Stci Finance Limited vs Imp Powers Limited & Ors

(Arising against the impugned order dated 22.04.2024 passed by the National Company Law Tribunal, Ahmedabad Division Bench in Misc. A/1 (AHM) 2024 in C.P. No. (IB) 203/2020)

IN THE MATTER OF:

STCI Finance Limited ...Appellant

Versus

IMP Powers Limited (Through its Liquidator) ...Respondent No.1

Mr. Ravindra Kumar Goyal (Liquidator) ...Respondent No.2 FM India Supply Chain Private Limited (Proforma ...Respondent No.3 Respondent) Rakesh Ramanlal Shah (Successful Auction ...Respondent No.4 Purchaser) State Bank of India (FC) ...Respondent No.5

Karnataka Bank (FC) ...Respondent No.6

IDBI Bank (FC) ...Respondent No.7

Axis Bank Ltd. (FC) ...Respondent No.8

Bank of India (FC) ...Respondent No.9

Indian Bank (FC) ...Respondent No.10

Present:

For Appellant: Mr. Arun Kathpalia, Sr. Advocate, Ms. Surekha Raman, Mr. Sidharth Nair, Ms. Diksha, Advocates. For Respondents: Mr. Krishnendu Datta, Sr. Advocate, Mr. Samaksh Goyal, Ms. Alina Merin Mathew, Advocates for Liquidator.

Mr. Malak Bhatt, Ms. Neeha Nagpal, Ms. Somya Saxena, Advocates for Successful Bidder.

Cont'd..../ -2-

Mr. Abhijeet Sinha, Sr. Advocate, Ms. Malvika, Mr. Harshit Khare, Mr. Prafful Saini, Mr. Ayuj Agrawal, Mr. Bijesh Gupta, Advocates for SBI & other bank.

With Company Appeal (AT) (Ins.) No. 1657 of 2024

(Arising against the impugned order dated 20.08.2024 passed by the National Company Law Tribunal, Ahmedabad Division Bench in IA/965(AHM) in Misc. A/1 (AHM) 2024 in C.P. No. (IB) 203/2020)

IN THE MATTER OF:

STCI Finance Ltd. ...Appellant

Versus

IMP Powers Limited (Through its Liquidator) ...Respondent No.1 Mr. Ravindra Kumar Goyal (Liquidator) ...Respondent No.2 FM India Supply Chain Private Limited ...Respondent No.3 (Proforma Respondent) Rakesh Ramanlal Shah (Successful Auction ...Respondent No.4 Purchaser) State Bank of India (FC) ...Respondent No.5

Karnataka Bank (FC) ...Respondent No.6

IDBI Bank (FC) ...Respondent No.7

Axis Bank Ltd (FC) ...Respondent No.8

Bank of India (FC) ...Respondent No.9

Indian Bank (FC) ...Respondent No.10

Present: For Appellant : Mr. Arun Kathpalia, Sr. Advocate, Ms. Surekha Raman, Mr. Sidharth Nair, Ms. Diksha, Advocates.

For Respondents : Mr. Krishnendu Datta, Sr. Advocate, Mr. Samaksh Goyal, Ms. Alina Merin Mathew, Advocates for Liquidator.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -3-

Mr. Malak Bhatt, Ms. Neeha Nagpal, Ms. Somya Saxena, Advocates for Successful Bidder.

Mr. Abhijeet Sinha, Sr. Advocate, Ms. Malvika, Mr. Harshit Khare, Mr. Prafful Saini, Mr. Ayuj Agrawal, Mr. Bijesh Gupta, Advocates for SBI & other bank.

With Company Appeal (AT) (Ins.) No. 893 of 2025

(Arising against the impugned order dated 05.11.2024 passed by the National Company Law Tribunal, Ahmedabad Bench in IA/1387 (AHM) 2024 in C.P. No. (IB) 203/2020)

IN THE MATTER OF:

STCI Finance Limited (NBFC and FC of CD) ...Appellant

Versus

Shri Rakesh Ramanlal Shah (Successful Auction ...Respondent No.1 Purchaser) Mr. Ravindra Kumar Goyal (Liquidator of IMP ...Respondent No.2 Powers Limited) State Bank of India (FC) ...Respondent No.3

Karnataka Bank (FC) ...Respondent No.4

IDBI Bank (FC) ...Respondent No.5

Axis Bank Ltd. (FC) ...Respondent No.6

Bank of India (FC) ...Respondent No.7

Indian Bank (FC) ...Respondent No.8

FM India Supply Chain Private Limited (Proforma ...Respondent No.9 Respondent)

Present:

For Appellant : Mr. Arun Kathpalia, Sr. Advocate, Ms. Surekha Raman, Mr. Sidharth Nair, Ms. Diksha, Advocates.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -4-

For Respondents : Mr. Krishnendu Datta, Sr. Advocate, Mr. Samaksh Goyal, Ms. Alina Merin Mathew, Advocates for Liquidator.

Mr. Malak Bhatt, Ms. Neeha Nagpal, Ms. Somya Saxena, Advocates for Successful Bidder. Mr. Abhijeet Sinha, Sr. Advocate, Ms. Malvika, Mr. Harshit Khare, Mr. Prafful Saini, Mr. Ayuj Agrawal, Mr. Bijesh Gupta, Advocates for SBI & other bank.

J U D G M EN T (27th April, 2026)

INDEVAR PANDEY, MEMBER (T)

These three appeals viz. Company Appeal (AT) (Ins.) No. 1019 of 2024;

Company Appeal (AT) (Ins.) No. 1657 of 2024; and Company Appeal (AT)

(Ins.) No. 893 of 2025 arise from the same insolvency and liquidation

proceedings of the Corporate Debtor, IMP Powers Limited, and these

involve common questions of fact and law relating to the rights of the

Appellant, STCI Finance Limited, who is one of the Financial Creditors of

the Corporate Debtor(CD) and is a Non-Banking Finance Company

registered with the Reserve Bank of India. All these Appeals were heard

together and are being decided by this common judgment to avoid repetition

of facts and to ensure consistency in adjudication.

COMPANY APPEAL (AT) (INS.) NO. 1019 OF 2024

2. The Company Appeal (AT) (Ins.) No. 1019 of 2024 has been preferred

by the Appellant, STCI Finance Limited, under Section 61 of the Insolvency

and Bankruptcy Code, 2016 (hereinafter referred to as 'Code'), assailing the

impugned order dated 22.04.2024 passed by the National Company Law

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -5-

Tribunal, Ahmedabad, Division Bench (Adjudicating Authority) in Misc. A/1

(AHM) 2024 in C.P. No. (IB) 203/2020, whereby the Adjudicating Authority

dismissed the application filed by the Appellant under Sections 60(5) and

52(5) of the Code seeking, inter alia, setting aside of the E-auction Sale

Notice dated 08.03.2024 issued by Respondent No.2, Mr. Ravindra

Kumar Goyal - Liquidator of IMP Powers Limited, (Corporate Debtor-

Respondent No. 1 herein) for sale of the Corporate Debtor(CD), as a going

concern, and further seeking a direction to permit the Appellant to realise

its secured assets independently under Section 52(3) of the Code. The other

Respondents in this appeal are FM India Supply Chain Private Limited/

Respondent no. 3 which is a Proforma Respondent. The Successful

Auction Purchaser Rakesh Ramanlal Shah is arrayed as Respondent No.

4. Six Banks which are financial creditors are arrayed in the following

manner: State Bank of India as Respondent No.5; Karnataka Bank as

Respondent No.6; IDBI Bank as Respondent No.7; Axis Bank Ltd as

Respondent No.8; Bank of India as Respondent No.9; and Indian Bank

as Respondent No.10. This appeal would henceforth be referred as First

Appeal.

3. Ld. Adjudicating Authority issued the following directions in Misc.

A/1(AHM)2024, vide the impugned order dated 22.04.2024 in para 18-22

of the same:

"18. We accordingly, order issue no. (I) and (II) in negative and we are of the view that the Liquidator should continue to sale the company as a going concern in order to comply with the liquidation order dated 19.07.2023 passed in IA No. 987 of 2023.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -6-

19. we are conscious that the Financial creditor has certain rights available to them under the Code so as to the manner of sale, accordingly, we direct the Financial Creditor to participate in all the SCC meetings, more particularly, regarding fixing the Reserve Price and the manner of sale of the corporate Debtor as a going concern in the SCC meetings.

20. we also direct the Liquidator not to issue the sale certificate or to distribute the proceeds of realized by way of sale as a going concern. The Liquidator is hereby directed to place the entire records before this Tribunal and after hearing the Applicant herein and the Liquidator, this Tribunal will further decide on the issue of the sale certificate and the distribution of the proceeds realized.

21. As regards prayer (c), no ground has been made by the Applicant seeking the deferment of cost payable to the Liquidator. Prayer (c) is hereby denied. Applicant to comply with the same in 15 days if not already complied.

22. With the above directions, the present Mis. A/ 1(AHM\2O24 in CP (IB) 203 of 2O2O is hereby disposed off."

4. The Appellant, being aggrieved by the failure of the Adjudicating

Authority to consider its categorical assertion of non-relinquishment of

security interest, has preferred the present Appeal wherein the following

reliefs have been sought in para 21 of the appeal:

"21. RELIEFS SOUGHT

a) An order allowing the present Appeal and thereby setting aside the Impugned Order of the Adjudicating Authority dated 22.04.2024 in Misc. A/1 (AHM) 2024 in C.P. No. (IB) 203/2020;

b) Pending the hearing and final disposal of the Appeal this Hon'ble Court stays the auction and sale of the Corporate Debtor.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -7-

c) Pending the hearing and final disposal of the Appeal the Liquidator be directed to maintain status quo qua the Secured Assets.

d) An order awarding to the Appellant and against the Respondent, costs of and relating to the present Appeal; and

e) Such other and/or further order(s) as this Hon'ble Appellate Tribunal may deem fit and proper in the facts and circumstances of the present case."

COMPANY APPEAL (AT) (INS.) NO. 1657 OF 2024

5. The Company Appeal (AT) (Ins.) No. 1657 of 2024 has been preferred

by the Appellant, STCI Finance Limited, under Section 61 of the Insolvency

and Bankruptcy Code, 2016, assailing the order dated 20.08.2024 passed

by the National Company Law Tribunal, Ahmedabad Division Bench in

IA/965(AHM) in Misc. A/1 (AHM) 2024 in C.P. No. (IB) 203/2020, whereby

the Adjudicating Authority directed issuance of the Sale Certificate in

respect of the Corporate Debtor, IMP Powers Limited, within a period of

three days and permitted filing of objections by other lenders with regard to

distribution of sale proceeds, despite the Appellant having asserted its

rights as a secured creditor under Section 52 of the Code and despite

pendency of proceedings before this Appellate Tribunal. The array of

respondents in this appeal also is exactly the same as in first appeal. For

the sake of convenience this appeal is referred to as Second Appeal.

6. Ld. Adjudicating Authority on 20.08.2024 passed the following order

in IA/965(AHM) in Misc. A/1(AHM)2024:

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -8-

In view of above, we hereby direct the Liquidator to issue a sale certificate, in favour of the Successful Bidder within three days from the date of this order.

Learned Counsel, Mr. Harshit Khare appears for the SBI Bank, Karnataka Bank, IDBI Bank, Axis Bank & Bank of India and seeks indulgence in this matter to file affidavit of objection and make submission on the issue of the distribution.

Let the same be filed within a period of seven days with liberty to other sides to file counter affidavit to the same, if any, before the next date of hearing.

Registry is directed to permit these Financial Creditors to file their objection/affidavit and place before us.

Meanwhile, we direct the liquidator to keep the amount realized through the auction sale meant for distribution to the financial creditors in interest bearing fixed deposit, if not already kept immediately. Re-list for further consideration on 06.09.2024.

7. the Appellant, being aggrieved by the aforesaid order which,

according to it, prejudicially affects its rights over the secured assets, has

preferred the present Appeal and sought the following Relief:

"21. RELIEFS SOUGHT

a) An order allowing the present Appeal and thereby direct stay of the issuance of sale certificate as passed vide order dated 06.08.2024 till the Recall Application is decided setting in Misc. A/1 (AHM) 2024 in C.P. No. (IB) 203/2020;

b) Alternatively, in the event sale certificate has been issued, pending the hearing and final disposal of the Appeal this Hon'ble Court stays the effect of sale certificate of the Corporate Debtor.

c) An order awarding to the Appellant and against the Respondent, costs of and relating to the present Appeal; and

d) Such other and/or further order(s) as this Hon'ble Appellate Tribunal may deem fit and proper in the facts and circumstances of the present case."

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -9-

COMPANY APPEAL (AT) (INS.) NO. 893 OF 2025

8. The Appeal (AT) (Ins.) No. 893 of 2025 has been preferred by the

Appellant, STCI Finance Limited, under Section 61 of the Insolvency and

Bankruptcy Code, 2016, assailing the impugned order dated 05.11.2024

passed by the National Company Law Tribunal, Ahmedabad Bench in

IA/1387 (AHM) 2024 in C.P. No. (IB) 203/2020, whereby an application filed

by Respondent No.1, Shri Rakesh Ramanlal Shah (successful auction

purchaser of the Corporate Debtor), came to be allowed granting various

reliefs, concessions, waivers and immunity under Section 32A of the Code

along with permissions for operation and revival of the Corporate Debtor as

a going concern, and such order was passed in conjunction with

Respondent No.2, Mr. Ravindra Kumar Goyal (Liquidator), without

impleading or issuing notice to the Appellant and other financial creditors

and in disregard of prior orders passed by this Appellate Tribunal making

the issuance of sale certificate subject to the outcome of pending

proceedings. In this appeal the respondents are the same as in previous

appeals except for the corporate Debtor who is not impleaded. For the sake

of convenience this appeal is referred to as Third Appeal.

9. The Appellant, being aggrieved by the said order passed in violation

of principles of natural justice and affecting its rights as a secured creditor,

has preferred the present Appeal and has sought the following Relief:

"RELIEFS SOUGHT

a) An order allowing the present Appeal and thereby setting aside the impugned order dated 05.11.2024 passed by National Company

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -10-

Law Tribunal, Ahmedabad Division Bench, IA/1387 (AHM)2024 in C.P. No. (IB) 203/2020:

b) Direct ex-parte ad interim stay of the order dated 05.11.2024 passed by National Company Law Tribunal, Ahmedabad Division Bench, IA/1387 (AHM)2024 in C.P. No. (IB) 203/2020;

c) Confirm prayer clause (b) after notice to the Respondents pending the hearing and final disposal of the present Appeal.

d) pass an order awarding to the Appellant and against the Respondent, costs of and relating to the present Appeal; and

e) Such other and/or further order(s) as this Hon'ble Appellate Tribunal may deem fit and proper in the facts and circumstances of the present case.

Brief facts of the case

10. The brief facts of the case relevant for deciding these appeals are as

given below:

i. The Appellant, being a Non-Banking Financial Company registered

under the Companies Act, 1956, had extended financial assistance to

the Corporate Debtor, namely IMP Powers Limited, by sanctioning a

term loan aggregating to Rs. 25 crores, disbursed in tranches during

November 2017 and August 2018, for purposes including

augmentation of long-term working capital and capital expenditure

requirements.

ii. In order to secure the said loan facility, comprehensive security

documents including loan agreements and mortgage deeds were

executed on 29.11.2017, followed by a supplementary mortgage dated

04.08.2018, whereby a first pari passu charge was created in favour of

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -11-

the Appellant alongside SBI/Respondent No.5. The Appellant's

exposure was substantially higher at approximately Rs. 40 crores as

against Rs. 9 crores of Respondent No.5.

iii. A default occurred in repayment obligations with effect from

29.02.2020, leading the Appellant to issue an Event of Default notice

on 09.02.2021, followed by a Recall Notice dated 21.05.2021 invoking

guarantees and demanding repayment of the entire outstanding dues

within stipulated timelines.

iv. Insolvency proceedings were triggered when the Appellant filed a

petition under Section 7 of the Code and the Adjudicating Authority,

admitted the Corporate Debtor into Corporate Insolvency Resolution

Process on 29.03.2022, appointing an Interim Resolution Professional

and constituting the Committee of Creditors.

v. The Corporate Debtor having failed to achieve resolution, the

Adjudicating Authority ordered liquidation on 19.12.2023 and

appointed Respondent No.2 as the Liquidator, who thereafter issued a

public announcement on 21.12.2023 inviting claims from

stakeholders.

vi. The Appellant submitted its claim on 17.01.2024 for an amount of Rs.

39,55,34,828/- and explicitly asserted its right as a secured creditor

without relinquishing its security interest under Section 52 of the

Code, thereby seeking to realise its secured assets independently.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -12-

vii. Although the Liquidator admitted the claim of the Appellant on

17.02.2024, he unilaterally assumed relinquishment of the Appellant's

security interest without consent, prompting the Appellant to object

and reiterate its intention to enforce security rights independently,

including by email dated 21.02.2024 and subsequent

communications.

viii. Despite such assertion by the Appellant, the Liquidator proceeded to

issue an e-auction sale notice dated 08.03.2024 for sale of the

Corporate Debtor as a going concern, disregarding the Appellant's

rights, compelling the Appellant to approach the Adjudicating

Authority challenging the same.

ix. The Adjudicating Authority, while dismissing the Appellant's

application vide order dated 22.04.2024, nevertheless directed that no

sale certificate be issued nor sale proceeds be distributed without

further hearing, thereby preserving the rights of the Appellant pending

adjudication. Aggrieved thereby, the Appellant filed Company Appeal

(AT) (Ins.) No. 1019 of 2024 (First Appeal) before this Appellate

Tribunal, wherein notice was issued on 21.05.2024 and it was recorded

that although the sale had taken place, issuance of sale certificate and

distribution of proceeds stood restrained.

x. During pendency of the appeal, the Liquidator moved an application

on 22.06.2024 seeking permission to issue the sale certificate and

distribute proceeds, which was entertained by the Adjudicating

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -13-

Authority on 26.06.2024, prompting further challenge by the Appellant

before this Tribunal.

xi. An affidavit was filed by the Liquidator on 03.08.2024 in this Appellate

Tribunal proposing distribution of sale proceeds, including payment of

approximately Rs.39.30 crores to the Appellant out of total sale

consideration of Rs.78 crores. The statement of Liquidator was

recorded by this Tribunal on 06.08.2024, leading to disposal of the

appeal without adjudication on merits.

xii. Subsequently, the Adjudicating Authority passed an order on

20.08.2024 directing issuance of sale certificate within three days,

which was immediately challenged by the Appellant through a recall

application and by filing a fresh appeal before this Tribunal.

xiii. This Appellate Tribunal, while entertaining the second appeal on

23.08.2024, specifically directed that issuance of the sale certificate

shall remain subject to the outcome of the appeal. The Appellant also

sought revival of the earlier appeal by filing IA No. 6616 of 2024, while

parallel proceedings continued before the Adjudicating Authority

regarding issuance of sale certificate and distribution of proceeds. This

Appellate Tribunal allowed the revival of First appeal on 19.02.2025.

xiv. The Adjudicating Authority, being aware of the pendency of appeals,

adjourned proceedings on 23.09.2024 expressly observing that judicial

propriety required awaiting the outcome of proceedings before the

Appellate Tribunal.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -14-

xv. Successful Auction Purchaser/ Respondent No.4 filed IA/1387 (AHM)

2024 before Adjudicating Authority seeking extensive reliefs including

immunity under Section 32A and permissions for revival, without

impleading or notifying the Appellant or other financial creditors. The

said application was prosecuted solely with the participation of the

Liquidator, who expressed no objection to grant of reliefs, even without

obtaining consent of stakeholders, thereby materially affecting their

rights.

xvi. The Adjudicating Authority, thereafter, proceeded to hear and allowed

the said application vide impugned order dated 05.11.2024, without

issuing notice to the Appellant or considering binding directions of this

Tribunal, thereby granting wide-ranging reliefs and creating a fait

accompli situation.

xvii. The Appellant claims he remained completely unaware of the said

proceedings and order, as neither the filing of the application nor the

passing of the order was disclosed, and only upon receipt of email

dated 04.05.2025 from the Liquidator enclosing a quarterly report did

the Appellant first came to know about the impugned order. The

Appellant thereafter filed the Third appeal CA (AT)(INS) No. 893 of 2025

challenging the aforesaid impugned order. The appeal has been filed

with a delay of 171 days.

xviii. Appellant also came to know that out of the total sale proceeds

amounting to Rs. 78 crores, a portion had already been appropriated

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -15-

and distributed in part, including payments towards liquidation costs,

fees, statutory dues, and the balance has been kept in fixed deposit.

xix.The Appellant contends that the impugned order has been obtained in

a clandestine manner, in violation of principles of natural justice, in

disregard of binding judicial orders, and in collusion between the SRA

and the Liquidator, thereby necessitating the filing of the Third Appeal

before this Tribunal.

Submissions of the Appellant/STCI

11. Shri Katpalia Ld. Sr. Counsel appearing on behalf of the Appellant at

the outset submitted that the present Appeal has been preferred assailing

the Impugned Order dated 22.04.2024 passed by the Learned Adjudicating

Authority, National Company Law Tribunal, Ahmedabad Bench, whereby

the application filed by the Appellant being Misc. A/1 (AHM) 2024 in C.P.

(IB) No. 203/2020 came to be dismissed. The said application had been filed

specifically seeking enforcement of the Appellant's security interest in terms

of Section 52 of the Insolvency and Bankruptcy Code, 2016 along with other

applicable provisions of the IBBI (Liquidation Process) Regulations, 2016. It

is submitted that the Impugned Order has resulted in a complete denial of

the statutory rights vested in the Appellant as a secured creditor.

12. He submitted that the findings recorded in the Impugned Order are

wholly unsustainable both in law as well as on facts. The Learned Sr.

Counsel submits that the Impugned Order is ex-facie arbitrary, perverse,

and contrary to settled legal principles. It is specifically contended that the

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -16-

Impugned Order has been passed in clear violation of Section 52 of the IBC,

which unequivocally grants a secured creditor the right to either relinquish

its security interest or realise the same independently. Further, the findings

are also in violation of Regulation 32 of the Liquidation Regulations, which

prohibits sale of secured assets without relinquishment of security interest.

It is also submitted that the Learned Adjudicating Authority has completely

misconstrued Regulation 21A as well as Regulation 37 of the Liquidation

Regulations and has erroneously applied the same in a manner that defeats

the statutory rights of the Appellant.

13. The Learned Sr. Counsel submits that it is an admitted position on

record that the Appellant and State Bank of India are the only secured

creditors holding first pari passu charge over the secured assets of the

Corporate Debtor. It is further submitted that the outstanding dues of the

Appellant are approximately Rs.40 crores, whereas the dues of SBI are

approximately Rs.4 crores, thereby clearly demonstrating that the Appellant

holds an overwhelming majority of the secured exposure, i.e., nearly 90% of

the secured debt. Despite this undisputed position, the Appellant's

statutory rights have been completely disregarded.

14. It is submitted that the factual matrix, as borne out from the record,

clearly establishes that the Corporate Debtor had availed a term loan of

Rs.25 crores under a loan agreement dated 29.11.2017, and thereafter, by

way of a supplementary mortgage deed dated 04.08.2018, a first pari passu

charge was extended in favour of the Appellant along with SBI.

Subsequently, the Corporate Debtor was admitted into CIRP on 29.03.2022,

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -17-

and eventually, liquidation was ordered on 19.12.2023. The Appellant duly

filed its claim on 17.01.2024 for an amount of Rs.39,55,34,828/-. It is

further submitted that the Liquidator verified the claim and security interest

of the Appellant and also acknowledged that the Appellant had elected not

to relinquish its security interest under Section 52 of the Code. However, in

a completely illegal and arbitrary manner, the Liquidator proceeded to

assume relinquishment of the Appellant's security interest without its

consent.

15. Ld. Sr Counsel submitted that the Appellant immediately objected to

such illegal assumption on 21.02.2024 and reiterated that it had not

relinquished its security interest. Despite this, the Liquidator continued to

act in violation of law by calling upon the Appellant to comply with

Regulation 21A without even disclosing the costs or enabling enforcement

of the security. It is also submitted that the Appellant was excluded from

the Stakeholders' Consultation Committee and was not made part of

deliberations, including the meeting dated 01.03.2024.

16. It is further submitted that despite repeated communications by the

Appellant, including letter dated 07.03.2024 asserting its statutory rights,

the Liquidator proceeded, with mala fide intent, to issue an e-auction notice

dated 08.03.2024 for sale of the Corporate Debtor as a going concern under

Regulation 32(e), in clear violation of the Appellant's rights. The Appellant

was therefore constrained to approach the Learned Adjudicating Authority

on 18.03.2024 seeking appropriate reliefs.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -18-

17. The Learned Sr. Counsel submits that despite the above undisputed

facts demonstrating blatant illegality on the part of the Liquidator, the

Learned Adjudicating Authority has erroneously dismissed the Appellant's

application and recorded findings which are contrary to law. It has been

wrongly held that the Appellant had not taken steps under SARFAESI, that

relinquishment is deemed under Section 13(9), that majority decision binds

even first charge holders, and that Regulation 21A results in automatic

inclusion in liquidation estate. It is submitted that these findings are wholly

unsustainable and based on a complete misreading of the statutory

framework. He submitted that the Impugned Order is liable to be set aside

being contrary to both law and facts.

18. The Learned Sr. Counsel submits that the Appellant had, within the

prescribed timelines, duly intimated the Liquidator of its intention to realise

its security interest independently. However, despite such intimation, the

Liquidator failed to comply with its statutory obligations under Section 52(3)

and (4) of the Code by not permitting the Appellant to enforce its security.

It is submitted that unless the Liquidator verifies the security interest and

facilitates enforcement, the secured creditor cannot proceed. Thus, the

failure of the Liquidator itself prevented the Appellant from taking further

steps. It is further submitted that judgments relied upon by the

Respondents, including Phoenix ARC Pvt. Ltd. v. Kuldeep Verma, are

distinguishable as in those cases possession was handed over, unlike the

present case.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -19-

19. It is further submitted that reliance on Section 13(9) of the SARFAESI

Act is wholly misplaced. Even assuming applicability, the Appellant and SBI

together constitute the first charge holders, and with the Appellant holding

nearly 90% of the secured exposure, it clearly satisfies any majority

requirement. Therefore, the finding that relinquishment is deemed is legally

untenable.

20. Ld. Sr. Counsel submitted that Section 13(9) is in any event subject

to the provisions of the IBC, which is a complete code. Under the IBC

framework, sale of the Corporate Debtor as a going concern is

impermissible, where a secured creditor has not relinquished its security

interest. In the present case, the Appellant has never relinquished its

security; hence, the very basis of sale as a going concern is illegal.

21. It is submitted that even during CIRP, the Appellant had consistently

opposed any proposal for sale of the Corporate Debtor as a going concern,

including in the 12th CoC meeting. This clearly establishes the consistent

stand of the Appellant that it has never relinquished its rights.

22. It is further submitted that the Impugned Order completely ignores

the settled principle of priority of charges. A first charge holder has

precedence over subordinate charge holders. However, by equating the

Appellant with second charge holders and making it subject to majority

decision, the Adjudicating Authority has effectively nullified the concept of

secured priority, contrary to the law laid down in ICICI Bank v. SIDCO

Leather Ltd. (2006) 10 SCC 452.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -20-

23. He submits that the finding that the Appellant could not have sold

the asset is factually incorrect, as the timeline under SARFAESI extended

till June 2024. Thus, the conclusion that enforcement was not possible is

based on incorrect assumptions.

24. It is also submitted that with respect to the scheme of compromise

and arrangement, the Appellant had consistently opposed the same and

had expressly reserved its right to initiate legal proceedings if its secured

assets were included. Thus, the finding that no objection was raised is

incorrect.

25. The Learned Sr. Counsel submits that since the Appellant has not

relinquished its security interest, it is not a member of the Stakeholders'

Consultation Committee under Regulation 31A, and therefore, the

reasoning of deadlock or majority decision is wholly irrelevant and

misconceived.

26. He submitted that Regulation 21A cannot be interpreted in a manner

that curtails or overrides the substantive rights granted under Section 52

of the Code. The right of a secured creditor to realise its security is a

statutory right and cannot be defeated by procedural regulations. He

submits that Regulation 21A must be interpreted harmoniously with

Section 52 and not in derogation thereof. Any interpretation that results in

extinguishment of rights would be contrary to legislative intent.

27. It is further submitted by Ld. Sr. Counsel that the proviso to

Regulation 21A(2)(b) merely deals with a situation where assets are not sold

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -21-

within 180 days, and does not empower the Liquidator to treat security

interest as relinquished or to usurp the rights of a secured creditor. He

submits that regulations cannot override the parent statute. The IBC does

not prescribe any such forfeiture of rights after 180 days. Further, there is

no requirement under the Code for payment of liquidation costs prior to

enforcement, except CIRP costs.

28. He submitted without prejudice, that even if the 180-day period is

considered, the same can commence only after the Liquidator permits

enforcement under Section 52(4). In the present case, no such permission

was granted; hence, the period cannot be invoked against the Appellant.

29. It is further submitted that the Appellant had clearly communicated

on 21.02.2024 that Regulation 21A was being misapplied, and that further

steps were contingent upon verification and handing over of possession,

which never occurred. It is also submitted that although part CIRP costs

were paid, liquidation costs were communicated only after issuance of the

e-auction notice, which itself was under challenge.

30. The Learned Sr. Counsel submits that the proviso to Regulation 32

clearly stipulates that assets subject to security interest cannot be sold

unless such security interest is relinquished. Since the Appellant has not

relinquished its security, the inclusion of such assets in the e-auction notice

is per se illegal.

31. It is further submitted that the Liquidator has no authority to compel

or deem relinquishment. In this regard, reliance is placed on "Canara

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -22-

Bank v. Rajendran (2024 SCC OnLine NCLAT 390)," wherein it has been

held that a secured creditor cannot be forced to relinquish its security

interest. The action of the Liquidator in deeming relinquishment is therefore

wholly without jurisdiction.

32. Ld. Sr. Counsel submits that Regulation 37 is not applicable in the

present case, as the precondition for its applicability--namely, verification

of security and handing over of possession--has not been fulfilled by the

Liquidator. In absence of compliance with Section 52(4), Regulation 37

cannot be invoked.

33. Summing up his arguments, Learned Sr. Counsel for the Appellant

submitted that the Impugned Order dated 22.04.2024 passed by the

Learned Adjudicating Authority deserves to be set aside, and the Appellant,

having not relinquished its security interest, be permitted to realise its

secured assets independently in accordance with Section 52(1)(b) of the

Insolvency and Bankruptcy Code, 2016.

Submissions of the Respondent No. 2/ Liquidator

34. Shri Krishnendu Datta Ld. Sr. Counsel for the Respondent No. 2/

Liquidator submits that the Appellant has failed to comply with the

statutory framework governing realization of security interest under Section

52 of the Insolvency and Bankruptcy Code, 2016 read with Regulations 21,

21A and 37 of the IBBI (Liquidation Process) Regulations. It is submitted

that the statutory scheme mandates that a secured creditor, if it elects to

realize its security interest outside liquidation, must undertake specific

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -23-

steps within a period of 90 days from the liquidation commencement date.

However, in the present case, the Appellant has admittedly failed to

undertake such steps within the prescribed timeline.

35. It is submitted that the law, as clarified by this Hon'ble Tribunal in

Phoenix ARC Pvt. Ltd. v. Kuldeep Verma, requires a secured creditor to, inter

alia, intimate the Liquidator of the proposed realization price of the secured

asset and enable the Liquidator to ascertain whether a higher bidder exists.

Simultaneously, the secured creditor is required to clearly communicate its

decision regarding relinquishment or realization of its security interest in

the prescribed form and, in case of realization, deposit the requisite CIRP

and liquidation costs within 90 days.

36. Ld. Sr. Counsel submits that in the present case, although the

Appellant filed its claim in Form D and indicated that it had not relinquished

its security interest, it failed to undertake any of the substantive steps

required for actual realization. Mere assertion of intention, without

compliance with statutory requirements, cannot be treated as valid exercise

of rights under Section 52.

37. He submitted that the Liquidator had, on multiple occasions,

informed the Appellant of the CIRP and liquidation costs payable. These

details were placed before the Appellant during the 14th CoC Meeting and

again in the 2nd SCC Meeting, the minutes of which were duly circulated

to the Appellant on 02.03.2024. Despite having full knowledge of the costs,

the Appellant failed to deposit the same within the statutory period.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -24-

38. Ld. Sr. Counsel further submits that the Liquidator, vide email dated

21.02.2024, specifically sought clarification from the Appellant regarding

the steps taken for realization of the security interest. However, the

Appellant failed to respond in terms of Regulation 21(2)(a), thereby

demonstrating complete inaction.

39. It is submitted that the legal consequence of such failure is clearly

provided under Regulation 21(3), which stipulates that if the secured

creditor does not comply with the requirements within 90 days, the secured

asset shall automatically form part of the liquidation estate. This position

has also been affirmed by this Hon'ble Tribunal in HDFC Bank Limited vs.

Hema Engineering Industries Limited, wherein it has been held that non-

payment of CIRP and liquidation costs within the stipulated period results

in automatic vesting of the asset in the liquidation estate.

40. Therefore, it is submitted that the Appellant's security interest stood

extinguished by operation of law, and the asset validly became part of the

liquidation estate. Consequently, the Appellant cannot now contend that it

continues to hold an independent right to realize the secured asset.

41. Ld. Sr. Counsel for the Respondent submits that the sale notices

issued by the Liquidator are fully compliant with the provisions of the Code

and the applicable regulations, and were issued pursuant to decisions

taken in the Stakeholders' Consultation Committee (SCC) meetings.

42. It is submitted that the first sale notice dated 08.03.2024 was issued

following the 3rd SCC Meeting, wherein a conscious decision was taken to

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -25-

sell the Corporate Debtor as a going concern at a reserve price of Rs. 94

crores. However, since no bids were received, the Liquidator, in consultation

with the SCC, issued a second sale notice dated 24.04.2024 at a reduced

reserve price. The minutes of these meetings were duly circulated to the

Appellant, thereby ensuring transparency and participation.

43. Ld. Sr. Counsel submits that the successful auction purchaser

(Respondent No. 3) emerged pursuant to the second sale notice, which was

issued well beyond the expiry of the 90-day period available to the Appellant

for realization of its security interest. The auction was conducted on

21.05.2024 and duly reported in the 6th SCC Meeting. Subsequently, the

sale certificate was issued in terms of the NCLT's order dated 20.08.2024.

44. He further submitted that the Appellant, along with other secured

creditors including SBI, did not raise any objection to either the sale process

or the sale consideration of Rs. 78 crores before the Adjudicating Authority.

In fact, the NCLT order records that there was no objection to the sale.

Therefore, the Appellant is estopped from challenging the sale at this stage.

45. In the light of the above, Ld. Sr. Counsel submitted that the sale

process was conducted strictly in accordance with law, and the Appellant

cannot now seek to invalidate the same on untenable grounds.

46. Regarding the Appellant's contention regarding lack of opportunity to

consider a scheme of compromise or arrangement Ld. Sr. Counsel submits

that is wholly misconceived and contrary to the record. He submitted that

during the 1st SCC Meeting held on 29.12.2023, the Liquidator had

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -26-

specifically taken up the agenda of inviting expressions of interest for a

scheme of compromise or arrangement. The Appellant was present in this

meeting and had full knowledge of the said process.

47. Despite being aware of the opportunity, the Appellant neither raised

any objection nor took any steps to propose or support any scheme.

Furthermore, in subsequent SCC meetings, including the 3rd SCC Meeting,

where such a scheme was discussed and ultimately rejected, the Appellant

chose to remain absent despite due notice. He submits that in these

circumstances, the Appellant cannot now be permitted to raise a belated

challenge on this ground, having consciously chosen not to participate in

the process.

48. Regarding the distribution mechanism proposed by the Liquidator in

the affidavit dated 03.08.2024, Shri Dutta Ld. Sr. Counsel submits that the

distribution mechanism is based on a careful consideration of the factual

matrix and applicable legal principles.

49. He submitted that although the principle of pari passu distribution

has been debated in various judgments, including TDB vs. Anil Goel, the

said judgment is presently stayed by the Hon'ble Supreme Court. Therefore,

reliance was placed on the judgment of the Hon'ble Supreme Court in ICICI

Bank Limited vs. SIDCO Leather Ltd., which clarifies that the inter se priority

of charges among secured creditors is not extinguished even in a liquidation

scenario.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -27-

50. It is submitted that the Liquidator, while proposing the distribution,

took into account the loan documents, the nature of security interests, and

the existence of pari passu charges between STCI and SBI, as well as letters

issued by other lenders ceding charge in favour of STCI.

51. Ld. Sr. Counsel further submitted that the Liquidator has acted in a

fair and transparent manner and has not sought to impose the proposed

distribution as final. In fact, in its reply to IA 6616/2024, the Liquidator

has expressly stated that it has no objection if this Hon'ble Tribunal

modifies the proposed distribution, and has left the issue entirely to the

wisdom of this Hon'ble Tribunal.

52. He submitted that the Liquidator has discharged its duties in

accordance with law, and the question of final distribution remains open for

adjudication by this Hon'ble Tribunal.

53. Shri Dutta Ld. Sr. Counsel for the Liquidator submits that the third

appeal is barred by limitation and is therefore not maintainable. It is further

submitted that, in any event, the Appellant did not press this appeal during

the course of arguments and confined its submissions to the first and

second appeals. Accordingly, the third appeal does not merit consideration.

54. Summing up his arguments Shri Dutta submitted that the appeals

filed by the Appellant are devoid of merit, both on facts and in law. The

Appellant has failed to comply with the statutory requirements for

realization of its security interest, has acquiesced in the sale process, and

is now seeking to challenge actions that are fully compliant with the

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -28-

Insolvency and Bankruptcy Code and the applicable regulations. The

present appeals therefore deserve to be dismissed.

Submissions of Respondent Nos. 5-10/ State Bank of India and other Banks

55. Shri Abhijeet Sinha Ld. Sr. Counsel appearing on behalf of SBI and

other Banks submitted at the outset that it is an admitted and undisputed

factual position on record that the Answering Respondents, namely State

Bank of India, Karnataka Bank, IDBI Bank, Axis Bank, Bank of India and

Indian Bank, were prior-in-time secured creditors of the Corporate Debtor,

much prior to the entry of STCI Finance Limited into the lending structure.

The State Bank of India, as a term loan lender, held a first charge over the

fixed assets and a second charge over the current assets of the Corporate

Debtor, whereas the consortium of working capital lenders held a first

charge over current assets and second charge over fixed assets. Thus, the

entire asset base of the Corporate Debtor stood fully encumbered in favour

of the Answering Respondents at the time when STCI entered into the loan

arrangement.

56. He submitted that the Term Loan Agreement dated 29.11.2017

executed by STCI itself clearly stipulated that the proposed security

structure, namely first charge over fixed assets and second charge over

current assets, was conditional upon obtaining 'No Objection Certificates'

(NOCs) from all existing secured creditors. Therefore, the very creation of

security in favour of STCI was contingent upon fulfilment of such

conditions.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -29-

57. It is submitted that although certain NOCs were issued by the

consortium lenders, including SBI, such NOCs were expressly conditional.

The conditions mandated (i) execution of an inter se agreement among all

secured creditors governing the pari passu charge, and (ii) issuance of a

reciprocal NOC by STCI in favour of SBI acknowledging such pari passu

arrangement. These conditions were fundamental and went to the root of

creation of any valid security interest.

58. Shri Sinha submits that it is an admitted position that neither of

these conditions were ever fulfilled. No inter se agreement was executed and

no reciprocal NOC was issued by STCI. Consequently, the conditional NOCs

never attained legal validity or enforceability. In law, a conditional consent

does not crystallize into an enforceable right unless the stipulated

conditions are strictly complied with. Therefore, the alleged pari passu

charge claimed by STCI never came into existence.

59. He further submitted that the NOCs issued by other banks were

themselves contingent upon the effectiveness of SBI's NOC. Since SBI's NOC

never became operative, all other NOCs also failed, thereby rendering the

entire claim of STCI as a secured creditor legally untenable.

60. It is his legal submission that the above legal position stands

conclusively settled by the judgment of the Hon'ble High Court of Telangana

in "Andhra Pradesh State Financial Corporation vs. Kotak Mahindra

Bank & Ors., Writ Petition No. 43027 of 2019" wherein it has been

categorically held that mere issuance of NOC or registration of charge does

not create a valid pari passu charge in absence of a binding contractual

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -30-

arrangement. The Hon'ble Court in Para 36 has clearly held that registration

of charge is only a procedural formality and cannot substitute actual

creation of charge.

61. He submits that, this Appellate Tribunal in "Avil Menezes vs.

Hinduja Leyland Finance Limited, Company Appeal (AT) (Insolvency)

No. 555 of 2024" has held that even if a charge is registered under Section

77 of the Companies Act, the same cannot be treated as valid in liquidation

in absence of valid and effective NOCs from existing secured creditors.

62. It is his submission that in view of the above the STCI cannot be

treated as a secured creditor and its entire claim is fundamentally

misconceived.

63. Shri Sinha further submits that even otherwise; the Appellant never

held any exclusive charge over the assets of the Corporate Debtor. The

security was always shared as part of a consortium arrangement, either on

first pari passu or second pari passu basis. Thus, the security interest was

a joint security interest.

64. It is his submission that secured creditors holding 69.15% in value

initially relinquished their security interest, and subsequently Karnataka

Bank and Indian Bank also relinquished their security, thereby taking the

total relinquishment to more than 85%. Thus, an overwhelming majority of

secured creditors relinquished their security interest.

65. It is further submitted that Section 52(4) of the IBC mandates that

enforcement of security must be in accordance with applicable law, and in

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -31-

the present case, the applicable law is Section 13(9) of the SARFAESI Act.

Under Section 13(9), any decision taken by secured creditors representing

not less than 60% in value is binding on all secured creditors. Since the

statutory threshold was exceeded (85%), the decision to relinquish security

became binding upon STCI by operation of law.

66. It is his submission that the Corporate Debtor was sold as a going

concern through e-auction, which necessarily implies that assets were sold

as a whole and not asset-wise. Therefore, no bifurcation of assets or

allocation of proceeds based on asset class is permissible.

67. Ld. Sr. Counsel further submits that this issue stands settled by this

Hon'ble Tribunal in Mr. Srikanth Dwarakanath, Liquidator of Surana Power

Limited vs. Bharat Heavy Electricals Limited, Company Appeal (AT)

(Insolvency) No. 1510 of 2019. He places further reliance is placed on State

Bank of India vs. Soni Ispat & Ors., Appeal No. R-53 of 2013 (DRAT) which

demonstrates that in cases of joint security, decision of majority creditors

binds all creditors irrespective of charge ranking.

68. Ld. Sr. Counsel submits that upon commencement of liquidation on

19.12.2023, STCI was required to comply with statutory obligations under

Section 52 of the IBC and Regulation 21A and Regulation 37 of the

Liquidation Regulations.

69. He submitted that Regulation 21A(2) mandates that a secured

creditor must pay its share of CIRP costs and workmen dues within 90 days.

The said period expired on 19.03.2024. Despite specific communications by

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -32-

the Liquidator dated 21.02.2024, STCI failed to make such payment. He

further submitted that Regulation 21A(3) clearly provides that failure to

comply results in automatic inclusion of the asset into the liquidation

estate. This is a statutory consequence and requires no further

adjudication. It is also submitted that Regulation 37 mandates that the

secured creditor must intimate the liquidator of the realization price. STCI

failed to comply with this requirement as well.

70. To buttress his submission, he relies upon the following judgments:

 Phoenix ARC Pvt. Ltd. vs. Kuldeep Verma, Liquidator of KS Oils Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 592 of 2024, decided on 20.03.2025 (Paras 16, 18, 21, 22; Pages 1-14 of compilation;

MANU/NL/0236/2025)

 Small Industries Development Bank of India vs. Vijendra Sharma, Company Appeal (AT) (Insolvency) No. 1027 of 2021, decided on 02.11.2022 (Paras 16, 21; Pages 15-21 of compilation; MANU/NL/0839/2022)

 Suraksha Assets Reconstruction Pvt. Ltd. vs. Varsha Bagri, Company Appeal (AT) (Insolvency) No. 650 of 2024 upheld by Hon'ble Supreme Court in Civil Appeal No. 2683 of 2025 dated 03.03.2025.

 State Bank of India vs. Navjit Singh, Company Appeal (AT) (Insolvency) No. 151 of 2022.

All these judgments clearly establish that non-compliance with Regulation

21A results in automatic vesting of secured assets into the liquidation

estate.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -33-

71. Ld. Sr. Counsel submitted that the definition of "secured creditor"

under the IBC does not create any distinction between first charge holder,

second charge holder or subordinate charge holder. Similarly, Section 53 of

the Code provides for distribution without creating any sub-classification

among secured creditors.

72. He submitted that it is a settled principle of law that unless expressly

provided, no "class within a class" can be created. Therefore, the Appellant

cannot claim preferential treatment based on alleged first charge.

73. It is further submitted that a dissenting financial creditor cannot

claim higher distribution based on security value.

74. In this regard reliance is placed upon:

 Oriental Bank of Commerce vs. Anil Anchalia, Liquidator of M/s Bala Techno Industries Ltd. & Anr., Company Appeal (AT) (Insolvency) No. 547 of 2022  State Bank of India vs. IDBI Bank & Ors., Company Appeal (AT) (Insolvency) No. 321 of 2024

which clearly hold that distribution must be based on admitted claims and

not on value of security.

75. In view of the aforesaid facts and submissions, Ld. Sr. Counsel for

Banks submitted that the present Appeal is wholly misconceived, devoid of

merit and contrary to the statutory scheme of the Insolvency and

Bankruptcy Code. The Appellant has neither perfected a valid security

interest nor complied with mandatory statutory requirements. Further, the

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -34-

decision of majority secured creditors is binding in law and the consequence

of non-compliance with Regulation 21A squarely applies. Accordingly, he

prayed for the dismissal of the present Appeal and the impugned order be

upheld in the interest of justice.

Submissions of the Respondent No. 4/Successful Auction Purchaser

76. Shri Malak Bhatt Ld. Counsel for the Respondent No.4/ Shri Rakesh

Ramanlal Shah, who is the Successful Auction Purchaser of IMP Powers

Limited submits that the Corporate Debtor has been purchased as a going

concern pursuant to a duly conducted liquidation sale under the

supervision of the Adjudicating Authority, and therefore, the sanctity of

such sale deserves utmost protection in law.

77. Ld. Counsel submits that in the first appeal, has been filed

challenging the order dated 22.04.2024 passed by the Ld. NCLT,

Ahmedabad Bench, whereby the application filed by Appellant/STCI

seeking to set aside the e-auction process and stall the liquidation sale was

dismissed. The Respondent submits that the said order rightly permitted

continuation of the liquidation process, thereby enabling value

maximization of the Corporate Debtor.

78. It is submitted that the second appeal, being Company Appeal (AT)

(Insolvency) No. 1675 of 2024, challenges the order dated 20.08.2024,

whereby the Adjudicating Authority directed issuance of the Sale Certificate

in favour of the Successful Auction Purchaser. The Respondent submits

that such issuance was in continuation of a concluded and valid auction

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -35-

process and was further supported by the consent of all lenders, including

STCI.

79. It is his submission that the third appeal, being Company Appeal (AT)

(Insolvency) No. 893 of 2025, challenges the order dated 05.11.2024,

whereby reliefs, concessions, waivers and immunity under Section 32A of

the Code were granted to the Successful Auction Purchaser. It is

emphatically submitted that the said appeal is barred by a delay of 171 days

and is liable to be dismissed on this ground alone, apart from merits.

80. He submits that even assuming, without admitting, that STCI

succeeds in its challenge and establishes that it was wrongly prevented from

enforcing its security interest, the statutory framework under the

Insolvency and Bankruptcy Code, 2016 places an absolute cap on its

recoverable amount. It is submitted that Section 52(7) clearly mandates that

a secured creditor is entitled only to the extent of its admitted claim and

any surplus realized must necessarily be remitted to the Liquidator.

Therefore, even if STCI were permitted to independently realize its security

interest, it could not, in law, appropriate any amount beyond Rs.39.55

Crores, being its admitted claim.

81. Ld. Counsel submits that Regulation 21A(2)(b) of the Liquidation

Regulations reinforces this statutory position by mandating that any excess

realization beyond the secured debt must revert to the liquidation estate.

Thus, both the Code and the Regulations operate in tandem to ensure

equitable distribution and prevent unjust enrichment. It is therefore

submitted that even on STCI's own case, the maximum relief that can be

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -36-

granted is limited to payment of Rs.39.55 Crores. In light of the sale

consideration of Rs.78 Crores already realized, all secured creditors,

including STCI, stand fully protected and adequately secured, and no

prejudice is caused to STCI in any manner whatsoever.

82. Ld. Counsel submits that after issuance of the Sale Certificate and

payment of the entire consideration, the Successful Auction Purchaser has

undertaken extensive, bona fide and irreversible steps towards revival and

operation of the Corporate Debtor. He submits that the Respondent has

incurred substantial expenditure to preserve and maintain the assets of the

Corporate Debtor, including safeguarding the Silvassa plant from

deterioration, despite continuous litigation initiated by STCI. The

Respondent has actively taken steps to restore corporate governance by

engaging with stock exchanges for revocation of suspension of trading of

shares, and by completing all statutory filings before the Ministry of

Corporate Affairs and Registrar of Companies reflecting change in control

and management.

83. He submitted that multiple Board Meetings and an Extraordinary

General Meeting have been convened to streamline governance structures,

and responses have been filed before tax authorities in relation to pending

GST audits and excise matters. The Respondent No. 4 has discharged

statutory and operational liabilities including payment of utilities, property

taxes, and electricity dues across various units, and has taken steps to

ensure continued operation of the factory by renewing licences and effecting

mutation of industrial premises.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -37-

84. It is submitted that the Respondent has also issued purchase orders

for plant maintenance, initiated NABL and ISO certification processes,

engaged with suppliers and customers including registration with PGCIL,

and ensured procurement of raw materials necessary for operations.

Managerial and technical personnel have been recruited, salaries and

statutory dues including PF and ESI have been paid, and active

communication has been established with customers regarding revival of

the Corporate Debtor along with maintenance of ongoing orders.

85. It is submitted that all these steps are documented, substantial, and

irreversible, having been undertaken strictly after issuance of the Sale

Certificate and full payment. Any attempt to set aside the sale would

necessarily require undoing these actions, which is neither feasible nor

equitable.

86. Ld. Counsel submitted that no prejudice whatsoever is caused to

STCI, as the sale proceeds of Rs.78 Crores, along with accrued interest of

approximately Rs.7-8 Crores, are more than sufficient to satisfy STCI's

admitted claim of Rs.39.55 Crores, even if its case is accepted in entirety.

87. He submitted that, in stark contrast, setting aside the sale at this

stage would result in grave, irreversible and irreparable prejudice to the

Successful Auction Purchaser, who has already paid the full consideration,

acted upon the Sale Certificate, and invested significant resources in

reviving the Corporate Debtor. Such interference would also lead to

destruction of value for all stakeholders, including secured creditors and

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -38-

employees, as the Corporate Debtor has already transitioned into a revived,

operational entity under the Successful Auction Purchaser.

88. He submitted that the balance of equities overwhelmingly favours

protection of the concluded sale, and any attempt to unsettle the same

would be contrary to the settled principles of insolvency law, which prioritize

finality, value maximization, and revival of the Corporate Debtor. Ld.

Counsel submits that the appeals filed by STCI are devoid of merit and liable

to be dismissed, and the sale in favour of the Successful Auction Purchaser

deserves to be upheld in entirety.

Analysis and findings

89. We have heard the Ld. Counsels of the parties in great detail, gone

through the voluminous records of the case and the written submission of

the parties. We now take up the first appeal and second appeal together as

they are sequential in nature.

90. The key issue to be determined in First Appeal is Whether the decision

of the Liquidator to compulsorily bring the security interest of the Appellant

(STCI Finance Ltd.) in the Liquidation Estate is in compliance with the

provisions of the code?

91. The main issue in the second appeal relates to distribution of

liquidation proceeds under Section 53 and the criteria to be adopted for

such distribution. We would now examine these issues in the same order.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -39-

92. The present dispute arises in the liquidation of the Corporate Debtor,

IMP Powers Limited, pursuant to liquidation order dated 19.12.2023. The

Appellant, a secured financial creditor with an admitted claim of

approximately Rs.39.55 Crores, asserts its right to stand outside liquidation

and realize its alleged secured assets under Section 52 of the Code. The

issue here is not merely about assertion of such right, but whether the

Appellant actually fulfilled the statutory conditions necessary to

operationalize that right, especially in a consortium lending structure where

multiple secured creditors exist.

93. The Appellant has contended that it is a secured creditor holding a

first pari passu charge over the fixed assets of the Corporate Debtor

pursuant to the supplementary mortgage dated 04.08.2018, and that it had

expressly elected not to relinquish its security interest while filing its claim

on 17.01.2024 for an amount of approximately Rs.39.55 Crores. It is argued

that the Liquidator, despite acknowledging such election in

communications dated 17.02.2024 and 19.02.2024, proceeded to wrongly

assume relinquishment and issued the e-auction sale notice dated

08.03.2024 without handing over possession of secured assets or enabling

enforcement. The Appellant submits that such conduct violates Section 52,

Regulation 21A, and Regulation 37, and that the impugned order has failed

to appreciate its statutory rights.

94. Per contra, the Respondents, including the Liquidator and

consortium banks, have contended that the Appellant's claim of being a

secured creditor itself is legally untenable, as the alleged first pari passu

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -40-

charge was conditional upon execution of an inter se agreement and

reciprocal NOCs, which were never fulfilled, thereby rendering the charge

ineffective. It is further contended that even assuming the Appellant to be a

secured creditor, it failed to comply with mandatory requirements under

Regulation 21A, including payment of CIRP costs and workmen dues within

90 days (i.e., by 18.03.2024), and also failed to intimate any realization

value or take steps under SARFAESI. The Respondents have emphasized

that the Appellant did not participate in multiple Stakeholders'

Consultation Committee meetings and instead sought to stall the process

through litigation. It is also submitted that a substantial majority of secured

creditors (more than 69%, subsequently exceeding 85%) had relinquished

their security interest, thereby binding the Appellant under Section 13(9) of

SARFAESI.

95. The Corporate Debtor had availed multiple credit facilities from

consortium lenders including SBI and other banks prior to availing a term

loan of Rs. 25 Crores from the Appellant in 2017-2018. The Appellant's

claim of first pari passu charge is rooted in a supplementary mortgage dated

04.08.2018. However, the record shows that the NoCs issued by consortium

lenders, particularly SBI were conditional and reciprocal in nature, and

such conditions were never fulfilled by the Appellant. Consequently, a fully

perfected and enforceable exclusive charge in favour of the Appellant never

came into existence.

96. The liquidation of the Corporate Debtor was ordered on 19.12.2023.

The Appellant filed its claim on 17.01.2024 and expressly indicated that it

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -41-

had not relinquished its security interest. The Liquidator admitted its claim

on 17.02.2024. However, subsequently, based on legal opinion and the

conduct of majority creditors, the Liquidator proceeded on the basis that

the security interest stood relinquished as part of liquidation estate.

97. It is an admitted position that secured creditors holding 69.15%

voting share had initially relinquished their security interest, this figure

later went up to 85% when 2 more banks relinquished their security

interest.

98. On 21.02.2024, the Appellant objected and sought permission to

realize its security under Section 52. However, significantly, no concrete

steps for realization were taken thereafter. Instead:

 The Appellant did not participate in multiple SCC meetings dated 22.02.2024, 01.03.2024, 02.04.2024 and 04.05.2024 despite notice.

 The Appellant did not intimate any proposed realization value or identify a buyer.

 The Appellant did not initiate any proceedings under SARFAESI Act.  The Appellant did not comply with the requirement of payment of CIRP/liquidation costs within prescribed timelines.

99. On 08.03.2024, the Liquidator issued the first e-auction notice for

sale of the Corporate Debtor as a going concern. The Appellant, instead of

taking enforcement steps, filed an application before the Adjudicating

Authority on 18.03.2024 seeking to restrain the liquidation process and

enforce its rights.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -42-

100. At this stage, it is necessary to examine the Appellant's claim that it

holds a first pari passu charge over the assets of the Corporate Debtor. Upon

perusal of the record, we find that when the Appellant entered into the Term

Loan Agreement dated 29.11.2017, the assets of the Corporate Debtor were

already charged in favour of the existing consortium lenders, including

State Bank of India, as reflected in Clauses 1.13, 1.14, 1.15 and 1.56 read

with Clause 3.11 and Schedule I and Schedule II (Part A & B) of the

financing documents.

1.13 "Consortium Lenders" or "Existing Lenders" means the Consortium Term Lenders as defined in Clause 1.14 herein and the Consortium Working Capital Lenders as defined in Clause 1.15 herein.

1.14 "Consortium Term Lenders" means the lenders who have sanctioned/granted Term Loan to the Borrowers as more particularly mentioned in the Part A of Schedule II hereunder written.

1.15 "Consortium Working Capital Lenders" means the lenders who have sanctioned granted Working Capital Facility Loan to the Borrowers as more particularly mentioned in the Part B of the Schedule II hereunder written.

1.56 "Security" or "Secured Assets" means (i) first and exclusive charge granted to be granted to the Lender by the Third Party Security Provider(s) on the Pledged Securities (as defined hereinabove) and (ii) first pari passu charge to be shared with the Consortium Term Lenders granted to be granted to the Lender by the Borrowers on the Fixed Assets/Mortgaged Property (as defined hereinabove) and charge on any other assets/security (moveable and/or immoveable) that may be pledged hypothecated/ mortgaged/ transferred/ assigned/charged by a Borrowers/ Guarantor (s)/Third party Security Provider(s) in favour of the Lender as and by way of

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -43-

security for payment of any Outstanding Amounts/Obligations including all Related Rights pertaining thereto.

3.11 The Borrowers shall create/extend mortgage on the Mortgaged Property on first pari passu basis to be shared along with the Consortium Term Lenders by depositing title deeds with IDBI Bank by way of constructive delivery and duly noting the same with the Sub-Registrar of Assurances and causing their authorised signatory to execute a declaration in favour of the Lender recording and confirming the same. However, it is agreed that on the payment/repayment of the Term Loan granted by the Consortium Term Lenders, the said title deeds shall be handed over directly by IDBI Bank to the Lender and the Borrowers shall along with the letter from the Consortium Lenders ceding charge submit to the Lender a letter to the said effect from the Consortium Lenders.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -44-

101. We further note that the security proposed in favour of the Appellant

under Clause 7.2(a)(ii) and 7.2(a)(iii) was clearly subject to obtaining valid

No Objection Certificates from the existing lenders, and the existing lenders

ceding first pari-passu charge for creating first pari-passu charge by the

Appellant (STCI here). The relevant clauses of the agreement are extracted

below:

7.2 (a) (ii) the Borrowers shall furnish to the Lender No Objection Certificate from the Consortium Lenders for creation of first pari passu charge in favour of the Lender by way mortgage of the Fixed Assets; or

7.2 (a) (iii) the Borrowers shall furnish to the Lender Letter ceding first pari passu charge from the Consortium Lenders for creation of pari passu charge in favour of the Lender by way of mortgage of the Fixed Assets;

102. We now take a look at the No Objection Certificate and letter ceding

first pari passu charge issued by the SBI and by Karnataka Bank. The

letters of NOC and ceding of first pari passu charge of all consortium lenders

were identical in nature to Karnataka Bank.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -45-

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -46-

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -47-

103. We note from the letter of the SBI ceding pari-passu Charge that it

involved the following:

i. SBI agreed to allow STCI to hold 1st pari-passu charge over the fixed

assets of the Company along with it. State Bank of India Term Loan

amounted to Rs. 9 crores and STCI Finance Term Loan of Rs. 25

crores were to be noted in the charge.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -48-

ii. State Bank of India also gave NOC to IMP Powers Ltd (Corporate

Debtor) to create 1st pari-passu charge on the fixed assets of the

Company in favour of STCI for securing the Term Loan of Rs. 25

crores.

iii. SBI also agreed to enter into a pari-passu agreement with STCI and

the Company defining the rights and obligations of parties inter se.

iv. It also authorised STCI to make a mention of 1st pari passu Charge

on Fixed asset of Company in the name of SBI and STCI with

Registrar of Companies.

v. STCI was to acknowledge the receipt and SBI clearly stated that

ceding of charge was on reciprocal basis subject to similar letter by

STCI ceding pari-passu charge in SBI's favour by the STCI.

104. The most important condition in the letter related to reciprocal ceding

of pari-passu charge by the STCI. We note from the records that based on

the aforesaid authorisation, the Company created 1st pari passu charge on

fixed assets of the company in favour of STCI also. Secondly STCI registered

the 1st pari-passu charge on fixed assets of the company with Registrar of

Companies. Most importantly, we note that no letter was issued by STCI

ceding the 1st Charge on pari-passu basis in favour of SBI nor was the inter-

se agreement executed between SBI, STCI and the company/CD. In view of

non-compliance with the conditions viz. the absence of a valid inter se

agreement, and reciprocal ceding of 1st pari-passu charge by the STCI, the

alleged pari passu charge never became operative in law.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -49-

105. We now take a look at the letter from Karnataka Bank to IMP Power

Ltd regarding issue of NOC/ceding of 1st pari passu charge by the bank on

the fixed assets of the company. It was emphasised that this was subject to

Lead Bank SBI and all other banks in the consortium ceding such charge

issuing such letter. Similar letters were issued by all members of the

consortium. As noted in earlier para, the letter issued by the SBI was a

conditional letter to STCI and the conditions mentioned therein were not

fulfilled by the STCI. The conditional letters issued by all member banks in

consortium therefore could not take effect, due to non-operation of letter by

Lead Bank SBI. A pari passu charge is inherently a shared charge and does

not confer any exclusive or superior right upon one creditor. Therefore, the

Appellant cannot claim an independent right to enforce the assets or to

stand outside the liquidation process on this basis.

106. The right to enforce the security interest outside the liquidation estate

under Section 52 of the IBC Code is a qualified statutory right, subject to

strict compliance with the conditions laid down in the Code and the

Liquidation Regulations. It cannot be exercised in isolation from the

collective framework of liquidation.

107. Section 52 of the IBC Code deals with the issue and the same is

extracted below:

"Section 52-Secured creditor in liquidation proceedings

(1) A secured creditor in the liquidation proceedings may--

(a) relinquish its security interest to the liquidation estate and receive proceeds from the sale of assets by the liquidator in the manner specified in section 53; or

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -50-

(b) realise its security interest in the manner specified in this section.

(2) Where the secured creditor realises security interest under clause

(b) of sub-section (1), he shall inform the liquidator of such security interest and identify the asset subject to such security interest to be realised.

(3) Before any security interest is realised by the secured creditor under this section, the liquidator shall verify such security interest and permit the secured creditor to realise only such security interest, the existence of which may be proved either--

(a) by the records of such security interest maintained by an information utility; or

(b) by such other means as may be specified by the Board.

(4) A secured creditor may enforce, realise, settle, compromise or deal with the secured assets in accordance with such law as applicable to the security interest being realised and to the secured creditor and apply the proceeds to recover the debts due to it.

(5) ......

(6) ......

(7) ......

(8) The amount of insolvency resolution process costs, due from secured creditors who realise their security interests in the manner provided in this section, shall be deducted from the proceeds of any realisation by such secured creditors, and they shall transfer such amounts to the liquidator to be included in the liquidation estate."

"

108. In this case STCI the Appellant submitted its claim on 17.01.2024 for

an amount of Rs. 39,55,34,828/- and also submitted to the Liquidator in

prescribed form stating their intention to realise its security interest in

accordance with Section 52(1)(b) of the Code. It is the submission of the

Appellant that the Liquidator admitted the claim of the Appellant on

17.02.2024 but he unilaterally assumed relinquishment of the Appellants

security interest without consent.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -51-

109. In this context, we now take a look at Regulation 21A of the

'Liquidation Regulation'.

"Regulation 21A: Presumption of security interest.

(1) A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II:

PROVIDED that, where a secured creditor does not intimate its decision within thirty days from the liquidation commencement date, the assets covered under the security interest shall be presumed to be part of the liquidation estate.

(2) Where a secured creditor proceeds to realise its security interest, it shall pay-

(a) as much towards the amount payable under clause (a) and sub-clause (i) of clause (b) of sub-section (1) of section 53, as it would have shared in case it had relinquished the security interest, to the liquidator within ninety days from the liquidation commencement date; and

(b) the excess of the realised value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within one hundred and eighty days from the liquidation commencement date:

PROVIDED that where the amount payable under this sub-regulation is not certain by the date the amount is payable under this sub- regulation, the secured creditor shall pay the amount, as estimated by the liquidator:

PROVIDED FURTHER that any difference between the amount payable under this sub-regulation and the amount paid under the first proviso shall be made good by the secured creditor or the liquidator, as the case may be, as soon as the amount payable under this sub- regulation is certain and so informed by the liquidator.

(3) Where a secured creditor fails to comply with sub-regulation (2), the asset, which is subject to security interest, shall become part of the liquidation estate.]"

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -52-

110. Liquidator in his email dated 21.02.2024 informed the Appellant that

in terms of Regulation 21A he has to within 90 days from the liquidation

commencement date paid to the Liquidator:

a. Insolvency Resolution Process cost and liquidation costs in full;

b. Workmen dues for the period of 24 months preceding the liquidation commencement date as it would have shared in case it had relinquished the security interest.

Liquidator also mentioned that the date of liquidation was 19.12.2023 and

he wanted to know from the Appellant as to what steps have been taken to

realise the security interest as 90 days period is near. However, the

Appellant failed to respond to these queries of liquidator.

111. It is on record that CIRP costs were approved by the 14th CoC held

between 28th to 31st July, 2023 and the concerned CoC Members were asked

to share the balance due. In this regard, we further note that in the second

Stakeholders Consultation Committee meeting held on 22.02.2024 agenda

item no.8 referred to the payment of pending CIRP cost by members of the

CoC which was also circulated to Appellant even though it was not present

in the meeting. As per the same the Appellant had to pay an amount of Rs.

34,11,727/- as balance CIRP cost. The relevant agenda is extracted below:

"8) Request for the Cost Contribution by the members of the Stakeholder Consultation Committee.

The Chairman informed the members that the Liquidator had sent an email to all the bankers on 08.02.2024 requesting them to contribute towards the cost incurred in running the process. The said email comprised of a sheet briefing the details of the Unpaid CIRP Cost for

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -53-

the period 01-10-2023 to 18-12-2023 and its bifurcation in voting ratio, along with details of the Total Amount Due, Total Amount Paid and Deficit which is required to be contributed by each member.

A Chartered Accountant certificate with respect to the same has also been shared to the members. Further, the members are requested to share their contributions at the earliest for the smooth running of the process. A snapshot of fund requirements is as follows:

The members agreed to contribute as soon as possible and had not further questions regarding the same."

112. In the Second SCC meeting held on 22.02.2024 the liquidator put-up

an agenda for approval of liquidation cost, which was subsequently

approved. The extract of relevant agenda item no.9 is extracted below:

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -54-

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -55-

113. Under Regulation 21(2) the secured creditor who intends to realise its

security interest outside the liquidation estate must pay its share of CIRP

cost and workmen dues within 90 days. The said period expired on

19.03.2024. We note that despite specific communication from the

liquidator dated 21.02.2024 the STCI failed to make such payment. We

further note that till 02.04.2024 the Appellant has not made payments of

CIRP costs and liquidation costs and had also not furnished to the

liquidator its plan of action to realise its secured interest.

114. In the present case, the failure to comply with Regulation 21A(2)

results in a statutory consequence under Regulation 21A(3), whereby the

secured asset forms part of the liquidation estate. This consequence is

automatic and leaves no discretion either with the Liquidator or with this

Tribunal.

115. Further, we note that the Appellant's charge is not the exclusive

charge on the fixed assets of the CD. It shares the first charge on the assets

on pari-passu basis with SBI and the other banks hold secondary charge

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -56-

on the said assets. The record clearly establishes that the alleged pari passu

charge was conditional and never perfected due to non-execution of inter se

agreements and reciprocal NOCs. The Appellant also did not seek

relinquishment by SBI in its favour to have exclusive charge on the assets

but it did not do so. SBI on the contrary relinquished its security interest to

the liquidation estate. Thus, the Appellant cannot claim any superior or

independent right over the secured assets.

116. In a consortium lending structure involving joint security and

involving disposal of fixed assets, Section 13(9) of SARFAESI becomes the

"applicable law" under Section 52(4) of the Code. Where more than 60% in

value of secured creditors decide upon a course of action, such decision

becomes binding on the remaining creditors.

117. In the present case, the threshold was not merely met but

substantially exceeded, with more than 69%--and subsequently over 85%--

of secured creditors relinquishing their security. The Appellant, therefore,

cannot unilaterally assert a contrary position to derail the liquidation

process.

118. We also note the concession made by the Ld. Counsel for the

Appellant during the proceedings in IA/965(Ahm)/2024 recorded in the

order dated 20.08.2024 which is extracted below:

"Further the Learned senior counsel appearing for the once of the Financial Creditors/STCI Finance Limited on instructions also stated that the STCI Finance Limited has also no objection on the reserve price fixed by the SCC, and sale through E-Auction on 21.05.2024 as a going concern as mentioned above for Rs.78,00,00,000/-"

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -57-

It is clear from the above, that the Ld. Counsel for the Appellant had agreed

to sale of the assets of the CD as a going concern.

119. The Appellant had relied upon the judgment in "Canara Bank vs. S.

Rajendran, (2024 SCC OnLine NCLAT 390)" of this Appellate Tribunal,

wherein the issue was whether a secured creditor could be compelled by the

Liquidator to relinquish its security interest, and it was held that such

relinquishment must be voluntary and cannot be forced. The facts of the

present case, however, stand on a different footing. Here, the inclusion of

the secured assets in the liquidation estate is not the result of any coercive

action on the part of the Liquidator, but is a consequence of the Appellant's

own failure to comply with the mandatory requirements under the

Liquidation Regulations. The record reflects that the Appellant did not pay

the CIRP costs and workmen dues within the prescribed period of 90 days

as required under Regulation 21A(2), nor did it take any effective steps to

realize its security interest under SARFAESI Act or intimate the realization

value as required under Regulation 37. In terms of Regulation 21A(3), such

non-compliance results in an automatic statutory consequence whereby the

secured asset forms part of the liquidation estate. Therefore, the present

case does not involve any forced relinquishment, but a deemed

relinquishment by operation of law. In these circumstances, the principle

laid down in Rajendran (supra) is clearly distinguishable and does not apply

to the present case.

120. The Appellant has relied on ICICI Bank Ltd. vs. SIDCO Leather Ltd.

(2006) 10 SCC 452, wherein the Hon'ble Supreme Court was dealing with

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -58-

a situation arising under general recovery laws where the dispute pertained

to inter se priority between secured creditors in enforcement proceedings.

The Court recognized the principle that a first charge holder would have

priority over subsequent charge holders in such enforcement actions.

However, the present case arises under the Insolvency and Bankruptcy

Code, which is a complete and self-contained framework governing

collective insolvency and liquidation. Moreover, in the present case, the

Appellant has not been able to establish that it holds a valid and perfected

first pari passu charge, as the alleged charge was conditional upon

fulfilment of NOC requirements and execution of an inter se agreement,

which admittedly never took place. In such a factual and legal context, the

principle of priority of charge as laid down in SIDCO Leather cannot be

applied to the present case.

121. Respondents have also relied on various judgments which are

discussed in subsequent paragraphs.

122. In "Andhra Pradesh State Financial Corporation vs. Kotak

Mahindra Bank & Ors., Writ Petition No. 43027 of 2019" the Hon'ble

High Court of Telangana examined whether a valid pari passu charge could

be said to exist merely on the basis of issuance of a No Objection Certificate

and registration of charge. The Court held that unless there exists a binding

contractual arrangement between the lenders, such as an inter se

agreement, the mere issuance of an NOC or filing of charge with the

Registrar of Companies does not result in creation of a legally enforceable

pari passu charge. It was further held that registration of charge is only a

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -59-

procedural requirement and cannot substitute the substantive act of

creation of charge. In the present case, we find that although conditional

NOCs were issued, the essential conditions, namely execution of an inter se

agreement and issuance of reciprocal Ceding of the charge by the Appellant,

were never fulfilled. Thus, applying the ratio of the above judgment, the

alleged pari passu charge in favour of the Appellant never came into

existence in law, and the Appellant cannot claim the status of a secured

creditor on that basis.

123. In "Avil Menezes vs. Hinduja Leyland Finance Limited, Company

Appeal (AT) (Insolvency) No. 555 of 2024 (NCLAT, decided in 2024)"

this Tribunal considered the validity of a charge in liquidation where the

charge had been registered but the foundational requirements for its

creation were not satisfied. It was held that mere registration of charge

under Section 77 of the Companies Act, 2013 does not by itself create a

valid and enforceable security interest unless the underlying conditions for

creation of such charge, including valid consent of existing secured

creditors, are fulfilled. The Tribunal emphasized that in insolvency

proceedings, substance prevails over form. In the present case, although

reliance is placed on documents suggesting creation or registration of

charge, the absence of a valid and effective NOC and inter se agreement

renders such charge legally unenforceable. Therefore, the principle laid

down in Avil Menezes squarely applies, supporting the conclusion that the

Appellant cannot be treated as a secured creditor.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -60-

124. In "State Bank of India vs. Soni Ispat Ltd., Appeal No. R-53 of

2013 (DRAT)" the Ld. Debts Recovery Appellate Tribunal considered the

applicability of Section 13(9) of the SARFAESI Act in a situation involving

multiple secured creditors holding joint security interests. The Tribunal

observed that where the secured assets are subject to a common charge in

favour of multiple lenders, the decision regarding enforcement of such

assets is to be taken collectively, and once the statutory threshold of 60%

in value is met, such decision becomes binding on all secured creditors,

irrespective of whether they hold first charge or second charge. The Tribunal

specifically noted that even a creditor claiming a first charge cannot act

independently in disregard of the majority decision when the security

interest is shared. In the present case, we find that the security over the

assets of the Corporate Debtor was not exclusive but was part of a

consortium lending structure, with joint and overlapping charges in favour

of multiple creditors. It is also not in dispute that secured creditors holding

more than the statutory threshold--initially 69.15% and subsequently

exceeding 85%--had taken a conscious decision to relinquish their security

interest and proceed with liquidation of the Corporate Debtor as a going

concern. We note that Section 13(9) of the SARFAESI Act, being the

applicable law under Section 52(4) of the Code, operates squarely in the

present case and negates the Appellant's claim of unilateral enforcement of

security interest.

125. In "Phoenix ARC Pvt. Ltd. vs. Kuldeep Verma, Liquidator of KS

Oils Ltd. & Ors., CA (AT) (Insolvency) No. 592 of 2024", this Appellate

Tribunal examined the consequences of non-compliance with Regulation Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -61-

21A of the IBBI (Liquidation Process) Regulations, 2016. It was held that

where a secured creditor, despite expressing an intention not to relinquish

its security interest, fails to comply with the mandatory requirements under

Regulation 21A(2), including payment of CIRP costs and workmen dues

within the prescribed timeline, the consequence under Regulation 21A(3)

follows automatically, and the secured asset becomes part of the liquidation

estate. The Tribunal further observed that mere assertion of a right under

Section 52 is not sufficient, and such right must be exercised strictly in

accordance with the statutory framework. In the present case, we find that

the liquidation order was passed on 19.12.2023, and the statutory period

of 90 days expired on 18/19.03.2024. The record clearly reflects that

despite specific communication from the Liquidator dated 21.02.2024

calling upon the Appellant to comply, no payment of CIRP costs or workmen

dues was not made within the prescribed period. Further, the Appellant did

not intimate any proposed realization value as required under Regulation

37. In such circumstances, the consequence under Regulation 21A(3)

squarely applies, and the secured assets form part of the liquidation estate

by operation of law. We, therefore, find that the ratio laid down in Phoenix

ARC Pvt. Ltd. vs. Kuldeep Verma squarely applies to the present case and

supports the conclusion that the Appellant failed to validly exercise its

rights under Section 52.

126. In "HDFC Bank Ltd. vs. Hema Engineering Industries Ltd.,

Company Appeal (AT) (Insolvency) No. 346 of 2025", this Tribunal held

that payment of dues under Section 53 within 90 days, as required under

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -62-

Regulation 21A(2), is mandatory and cannot be postponed on the ground

that the secured creditor wishes to first realize its security. It was also held

that failure to make such payment leads to automatic inclusion of the asset

in the liquidation estate. In the present case, the Appellant did not deposit

the required dues within the prescribed time and did not seek extension,

but only asserted its right to realize the security. Applying this principle,

the Appellant's non-compliance results in the statutory consequence under

Regulation 21A(3), supporting the case of the Respondents. Relevant paras

31 & 34 have been extracted below:

"31. Thus, it is evident from the above material that before Tribunal no request has ever been made by the appellant to provide him sufficient time for the purpose of deposition of dues as required under Section 53 of the IBC. Contrary to this the appellant has requested to grant permission to pay the dues as required under Section 53 of the IBC only after realization of his security interest. It is to be recalled that the provision as contained under Insolvency Regulation 21A (2) (a) pertaining to deposition of such dues in 90 days is a mandatory provision, unless rare circumstances of exceptional nature occurs, in which case time extension may be considered and the same is also not dependent on realisation of security interest by secured creditor and therefore it could not be linked with realisation of security interest. In simple words the payment which is to be made under relevant provisions of Section 52 and 53 of the IBC by the secured creditor is not dependent on the realisation of security interest by a secured creditor. Thus the Tribunal in this regard has not erred in returning a finding that prayer of the appellant to pay the required dues under Section 53 of the IBC only after realisation of his security interest is not justified and legal.

34. Therefore, having regard to all the facts and circumstances of this case and keeping in view the various judgments passed by this Tribunal mentioned herein before it is evident that the appellant did not make any prayer before the Tribunal to extend time or to provide sufficient time to deposit the money as required under Section 53 of the IBC and has only requested the Tribunal to permit him to realise his security interest first and to further permit to deposit the dues under Section 53 of the IBC thereafter from the proceeds of such realisation and this prayer of the appellant in our considered opinion has been

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -63-

rightly rejected by the Tribunal. The Judgment impugned before us is required to be tested on the basis of the prayers made before the Tribunal and reasons given by the Tribunal in order to arrive at a particular finding. Therefore, when no prayer for extension or exclusion of time has been made before Tribunal by the appellant, he may not be deemed to be an aggrieved person so far as this prayer is concerned. It is also to be recalled that non-deposition of dues as required under Section 53 of the IBC read with Regulation 21A (2) (a) of Insolvency Regulations within stipulated period has resulted in the automatic vesting of the assets in liquidation pool and the liquidator vide his email dated 08.09.2022 has only formally communicated it. Though the dispute before us has not been contested by Ld. Counsel for liquidator with tooth and nail but even thereafter in our considered opinion when no request to extend time or exclusion of time was prayed before the Tribunal by the appellant, the Tribunal was not obliged to grant it on its own. At the cost of repetition, it is stated that the appellant before tribunal has requested to permit him to realise the secured interest from specified properties at first and thereafter to deposit the dues as provided under Section 53 of the IBC, which have been duly communicated to the appellant by the Respondent/liquidator and after getting knowledge of these dues the appellant instead of making efforts to deposit it, chosen to challenge the decision of the liquidator and has also challenged the vires of Insolvency Regulation 21A. Thus, the intention of the appellant, before the tribunal was not of deposition of the dues."

127. In light of the above, we hold that the Appellant, despite asserting its

intention not to relinquish its security interest, failed to comply with the

mandatory statutory requirements necessary to give effect to such

intention. Its failure to initiate enforcement proceedings; failure to pay CIRP

and liquidation costs within the prescribed period; failure to intimate

realization value; and non-participation in the liquidation process

collectively establish that the Appellant did not validly exercise its rights

under Section 52.

128. Consequently, the secured assets stood vested in the liquidation

estate by operation of law, and the Liquidator was fully justified in issuing

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -64-

the e-auction sale notice dated 08.03.2024 and proceeding with the sale of

the Corporate Debtor as a going concern.

129. In view of the findings in above paragraphs, we do not find any

infirmity in the way the liquidation process has been carried out by the

liquidator. The first issue therefore is decided in favour of Respondents.

130. We now take up the second issue relating to distribution of liquidation

sale proceeds which has been agitated in the second appeal. It arises out of

subsequent developments in the liquidation process, particularly the order

dated 20.08.2024 directing issuance of the sale certificate in favour of the

Successful Auction Purchaser. The grievance of the Appellant, in substance,

is not confined to the issuance of the sale certificate alone, but extends to

the manner in which the sale proceeds are to be distributed amongst the

stakeholders. The question therefore, arises for consideration is whether

such dispute can be adjudicated at this stage by this Tribunal, or whether

it ought to be considered by the Adjudicating Authority in the first instance.

131. The Appellant has contended that the issuance of the sale certificate

ought not to have been directed without first determining the correct

manner of distribution of sale proceeds, particularly in view of its asserted

status and its claim to a higher share. On the other hand, the Respondents,

including the Liquidator, have submitted that the auction process has

already attained finality, the Successful Auction Purchaser has deposited

the entire sale consideration, and the issuance of the sale certificate was a

necessary consequence of a concluded sale. It is further submitted that the

issue of distribution of sale proceeds is already pending consideration before

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -65-

the Adjudicating Authority, where a proposed distribution has been placed

on record by way of affidavit dated 03.08.2024.

132. Upon a careful examination of the record, we find that the liquidation

process has substantially progressed, and the Corporate Debtor has been

sold as a going concern through a duly conducted e-auction. The Successful

Auction Purchaser has deposited the entire consideration, and the issuance

of the sale certificate pursuant to the order dated 20.08.2024 is only a

consequential step towards completion of the sale. At the same time, it is

equally evident that the question of distribution of sale proceeds has not yet

attained finality and remains pending before the Adjudicating Authority.

133. We are of the view that the scheme of the Insolvency and Bankruptcy

Code, 2016 clearly envisages that matters relating to determination of

claims, classification of creditors, and distribution of proceeds under

Section 53 are to be adjudicated by the Adjudicating Authority in the first

instance.

134. Such determination necessarily involves examination of factual and

legal issues, including the status of creditors, the nature and extent of their

security interest, and their respective entitlements in the liquidation

waterfall mechanism as provided in Section 53(1) of the Code. These are not

matters which can be appropriately decided at the appellate stage without

a prior determination by the Adjudicating Authority.

135. In the present case, the grievance of the Appellant is intrinsically

linked to its entitlement in the distribution of sale proceeds. However, since

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -66-

the issue of distribution is already pending adjudication before the

Adjudicating Authority, we find that it would not be appropriate for us to

undertake such determination at this stage. Further, in view of our findings

in the First Appeal wherein the validity of the auction process and inclusion

of assets in the liquidation estate has been found to be in order, and

therefore, the only surviving dispute between the parties pertains to

distribution of liquidation proceeds.

136. In these circumstances, while we do not find any infirmity in the

issuance of the sale certificate, we deem it appropriate to remand the matter

to the Adjudicating Authority for the limited purpose of adjudicating the

issue of distribution of sale proceeds and the inter se rights of stakeholders.

The Adjudicating Authority shall consider the claims of all parties, including

the Appellant, in accordance with Section 53 of the Code, without being

influenced by our observations.

137. The third appeal, being Company Appeal (AT) (Ins.) No. 893 of 2025,

arises from the order dated 05.11.2024 passed by the Adjudicating

Authority in IA No. 1387 of 2024, filed by the Successful Auction Purchaser

whereby reliefs and protections under Section 32A of the Insolvency and

Bankruptcy Code, 2016 were granted without hearing the Appellant or

other Financial Creditors.

138. We note that the appeal has been filed with a delay of 171 days. At

the outset, we find that the present appeal raises a threshold issue of

limitation and maintainability, which goes to the root of the matter and

must be decided prior to examining the merits of the case.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -67-

139. The Appellant has sought to justify the delay by submitting that the

impugned order cannot be viewed in isolation, but forms part of a

continuing chain of proceedings arising out of the liquidation of the

Corporate Debtor, including the earlier orders dated 22.04.2024 and

20.08.2024, which are already under challenge in connected appeals. It is

contended that the rights of the Appellant are directly impacted by the

cumulative effect of these orders, and therefore, the present appeal is in

continuation of its earlier challenges. The Appellant has further submitted

that the consequences of the impugned order dated 05.11.2024 became

fully evident only upon implementation of the sale and the subsequent steps

taken by the Successful Auction Purchaser, including seeking waivers and

concessions, which prompted the Appellant to take recourse to appellate

remedy. It is also urged that the Appellant has been actively pursuing its

remedies before the Adjudicating Authority as well as this Tribunal in

related proceedings, and that the delay has occurred on account of bona

fide prosecution of such remedies and the overlapping nature of issues

involved, and not due to any deliberate or negligent conduct.

140. We have considered the explanation offered by the Appellant. However,

under Section 61 of the Insolvency and Bankruptcy Code, an appeal is

required to be filed within 30 days, extendable by a further period of 15 days

if sufficient cause is shown. The statutory scheme thus prescribes a strict

outer limit of 45 days, beyond which this Tribunal does not have jurisdiction

to condone the delay. In the present case, the record indicates that the

impugned order was passed on 05.11.2024, whereas the present appeal has

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -68-

been filed on 24.05.2025, resulting in a delay of 171 days. This has been

admitted by the Appellant.

141. The contention that the impugned order forms part of a continuing

cause of action or that its consequences were realized subsequently cannot

be accepted to extend the statutory limitation period. Each order passed by

the Adjudicating Authority gives rise to an independent cause of action, and

limitation is to be computed from the date of such order. The fact that earlier

appeals have been filed does not suspend or enlarge the period of limitation

prescribed under the Code. Therefore, this delay of 171 days is beyond the

powers of this tribunal, which can condone delay up to a maximum period

of 45 days.

142. We are, therefore, of the considered view that the present appeal is

clearly barred by limitation and is not maintainable. Accordingly, the third

appeal is dismissed as being barred by limitation and not maintainable.

143. In view of the findings above, we dispose of these three appeals in the

following manner:

i. The First Appeal (Company Appeal (AT) (Ins.) No. 1019 of 2024) stands dismissed.

ii. The Second Appeal (Company Appeal (AT) (Ins.) No. 1657of 2024) is disposed off with direction to Ld. Adjudicating Authority to decide the distribution of liquidation sale proceeds in accordance with Section 53(1) of the Code within a period of 4 weeks.

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025 -69-

iii. The Third Appeal (Company Appeal (AT) (Ins.) No. 893 of 2025) is not

maintainable and dismissed accordingly. There shall be no order as

to costs. Pending IA's, if any, are closed.

[Justice Ashok Bhushan) Chairperson

[Mr. Indevar Pandey] Member (Technical)

Place: New Delhi

Harleen/ Pragya (LRA)

Company Appeal (AT) (Ins.) Nos., 1019, 1657 of 2024 & 893 of 2025