NCLT Mumbai Says Bank Did Not Relinquish Security Interest By Participating In First Creditors' Meeting

The National Company Law Tribunal (NCLT) in Mumbai bench has rejected a liquidator's contention that Kotak Mahindra Bank relinquished its security interest by proving its entire claim and participating in the first creditors' meeting during the winding up of Brijeel Foods & Beverages Pvt Ltd.

The tribunal held that the bank remains entitled to enforce its security outside the winding-up proceedings.

A bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar found no material showing that the bank had expressly surrendered its security interest. It also found no basis to conclude that the bank had abandoned its right to realise the secured assets independently.

Observing that the record did not support the liquidator's case, the bench held:

“Having regard to the statutory framework, the safeguards embodied in Rules 61 and 62, the absence of any express election to surrender the security, the lack of material demonstrating a formal vote in respect of the entire debt, and the subsequent unequivocal assertion by the secured creditor of its intention to realise the security outside the winding-up proceedings, this Tribunal is unable to conclude that the secured creditor has relinquished or surrendered its security interest.”

The dispute arose after the tribunal ordered the winding up of Brijeel Foods & Beverages on January 12, 2026. Kotak subsequently submitted a proof of debt of about ₹3.58 crore before the company liquidator.

According to the liquidator, the bank had proved its entire claim and participated in the first meeting of creditors. He argued that this amounted to a surrender of the bank's security interest. On that basis, he sought directions requiring the bank to hand over the secured assets.

Kotak opposed the move. The bank maintained that it had already taken possession of the secured assets and initiated enforcement measures under the SARFAESI Act before the winding-up order. It argued that it was entitled to continue pursuing those remedies.

The tribunal noted that the prescribed proof-of-debt form does not require a secured creditor to declare whether it intends to surrender its security or realise it independently. It also found that the liquidator had not produced any communication, declaration, or other material showing that the bank had elected to relinquish its security interest.

The bench further noted that the bank had disclosed details of its security and its estimated value while filing its claim. In those circumstances, it was for the liquidator to determine the extent of voting rights available to the creditor after accounting for the value of the security.

Explaining its interpretation of the winding-up rules, the tribunal observed,

“It is clear from the plain reading of Rule 60 that the Kotak Bank was entitled to vote on the resolution in respect of amount of debt due from the Company after deducting the security interest. It is pertinent to note that prescribed Form Win 44 does not contain any column requiring such deduction, and such right is to be inferred from the plain reading of Rule 60 itself.”

The tribunal also rejected the argument that the bank's participation in the first creditors' meeting resulted in a deemed surrender of its security. It held that Rules 60 and 61 of the Companies (Winding Up) Rules did not apply to that meeting. As a result, the voting rights exercised by the bank could not be treated as relinquishment of its security interest.

The bench further found that the Companies Act, 2013 does not require a secured creditor to notify its intention to realise security within a specified period.

Faulting the liquidator's approach, the tribunal observed,

“Hence, the liquidator requiring Kotak Bank to handover security interest to him has committed error in law, and he ought to have analysed the provisions of Companies Act, 2013 in relation to winding up before requiring the Kotak Bank for such handing over, as the Companies Act, 2013 does not require the security interest holder to notify its intent to realise security interest within specified time or realise such interest thereafter within definite timelines.”

Referring to Supreme Court decisions in Pegasus Assets Reconstruction Pvt Ltd v Haryana Concast Ltd and A. Navinchandra Steels Pvt Ltd v SREI Equipment Finance Ltd, the tribunal reiterated that a secured creditor may stand outside winding-up proceedings and realise its security in accordance with law.

The tribunal consequently allowed Kotak's application and dismissed the liquidator's application seeking surrender of the secured assets.