Funded interest account ruled as secured debt, official liquidator decision overturned

The court held that the funded interest account should be treated as secured debt as it represented interest accrued on term loans for which a charge had already been registered, negating the need for additional registration. The court overturned the official liquidator's decision and ruled in favor of the appellant, Andhra Pradesh State Financial Corporation, allowing the funded interest amount of Rs. 33,12,717 to be considered secured debt in relation to the funded interest loan account.

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Issues:
1. Official liquidator's rejection of appellant's claim as secured debt.

Analysis:
The case involved an appeal against the official liquidator's order rejecting the appellant's claim to treat a sum of Rs. 33,12,717 as secured debt. The appellant, Andhra Pradesh State Financial Corporation, had provided term loans to a company, which failed to repay within the stipulated time. The loans were rescheduled, and interest due was transferred to a funded interest account. The company was later directed to be wound up, and the official liquidator called for creditors' claims. The appellant filed its claim, which was partially treated as secured and unsecured debt by the official liquidator, leading to the appeal.

The main issue for adjudication was whether the funded interest account could be considered a separate loan account requiring notification to the Registrar of Companies under section 135 of the Companies Act, 1956. The appellant had registered a charge over the properties for the term loans provided, including the accrued interest transferred to the funded interest account. The court examined the charge register and concluded that the funded interest account represented interest accrued on the term loans, not a separate loan. As the charge already covered the principal amount and interest, no additional registration was necessary for the funded interest account. Therefore, the court held that the funded interest account should be treated as secured debt, overturning the official liquidator's decision.

In the judgment, the court emphasized that the funded interest account was merely interest due on the term loans for which a charge had already been registered. Since no fresh amount was advanced, and the charge covered both principal and interest, the court found no requirement to inform the Registrar of Companies about the funded interest account. Consequently, the court allowed the appeal, setting aside the official liquidator's order and ruling that the funded interest amount of Rs. 33,12,717 should be treated as secured debt in relation to the funded interest loan account.

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