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CS Professional · Insolvency and Bankruptcy - Law and Practice · Liquidation of Corporate Person

Meridian Steel Ltd is in liquidation. Its secured creditor, Bharat Finance, decides to realise its security interest on a plant outside the liquidation process rather than relinquish it. Before Bharat Finance can proceed, what must the liquidator do?

The liquidator must verify the security interest before the secured creditor realises it. Proof can be through information utility records or other means specified by the Board, and the creditor is permitted to realise only the interest so verified. Tribunal approval is not required unless resistance is faced.

  1. AVerify the security interest, proved by information utility records or other means specified by the Board, and permit realisation of only that security interestCorrect
  2. BObtain the committee of creditors' approval for the realisation
  3. CSell the plant himself and pay Bharat Finance from the proceeds under the waterfall
  4. DSeek Adjudicating Authority's permission in every case before allowing realisation

Explanation

Under section 52(3), before realisation the liquidator verifies the security interest, which may be proved by information utility records or other means specified by the Board, and permits realisation of only such verified interest. Adjudicating Authority involvement arises only under section 52(5) if there is resistance.

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