Resolution Plan approval upheld as appellant fails to prove secured creditor status under Section 3(31) IBC

The NCLAT dismissed an appeal challenging a Resolution Plan approval. The Appellant claimed to be a secured creditor but the Resolution Professional classified them as unsecured. The NCLAT held that under Section 3(31) of IBC, no transaction creating security interest in Corporate Debtor's assets in favor of Appellant was established. Mortgages referenced in sanction letters were by guarantors, not Corporate Debtor's assets. The NCLAT also rejected challenges regarding timeline extensions, finding the Adjudicating Authority properly approved the Resolution Plan within prescribed timelines without procedural infirmities.

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Issues Involved:
1. Whether the appellant is a secured creditor of the Corporate Debtor.
2. Whether the decision of the Resolution Professional (RP) declaring the appellant as an unsecured creditor is in accordance with law.
3. Whether the approval of the Resolution Plan after the expiry of the Corporate Insolvency Resolution Process (CIRP) period is valid.

Issue 1: Secured Creditor Status
The appellant, a financial creditor, contended that it should be classified as a secured creditor based on the sanctioned mortgage overdraft facility granted to the Corporate Debtor by letters dated 04.11.2011 and 17.01.2013. The RP and the Adjudicating Authority did not recognize the appellant as a secured creditor due to the absence of registered charges u/s 77 of the Companies Act, 2013. The Sanction Letters referred to mortgages by guarantors and not the Corporate Debtor's assets. The appellant's reliance on a letter of Lien and Set-off dated 04.11.2011 was also deemed insufficient to establish a security interest on the Corporate Debtor's assets.

Issue 2: Decision of the RP
The RP's decision to classify the appellant as an unsecured creditor was upheld. The Tribunal noted that the appellant failed to provide any documents proving the creation of security interest in the Corporate Debtor's assets. The Tribunal referenced Section 3(31) of the Insolvency and Bankruptcy Code (IBC), which defines "security interest" and concluded that no transaction securing payment or performance of an obligation was established by the appellant.

Issue 3: Approval of Resolution Plan Post-CIRP Period
The appellant argued that the approval of the Resolution Plan after the expiry of the CIRP period on 13.08.2023 was invalid. However, the Tribunal noted that the RP had filed an application for the exclusion of 23 days from the CIRP period on 11.08.2023, which was acknowledged by the Adjudicating Authority. The Resolution Plan was approved on 23.08.2023, and the Tribunal found no error in this approval, considering the exclusion application was pending and admissible.

Conclusion:
The Tribunal dismissed the appeal, affirming the RP's decision to classify the appellant as an unsecured creditor and validating the approval of the Resolution Plan despite the CIRP period concerns. The appeal was dismissed with no order as to costs.

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