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Issues: Whether the appellant could be treated as a secured financial creditor in liquidation despite the absence of registration of charge under the Companies Act, and whether registration of hypothecation under the Motor Vehicles Act was sufficient to enforce the security interest against the liquidator.
Analysis: Section 52 of the Insolvency and Bankruptcy Code, 2016 permits a secured creditor in liquidation to realise security interest only if the existence of such security interest is proved in the manner recognised by the Code and the liquidation regulations. Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016 recognises proof through records of an information utility, a certificate of registration of charge issued by the Registrar of Companies, or proof of registration with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India. The security claimed here was not shown to be supported by any of these modes. Section 77(3) of the Companies Act, 2013 makes clear that no charge created by a company is to be taken into account by the liquidator or any other creditor unless it is duly registered and a certificate of registration is issued. The appellant did not avail the statutory mechanism for registration of charge, including the remedial route under Section 78 of the Companies Act, 2013. Registration of hypothecation entry under Section 51 of the Motor Vehicles Act, 1988 was held to be only an entry in the certificate of registration and not a substitute for the statutory registration of charge required for recognition of security interest in liquidation.
Conclusion: The appellant was not entitled to be treated as a secured financial creditor, and the claim could not be enforced as a security interest against the liquidator.
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