Security Interest shall Stand Relinquished On Default Payment of Liquidation Costs as per 21A(3) of Liquidation Regulations: NCLAT

The NCLAT has ruled that security interest shall stand relinquished on default payment of liquidation costs under Section 21A(3) of the Liquidation Regulations. The case concerns a default in payment of liquidation costs during the liquidation process of a company. The NCLAT clarified that if the liquidation costs are not paid, the security interest held by creditors will be relinquished, making them ineligible for priority claims during liquidation proceedings. This ruling emphasizes the strict compliance required for creditors during liquidation, ensuring that all necessary payments are made for the process to proceed smoothly. The decision reinforces the legal framework surrounding creditor rights and liquidation costs, promoting fairness and accountability in the insolvency process.