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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 ..... sts of inventory like granite, marble, tiles, sanitary fittings, etc. lying in the yard/godown of the corporate debtor. (Liquidation Value Rs. is assessed as 78.42 lakh). Besides, it consists of an Eicher Lorry (Liquidation value Rs. 3.20 lakh) and a Benz Car Benz CLA 200 CD, financed by M/s. Daimler Financial Services Pvt. Ltd. (Liquidation value Rs. 17.60 lakh). The Eicher Lorry was sold at Rs. 3.40 lakh and proceeds credited to the liquidation account maintained with the State Bank of India. The stakeholders consist of the State Bank of India with 96.26% share and M/s. Daimler Financial Services Pvt. Ltd who financed the Benz Car with 3.74% share based on their claims admitted. There are no other stakeholders. 3. In the application it is stated that the Benz Car CLA 200 CD was financed by M/s. Daimler Financial Services Pvt. Ltd. The vehicle is having Pondicherry registration. The respondent herein submitted their claim in Form D. Subsequently, they requested release of their security interest. Thereafter, the stakeholders Consultative Committee discussed the matter, and the liquidator advised releasing the security interest with a stipulation that in terms of Regulation 21 A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requested the Borrower to make the payment of Rs. 23,90,066.33/- (Rupees Twenty-Three Lakh Ninety Thousand Sixty-Six and Thirty-Three Paisa only). 10. The Borrower did not pay heed to the said notice dated 05.10.2019.Therefore, in view of the accepted terms and conditions of the Loan Agreement and as per the procedure established, they were given the last opportunity to clear the outstanding dues by sending the Early Termination Quotation to the Borrower, wherein an amount of Rs. 25,82,475.33/- (Rupees Twenty-Five Lakh Eighty-Two Thousand Four Hundred and Seventy-Five and thirty-three paisa only) was explicitly stated to be due and payable by the Borrower. In this respect, nowhere it can be read that the Respondent addressed any of the said communication, notices, or letter to M/s. Adhils Builder and Developer Pvt. Ltd. in the capacity of the owner. They have sent all notices to Mr. Asharf Abdulla Kunju. 11. The Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 r/w Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 filed by the Operational Creditor on 28.11.2019, and thereafter, the Corporate Insolvency Resolution Process was init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited in its operation in respect of these two types of assets only, although as per the main provision, an Asset owned by the third party but in possession of the Corporate Debtor shall not be included u/s 18(1)(f) which prescribes taking control over the properties as described therein. 15. The Applicant through the letter dated 06.03.2021 informed the representative of the Respondent about the decision taken in the SCC meeting held on 07.03.2021 wherein it was agreed to realize the security subject to the following conditions: a. The Respondent should give a written consent/agreement to the effect that the Respondent has no claim on Asset and; b. The Respondent should share the CIRP and Liquidation cost and the excess of realized value will be remitted. 16. To the above intimation of Liquidator, the Respondent sent a reply on 16.03.2021 stating that the Respondent has agreed to pay the Liquidation cost @16.46%, however, would not be paying the CIRP cost, as the Respondent was not part of the CIRP. 17. On 22.05.2021 the Respondent received a letter dated 19.05.2021 from the Liquidator stating that the SCC had relinquished all the rights of the security interest based on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not the Corporate Debtor. 21. Having considered, the submissions of the learned counsel appearing for the Applicant and the Respondent and on perusal of the records placed before this Tribunal, we have noticed that the Respondent herein submitted their claim in Form D. Subsequently, they requested the release of their security interest stating that the owner of the vehicle is the borrower i.e. Mr. Muhammed Kunju Asharaf and the Corporate Debtor is only a co-borrower and that the title of the asset vest with the borrower and that the Co-borrower has no role to play. 22. It is not in dispute that the Respondent and the borrower executed a Loan Agreement bearing No.10125827 on 22.06.2017, for an amount of Rs. 30,00,000/- payable in 60 monthly instalments for purchase of 'Benz-CLA 200 CDI'. It is also not in dispute that the subject property has been hypothecated by the Corporate Debtor and under Section 51 of the 'MV Act', 1988, entry of the agreement is made in the Certificate of Registration with the RTO. In the registration certificate, it is seen that the RC was issued in the name of the Suspended Director of the Corporate Debtor. To make it clear the R. C is reproduced bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such security interest maintained by an information utility; or (b) by such other means as may be specified by the Board. (4) A secured creditor may enforce, realize, settle, compromise or deal with the secured assets in accordance with such law as applicable to the security interest being realised and to the secured creditor and apply the proceeds to recover the debts due to it. (5) If in the course of realising a secured asset, any secured creditor faces resistance from the corporate debtor or any person connected therewith in taking possession of, selling, or otherwise disposing off the security, the secured creditor may make an application to the Adjudicating Authority to facilitate the secured creditor to realise such security interest in accordance with law for the time being in force. (6) The Adjudicating Authority, on the receipt of an application from a secured creditor under sub-section (5) may pass such order as may be necessary to permit a secured creditor to realise security interest in accordance with law for the time being in force. (7) Where the enforcement of the security interest under sub-section (4) yields an amount by way of proceeds which is in exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Liquidation for Corporate Persons. This arrangement under the legal framework would demonstrate that insolvency resolution and liquidation for Corporate Persons is interlinked but treated distinctly from insolvency resolution and bankruptcy for Individuals and partnership firms falling under Part III of I&B Code. Section 52, being a part of the liquidation process prescribes one of the two courses which, at its option, a Secured Creditor can adopt in liquidation proceedings: (i) The Secured Creditor may relinquish its security interest to the liquidation estate. If it does so, it shall be entitled to receive proceeds from the sale of assets by Liquidator in accordance with the waterfall mechanism engrafted in Section 53; or (ii) The Secured Creditor may realize its security interest as provided in Section 52 of the I&B Code. 27. Section 52(2) provides that in the event, the Secured Creditor choosing to realise the security interest, it shall inform the liquidator of such security interest and also identify the asset subject to such security interest to be realised. It shall be the duty of the Liquidator to verify such security interest and permit the Secured Creditor to rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neficiaries classified under clause (b) would rank next only to clause (a) viz. insolvency resolution process cost and liquidation costs paid in full. 29. From the above it is clear that if the respondent wants to proceed with the liquidation proceedings without relinquishing his security interest he has to follow Section 52 of the I&B Code in which it is 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. 30. It is also pertinent to consider the submission of the Respondent in the letter dated 16.03.2021 that it is not liable to pay Rs. 4,17,830/ (Rupees Four Lakh Seventeen Thousand Eight Hundred and Thirty-One Only) which is inclusive of CIRP and Liquidation costs. Only the CoC members are entitled to bear the costs of the CIRP and the Respondent being a claimant only in the liquidation process, can only be responsible for the disbursement of the Liquidation cost to the tune of Rs. 1,39,910/- (Rupees One Lakh Thirty-Nine Thousand Nine Hundred and Ten Only) which is proportio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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