Whether inter se ranking of the charges among Secured Financial Creditors existing before initiation of CIRP will be recognized while distributing the sale proceeds in liquidation under Section 53(1) of IBC, 2016 – PTC India Financial Services Ltd. Vs. Vikas Prakash Gupta RP of Varam Bioenergy Pvt. Ltd. – NCLT Hyderabad Bench

The Adjudicating Authority held that Section 53(1) of IBC does not recognize any inter se ranking of charges among financial creditors existing before initiation of CIRP for distribution of sale proceeds under liquidation. Section 53(2) also further clarifies that liquidator shall dis regard any contractual arrangement between recipient under Sub-Section 53(1) with equal ranking if disrupting the order of priority. Also, Section 53(1) very clearly defines the classes and order of water fall mechanism and has no scope for adding other sub-classes.

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