Creditor must have exclusive or sole first charge over property to enforce security interest u/s 52(1)(b) of IBC

Case details: Asset Reconstruction Company India (P.) Ltd. v. Venkatramanrao Nagarajan - [2021] 127 taxmann.com 863 (NCLT- Chennai )

Judiciary and Counsel Details

• • R.  Sucharitha | Judicial Member & Anil Kumar B | Technical Member
  • M.S. Krishnan, Sr. Adv. and Abitha Banu, Adv., for the Appellant
  • R. Subramaniam, Adv. and R. Sugumaran, Adv. for the Respondent

Facts of the Case

The Corporate debtor had borrowed a loan from IDFC Bank and committed default in repayment of the loan and as a result of which account of the corporate debtor had been declared as Non-Performing Asset (NPA). The IDFC Bank vide Assignment Deed assigned the debt to the applicant.

The Applicant initiated a proceeding for the recovery of a sum before DRT. However, the Operational creditor of the corporate debtor applied section 9 against the corporate debtor and Tribunal initiated CIRP against the corporate debtor and appointed the respondent as Interim Resolution Professional.

NCLT Held

Since no viable resolution plan was forthcoming, the corporate debtor was ordered for Liquidation. The Applicant was a secured creditor who had expressed its willingness to stand outside the purview of liquidation proceedings under section 52 and also required the Liquidator to hand over physical possession of movable and immovable properties described in the schedule to enable the applicant to proceed under the SARFAESI Act.

In addition, documents were not placed on record to substantiate facts as to which property applicant was having ‘exclusive charge’ or ‘sole first charge’, therefore, the liquidator was directed by NCLT to identify properties over which the applicant was having ‘exclusive charge’ or ‘sole first charge’ and to hand over physical possession of same to the applicant to exercise its security interest.

As a result, properties over which the applicant was having ‘second charge’ or ‘pari passu’ charge was to be held within the possession of Liquidator and necessarily said property formed part of ‘Liquidation Estate’.