TMI BlogSecured Creditors in Liquidation Proceedings [ Section 52 ]X X X X Extracts X X X X X X X X Extracts X X X X ..... the liquidation estate and can enforce it on its own. This right is provided under section 52 of the IBC. Upon commencement of the liquidation process, secured creditors have two options for the recovery of money owed to them either to relinquish their security interest to the liquidation estate and receive proceeds from the sale of assets by the liquidator, or to stay outside the liquidation process and recover the debt owed to them by enforcement of their security interest in accordance with section 52 of the IBC. Right of secured creditor [ Section 52(1) ] A secured creditor in the liquidation proceedings may- (a) relinquish its security interest to the liquidation estate and receive proceeds from the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Passing of order by Adjudicating Authority [ Section 52(6) ] The Adjudicating Authority, on the receipt of an application from a secured creditor under section 52(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. Yield of surplus [ Section 52(7) ] Where the enforcement of the security interest under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dator to hand over symbolic possession of the assets to the secured FC. The NCLAT held that only one secured creditor can enforce its right for realization of its debt out of the secured assets as per section 52. It also held that the AA has no jurisdiction to entertain the application under section 52(6) in absence of any cause of action as per section 52(5). It noted that for realization of secured assets by a secured creditor, it must inform the liquidator, who is required to verify such security interest and permit the secured creditor to realize it. If a secured creditor applies directly to the AA for realization of secured assets under section 52(6), such an application is not maintainable. It remitted the matter to the liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at least 60 percent of the value of total debt. In this case, 73.76 percent of the secured creditors had already relinquished the security interest to the liquidation estate. Thus, it would be prejudicial to stall the liquidation process at the instance of a single creditor having only 26.24 percent share (in value) in the secured assets. The respondent did not hold a superior charge from the rest of the secured FCs. The NCLAT applied section 13(9) of the SARFAESI Act to end the deadlock, and held that the decision of 73.76 percent of the secured creditors, who had relinquished their security interest, shall be binding on the dissenting secured creditors. Bank of Baroda Vs. Mrs. Deepa Venkat Ramani Another - NCLAT Dated 04.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 52(1)(b) read with section 52(2) and (3) of the Code. B.R. Traders Vs. Venkataramanarao Nagarajan Ors. - NCLAT Dated 13.11.2019 Even during liquidation process, the liquidator is to ensure that CD remains a going concern. If no arrangement or scheme framed under section 230 to 232 of the Companies Act, 2013 becomes possible or the CD is not sold in its totality along with the employees and there is no option but to sell the assets of the CD and to distribute the same amongst the creditors in terms of section 53 read with section 52 of the Code, the liquidator may be asked to return the third party assets. Leo Edibles Fats Ltd. Vs. The Tax Recovery Officer (Central) Ors. - HC, Hyderabad Dated 26.07.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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