Vishweshwar Sahakari Bank Limited Vs Prashant Jain (NCLT Mumbai)
The NCLT Mumbai considered an application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) by a secured creditor seeking permission under Section 52(1)(b) to realise its security interest over the corporate debtor’s mortgaged property after the Liquidator rejected its request.
The corporate debtor entered CIRP pursuant to an order under Section 7 of the IBC. As no resolution plan was approved, the Adjudicating Authority ordered liquidation on 02.02.2023. A public announcement inviting claims was issued on 08.02.2023. The liquidation order was subsequently stayed by the NCLAT on 23.02.2023 and the stay was vacated on 12.12.2023. During the intervening period, the original Liquidator resigned, and a new Liquidator was appointed only on 09.04.2025. The applicant submitted its claim on 19.05.2025. While the Liquidator admitted the claim, he rejected the request to realise the security interest under Section 52, citing non-compliance with Regulations 21A and 37 of the IBBI (Liquidation Process) Regulations, 2016.
The applicant contended that Section 52 merely required a secured creditor to intimate its decision to realise its security interest and that the Liquidator was obliged to verify the security interest and permit its realisation. It argued that the liquidation process effectively remained inoperative during the NCLAT stay and the subsequent vacancy in the office of the Liquidator, leaving only ten days available for exercising its option after appointment of the new Liquidator. The applicant sought condonation of the alleged delay and further submitted that Regulation 37 did not become applicable until permission to realise the security interest had been granted. It also argued that the rights under Section 52 were not conditional upon compliance with Regulations 21A or 37.
