IDFC Bank Limited Vs Monnet Power Company Limited (NCLT Cuttack)
Secured creditors cannot seek priority during distribution of sale proceeds after relinquishing security interest
NCLT Cuttack held that after relinquishing its security interest, Secured Creditors cannot seek priority over other similar creditors during the distribution of the sale proceeds of the secured assets.
Facts- The present Application is filed by the Liquidator of the Corporate Debtor, i.e., Monnet Power Company Limited (applicant), seeking directions from this Adjudicating Authority for distribution of the balance sale consideration and for extending the time for distribution of sale proceeds u/s. 53 of the Insolvency and Bankruptcy Code, 2016 read with Regulation 42 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
Conclusion- Insofar as the issue about the distribution of assets among creditors is concerned, as per the judgment of the Hon’ble NCLAT, after relinquishing its security interest, Secured Creditors cannot seek priority over other similar creditors during the distribution of the sale proceeds of the secured assets.
Held that once a Secured Creditor relinquishes its security interest to the liquidation estate, it cannot seek priority among other secured creditors on the basis of the charge and is only entitled to receive proceeds from the sale of assets in the manner specified under Section 53 of the Code.
