Secured Assets Enter Liquidation Estate on Regulation 21A Default, Validating Auction Sale: NCLAT
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REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal (NCLAT) clarified that a secured creditor’s failure to act within the prescribed timeline under Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, results in the secured assets automatically forming part of the liquidation estate. The Tribunal affirmed that, in such cases, the Liquidator is legally empowered to proceed with the auction sale of those assets, and such a sale remains valid and binding.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating a Company Appeal along with connected Interlocutory Applications, held that non-compliance with Regulation 21A—either by failing to realise the secured assets or by not depositing the sale proceeds within the stipulated period—triggers the inclusion of such assets in the liquidation estate. Consequently, the Liquidator’s subsequent auction sale of these assets stands on a firm legal footing and cannot be challenged on this ground.
The Appellant had challenged the order dated 16.02.2024 of the NCLT, Indore Special Bench, which rejected its objection to the inclusion of the Haldia property in the liquidation estate of the Corporate Debtor. The liquidation commenced on 16.03.2021, and while the Appellant filed its claim of ₹793.45 crore on 14.04.2021, it did not relinquish its security interest in the Haldia Unit measuring 12.84 acres with attached plant and machinery, although it relinquished its security interest in other assets. Following the failure of a scheme under Section 230 of the Companies Act, 2013, the NCLT on 06.01.2023 directed the Liquidator to proceed with liquidation. On 20.01.2023, the Appellant sought possession of 12.87 acres and claimed an additional 8.02 acres allegedly mortgaged in its favour. The Liquidator handed over symbolic possession of 12.87 acres but maintained that the additional 8.02 acres formed part of the liquidation estate.
On 14.07.2023, the Liquidator informed the Appellant that the Haldia Unit had become part of the liquidation estate under Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016. Despite objections and claims of having received private offers of ₹35 crore and ₹40 crore, the Liquidator issued a sale notice on 19.07.2023 with a reserve price of ₹74.21 crore, following an unsuccessful attempt to sell the Corporate Debtor as a going concern without the Haldia Unit. Multiple auction attempts failed, and on 03.01.2024, a fresh sale notice fixed the reserve price at ₹57.10 crore. On 03.02.2024, the property was sold through auction to the Successful Bidder, and a Letter of Intent was issued upon deposit of the earnest money.
The NCLT held that the Appellant’s failure to comply with Regulation 21A(2) resulted in the Haldia Unit forming part of the liquidation estate. It was observed that despite symbolic possession being handed over on 21.01.2023, the Appellant neither sold the secured assets nor deposited amounts required under Section 53(1)(a) and (b)(i) of the Insolvency and Bankruptcy Code within the prescribed period. The Liquidator and Financial Creditors contended that the Appellant failed to intimate the price for realisation under Regulation 37, did not make payments within 90 days from 06.01.2023, and did not communicate regarding the 8.02 acres within one month of the liquidation order. The Tribunal concluded that the auction sale of the Haldia Unit for ₹57.10 crore was valid and dismissed the appeal.
Mr. Amit Singh Chadha, Sr. Advocate, with Mr. Suresh Dutt Dobhal, Mr. Shikhar and Mr. Abhinav Sharma, Advocates, represented the Appellant.
Mr. Krishnendu Dutta, Sr. Advocate, with Mr. Sidhartha Sharma, Mr. Arjun Asthana and Ms. Shalini Basu, Advocates, represented the Appellant in I.A. No.1166/2025 & I.A. No. 3167/2024.
Mr. Vivek Sibal, Sr. Advocate, with Mr. Aditya J. Pandya, Advocates, appeared for the Liquidator.
Mr. Siddharth Sangal and Ms. Richa Mishra, Advocates, appeared for Respondent No. 2 to Respondent No. 9.
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