Tribunal affirms MSTC as secured creditor; faults IRP & RP for asset control lapses

The Tribunal upheld MSTC Limited as a secured operational creditor based on valid pledge agreements, recognizing its security interest in the pledged goods. It held the Interim Resolution Professional (IRP) and Resolution Professional (RP) responsible for inadequate asset control, leading to missing stock, impacting MSTC's claim. Despite non-registration under Section 77 of the Companies Act, 2013, the Tribunal affirmed MSTC's secured creditor status, dismissing the appeal and emphasizing the IRP and RP's asset management duties.

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Issues Involved:
1. Whether MSTC Limited (MSTC) should be recognized as a secured operational creditor.
2. The validity and implications of the pledge agreements between MSTC and the Corporate Debtor.
3. The responsibilities of the Interim Resolution Professional (IRP) and Resolution Professional (RP) regarding the control and custody of assets.
4. The impact of the missing stock on the claims of MSTC.
5. The relevance of Section 77 of the Companies Act, 2013 in determining secured creditor status.

Issue-wise Detailed Analysis:

1. Recognition of MSTC as a Secured Operational Creditor:
The Adjudicating Authority treated MSTC as an operational creditor with security interest, based on the pledge agreements. The Tribunal upheld this, noting that if a security interest is created or exists in favor of an operational creditor, such operational creditor would be considered a secured creditor. The Tribunal found that MSTC had security interest in the pledged goods supplied, thus recognizing MSTC as a secured creditor.

2. Validity and Implications of Pledge Agreements:
The Tribunal examined the agreements between MSTC and the Corporate Debtor, including the tripartite agreement involving FSNL as the custodian of the pledged stock. The agreements stipulated that goods procured by MSTC were to be stored at the Corporate Debtor’s premises under FSNL's custody and released on a cash and carry basis. The Tribunal noted that these agreements created a valid pledge, giving MSTC a security interest in the goods.

3. Responsibilities of IRP and RP Regarding Control and Custody of Assets:
The Tribunal emphasized the duties of the IRP and RP under Sections 18(1)(f) and 25(1) of the Insolvency and Bankruptcy Code (IBC) to take immediate custody and control of all assets of the Corporate Debtor. The Tribunal found that the IRP and RP failed to conduct a proper physical verification of the stocks, which led to the disappearance of substantial quantities of pledged goods. The Tribunal held the IRP and RP responsible for not securing the assets adequately.

4. Impact of Missing Stock on MSTC's Claims:
The Tribunal considered the two inspection reports, one conducted on 29th March 2018 and another on 3rd May 2018, which showed a significant reduction in the stock of Steam Coal and Steel Billets. The Tribunal concluded that the missing stock, which was under the control of the IRP and RP, could not be blamed on MSTC. The Tribunal held that the value of the missing goods should be accounted for, impacting MSTC's claim.

5. Relevance of Section 77 of the Companies Act, 2013:
The Appellant argued that MSTC could not be considered a secured creditor due to the non-registration of the charge under Section 77 of the Companies Act, 2013. However, the Tribunal noted that Section 77(4) provides that non-registration does not prejudice any contract or obligation for repayment of the money secured by a charge. The Tribunal found that the agreements and the Memorandum of Pledge created a valid security interest in favor of MSTC, despite the non-registration of the charge.

Conclusion:
The Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision to recognize MSTC as a secured operational creditor. The Tribunal emphasized the responsibilities of the IRP and RP in managing the assets and held them accountable for the missing stock. The Tribunal also clarified the applicability of Section 77 of the Companies Act, 2013, in the context of the pledge agreements, supporting MSTC's claim as a secured creditor.

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