LIC Housing Finance's Failure to Realise Madhapur Property Security Interest Within 180 Days Mandated by IBBI Regulations Leads to Inclusion in Corporate Debtor's Liquidation Estate
In a significant decision dated October 7, 2026, the National Company Law Tribunal (NCLT), Hyderabad Bench, adjudicated on the fate of secured assets in the liquidation of a corporate debtor, underscoring the strict timelines under the Insolvency and Bankruptcy Code, 2016 (IBC) and associated regulations. The case of Mr. Gonugunta Murali, the Liquidator of the corporate debtor, versus LIC Housing Finance Limited, a secured financial creditor, centered around the latter's failure to realise its security interest in a mortgaged property within the prescribed 180-day period post-liquidation commencement.
The corporate debtor had mortgaged two prime properties - the Banjara Hills Property and the Madhapur Property - to LIC Housing Finance Limited against a substantial loan facility of Rs. 310 crores under a rental discounting scheme. While the secured creditor relinquished its security interest in the Banjara Hills Property via email dated May 17, 2022, it elected to realise the security interest in the Madhapur Property.
Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, mandates that a secured creditor who elects to realise security interest must do so within 180 days from the liquidation commencement date. The respondent's failure to comply with this timeline was central to the tribunal's analysis.
The respondent argued that it had initiated recovery proceedings under the SARFAESI Act, 2002, and that interim relief granted by the Telangana High Court in a writ petition had delayed its efforts. The High Court's stay was vacated on November 14, 2022, after which the secured creditor still did not demonstrate any concrete steps or successful realisation within the next 180 days (which expired on May 13, 2023). The respondent's email stating initiation of recovery proceedings post-May 2023 lacked documentary evidence such as applications, orders, sale notices, or auction proceedings to substantiate actual realisation.
The tribunal found that mere assertions without proof of realisation within the statutory period were insufficient. It emphasized the time-bound nature of the IBC and the necessity of strict compliance with Regulation 21A. The respondent's failure to either relinquish the security interest or realise the Madhapur Property within the prescribed period resulted in the asset becoming part of the liquidation estate.
This judgment clarifies that secured creditors under IBC must diligently pursue realisation of security interests within prescribed timelines or otherwise lose the benefit of such assets, which then integrate into the liquidation estate for distribution among stakeholders. The decision reinforces the principle of time-bound resolution and asset maximisation under the Insolvency and Bankruptcy Code.
Bottom Line:
Insolvency and Bankruptcy Code - Liquidation - Secured creditor having elected not to relinquish security interest over one mortgaged property was bound to realise the same within the period prescribed under Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 - Mere assertion that recovery steps were initiated under SARFAESI Act, without documentary proof and without actual realization within time, is insufficient - On failure to realise within prescribed period, such non-relinquished secured asset becomes part of liquidation estate.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 52, Section 60(5); IBBI (Liquidation Process) Regulations, 2016 Regulation 21A; SARFAESI Act, 2002 Sections 13(4), 14
