Skip to main content

NCLAT applies SARFAESI Act to break deadlock in Insolvency Process

In Liquidator of Surana Power Limited vs Bharat Heavy Electricals Limited, a deadlock was created by the refusal of the Respondent to release its charge of secured assets so that the Liquidator can sale the assets.

The Respondent won an arbitration award allowing lien on assets on which several other creditors were already holding charge. The Liquidator asked for direction from the NCLAT to break the deadlock.

The NCLAT observed that the Learned Adjudicating Authority has rejected the Application mainly on the ground that BHEL is a Secured Creditors, entitle to proceed under Section 52 to realize its Security Interest. The Appellant Liquidator cannot cause the sale of asset filing under Section 52 in the manner as specified under Section 53 of the Code unless the charge holder relinquishes the Security Interest. The Adjudicating Authority has held that the Respondent's lien has a preference over the charge created in favour of the remaining Secured Financial Creditors.

It is essential to point out that the Adjudicating Authority has failed to appreciate that all the Secured Creditors are on the same footing regardless of the mode of creation of charge.

t is pertinent to mention that the Respondent is also a Secured Creditor at par with the remaining ten other Secured Creditors. Enforcement of security interest is governed by the SEC 13 of the SARFAESI Act. As per terms of Section 13(9) of the SARFAESI Act, 2002 any steps about the realization of assets by the Secured Creditors requires confirmation from the Creditors having at least 60% of the value of total debt.

In the present case, the Secured Creditors which 73.76% in value have already relinquished the Security Interest into the liquidation estate. Thus, it would be prejudicial to stall the liquidation process at the instance of a single creditor having only 26.24% share (in value), in the secured assets. The Respondent does not hold a superior charge from the rest of the Secured financial creditors in the secured Assets. The above provision of SARFAESI Act will be applicable in this case to end this deadlock, and the decision of 73.76% of majority Secured Creditors, who have relinquished the Security Interest shall also be binding on the dissenting secured creditors, i.e. Respondent.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Flat owner without legal title has consumer rights

In a significant judgment, the South Mumbai Consumer Forum has held that a flat owner legally occupying the flat would be a consumer, even if his title to the flat might be in dispute before a competent court. Thurlow owned a flat in a co-operative society. Appuswami was residing with him. In 1976, Appuswami got married in the same flat, and his wife started residing in the same flat. They had three children, born and brought up in the same flat. After Thurlow expired in 2004, Appuswami approached the High Court for inheritance to Thurlow's estate but expired while the matter was pending. His wife and children were brought on record. Subsequently, the society intervened, contending Appuswami did not have any right to the flat and it should be handed over to the Society. The Appuswami family continued to reside in the flat, and even pay the society's outgoings and maintenance charges. Later, the society stopped collecting maintenance charges from all members, as it earned...
Post a Comment
Read more

NCLT - Mere admission of receipt of money does not qualify as a financial debt

Cause Title : Meghna Devang Juthani Vs Ambe Securities Private Limited, National Company Law Tribunal, Mumbai, CP (IB) No. 974/MB-VI/2020 Date of Judgment/Order : 18.12.2023 Corum : Hon’ble Shri K. R. Saji Kumar, Member (Judicial) Hon’ble Shri Sanjiv Dutt, Member (Technical) Citied:  Carnoustie Management India Pvt. Ltd. Vs. CBS International Projects Private Limited, NCLT Swiss Ribbons Pvt. Ltd. & Anr vs. Union of India & Ors. (2019) Sanjay Kewalramani vs Sunil Parmanand Kewalramani & Ors. (2018) Pawan Kumar vs. Utsav Securities Pvt Ltd 2021 Background Application was filed under section 7 of the Insolvency and Bankruptcy Code, 2016 alleging loan of Rs, 1.70 cr is due. The Applicate identified herself as the widow and heir of the lender but could not produce any documents proving financial contract between her Late husband and the CD but claimed that the CD has accepted that money was received from her husband. The applicant subs...
Post a Comment
Read more