received, the Respondent No. 1 disbursed the amount received from the sale of assets on 14.07.2018, in consideration of charge held by the creditors on the assets of the Corporate Debtor in the following manner: 18. The Respondent No. 1 submits that Respondent No. 1 has distributed the liquidation proceeds as per the provisions of the IB Code and based on understanding of paragraph 21.6 of Insolvency Law Committee (ILC) Report dated 26/03/2018 with regard to waterfall treatment of section 53 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor has anyone of the following two options:- To realize his security interest outside the liquidation proceedings (Section 52 of the Code). To claim the proceed from the liquidation proceedings after relinquishment of the security interest (Section 53 of the Code). Now, the issue to be decided is whether; Once a secured creditor has not realized his security, under Section 52 of the Code, and has relinquished the security to the liquidation estate, there remains no classification inter-se, i.e. by joining liquidation proceedings, all the secured creditors rank equal (pari passu), irrespective of the fact that they have inter-se priority in security charge. It is important to understand what a first charge and second charge is. The first charge holder has a security interest on the asset of a company; the second charge holder has a subsequent charge over the remainder of the asset of the company, which is remaining after settling the claims of the first charge holder. In that sense, the charges are sequential and not proportional. It is a settled position that when a charge is created on a property already subject to encumbrance, it is no good to say that the existing char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors. It is only with a view to bring the workmen's dues pari passu with the secured creditors, that Section 529-A was enacted. 36. **Only because the dues of the workmen and the debts due to the secured creditors are treated pari passu with each other, the same by itself, in our considered view, would not lead to the conclusion that the concept of inter se priorities amongst the secured creditors had thereby been intended to be given a total go-by." The issue of ranking of secured creditors have been discussed by the Supreme Court in ICICI Bank V. Sidco Leathers Ltd'' (2006) 10 SCC 452 - If the secured creditors relinquish their security interest and make claim on the liquidation estate, will the first/second ranking remain, or all secured creditors will be of the same ranking. In this case, the Supreme Court discussed the legal position and maintained the ranking of the secured creditors. 20.2.3 In view of the above, this Adjudicating Authority is of the considered view that the inter se priorities amongst the secured creditors will remain valid and prevail in distribution of assets in liquidation and hence the instant application IA 514/2019 in CP(IB) 04/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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