NCLT Mumbai (10.05.2019) in Edelweiss Asset Reconstruction Co. Ltd. v/s. Reid and Taylor India Limited [M.A. No.1392/2019 in C.P. No. 382/IB/MB/MAH/2018] held that; only the first charge holder/the secured creditor with first pari-passu charge can stay outside the liquidation process by the Liquidator and realize his security interest in the manner provided under the above provisions of law
Excerpts of the order;
# 2. The MA has been filed by one of the Financial Creditors of the Corporate Debtor, Finquest Financial Solutions Pvt. Ltd. claiming sole first charge over all the fixed assets and first pari-passu charge over the current assets of the Corporate Debtor. By way of this Application, the Applicant seeks permission to realize their security interest by selling or disposing the secured assets of the Corporate Debtor on “as is where is” basis as a going concern as per Section 52 of the Insolvency and Bankruptcy Code, 2016 read with Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016. The Applicant has submitted an envelope to this Tribunal as well as to the Liquidator informing the price at which they intend to realize the assets of the Corporate Debtor. They also seek that pending the completion of sale of the secured assets of the Corporate Debtor, the secured assets should be under the possession, overall control, supervision and direction of the Applicant.
# 3. Edelweiss Asset Reconstruction Company Ltd. (Edelweiss) is one of the Financial Creditors of the Corporate Debtor who has objected to the Application filed by Finquest Financial Solutions Pvt. Ltd. In their objection they have stated that Section 52 of the IBC does not empower a secured creditor to stand outside the liquidation process to enforce its security to the exclusion of other secured creditors having same ranking pari-passu charge over the same security interest, more particularly when the issue of priority of charges has not been adjudicated by the Hon’ble Court of Civil judge Sr. Division at Nanjangud, Karnataka under Suit No.84 of 2013 (Suit).
# 4. Edelweiss has further stated that this Hon’ble tribunal does not have the jurisdiction to determine disputed questions of facts regarding the validity/existence of the registered same ranking pari-passu charges of secured creditors over the same asset. They have submitted that since the Applicant is not the sole secured creditor, it is not open for the Applicant to realize its security interest to the exclusion of other secured creditors having first charge over the same asset under the misconceived notion of allegedly being a prior exclusive first charge holder of the asset.
# 6. The Liquidator has submitted a reply stating that he has verified the documents submitted by the Financial Creditors including the Applicant and also verified documents available with the Registrar of Companies with respect to the security held by the charge holders. Basing on this, the Liquidator submits that the Applicant is the sole first charge holder of the immovable property of the Corporate Debtor at Mysore and the movable fixed assets of the Corporate Debtor. The Applicant holds only a second pari-passu charge over the current assets of the Corporate Debtor.
# 7. From the above pleadings this Bench forms the following issues:
1. Whether the Applicant is entitled to realize their security interest in the manner specified under Section 52(1)(b) r/w Regulation 37 of the IBBI (Liquidation process) Regulations, 2016.
2. Whether this Tribunal has jurisdiction to determine on the issue of disputed question of fact as to who the first charge holder is.
# 8. As regards the Issue No. 1, only the first charge holder/the secured creditor with first pari-passu charge can stay outside the liquidation process by the Liquidator and realize his security interest in the manner provided under the above provisions of law.
# 10. ………….. In addition to the above, the most important aspect of the realization of security interest by the secured creditor who is having the first charge is to be verified and vetted by the Liquidator who in this particular case had verified the same in terms of Section 52(3) of the Insolvency and Bankruptcy Code, 2016 and in all categorical terms ascertained that the applicant is the first charge holder of the fixed assets of the Corporate Debtor. In view of the above uncontradictable documentation in favor of the Applicant, the supportive documents and the reply filed by the Liquidator after duly scrutinizing the documents, we hold that the Applicant is entitled to realize their security interest under Section 52(1)(b) read with Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016. Hence the issue no. 1 is decided in favor of the Applicant. As regards the current assets, we hold that the Applicant does not have the first charge..
# 11. ……….. Even otherwise, we hold that it is the exclusive prerogative of this Tribunal which is exclusively vested with the power to adjudicate the matters relating to and connected with insolvency and bankruptcy law particularly the process of liquidation and the related measures to be adopted in the said process of liquidation. This is just not a substantive law but also a procedural law. Therefore, we hold that this Tribunal can decide on the issues of disputed question of fact when the documents unequivocally prove the point that is sought to be decided. The so called dispute raised by the Edelweiss is just frivolous and is hereby rejected.
# 12. From the above, we hold that the issue no. 1 and 2 are decided in favor of the Applicant and further we hold that the Applicant is entitled to realize their security interest as provided under Section 52(1)(b) r/w Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016.
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