TaxTMI 
TaxTMI 
2022 (1) TMI 214
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....pyard Limited - Corporate Debtor had obtained financial assistance from the Appellant vide sanction letter dated 28th March, 2013. A Medium Term Loan of Rs. 90,00,00,000 (Rupees Ninety Crores Only) was sanctioned by the Appellant to the Corporate Debtor. The Loan Agreement was entered between the Corporate Debtor and the Appellant. Security was provided by the Corporate Debtor for the loan by mortgage and hypothecation. The Loan Agreement was executed on 30th March, 2013. Clause 3 of Sanction Letter as modified on April 5, 2013 provided as follows: "(3) Hypothecation of receivables: An exclusive charge of entire Receivables of subsidy under the Shipbuilding Subsidy Scheme to be received from the Ministry of Shipping Government of India to be hypothecated in a separate 'No Lien Escrow Account' bearing no.00600350093444 with HDFC Bank (the escrow agent), in favour of SICOM Ltd." (ii) The Deed of Hypothecation was also executed on 11th April, 2013, creating first exclusive charge for the entire receivables under Shipbuilding Subsidy Scheme. (iii) On 31st October, 2013, the account of Corporate Debtor was classified as Non-Performing Asset (NPA). The Appellant C....
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....document pertaining to ROC charge/ registration certificate in support of its security interest as required by Section 77 of Companies Act, 2013. 3. We have heard Shri Arun Kathpalia, learned Senior Counsel for the Appellant and Shri Nakul Dewan, learned Senior Counsel for the Respondent (Liquidator). 4. Shri Kathpalia submitted that the Adjudicating Authority committed error in rejecting the Application of the Appellant filed under Section 60 Company Appeal (AT) (Insolvency) No. 470 of 2021 5 sub-section (5) of the IB Code and not under Section 42, hence limitation provided for filing an Appeal was not applicable. The Appellant was aggrieved with regard to its categorization as 'unsecured creditor', which was fully covered by Section 60 sub-section (5), relating to question of priorities. It is further submitted that Section 77 of the Companies Act, 2013 was not applicable in the present case in view of the fact that there was a Decree in favour of the Appellant by Debt Recovery Tribunal. The claim of the Appellant over shipping subsidies arises and accrues from the DRT judgment. The definition of 'security interest' under Section 3(31) of the Code is wide enough to include ....
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....n proceedings'. Section 52 sub-section (1) is to the following effect: "52. Secured creditor in liquidation proceedings. - (1) A secured creditor in the liquidation proceedings may- (a) relinquish its security interest to the liquidation estate and receive proceeds from the sale of assets by the liquidator in the manner specified in section 53; or (b) realise its security interest in the manner specified in this section." 9. Regulation 21 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 provides for 'Proving security interest' in following words: "21. Proving security interest. The existence of a security interest may be proved by a secured creditor on the basis of- (a) the records available in an information utility, if any; (b) certificate of registration of charge issued by the Registrar of Companies; or (c) proof of registration of charge with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India." 10. Another provision which needs to be noticed for deciding this Appeal is Section 77 of the Companies Act, 2013, which is c....
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....consent regarding relinquishment of security interest in the assets of the Corporate Debtor, which consent was given by the Appellant. The Appellant at different stages of the liquidation has kept on repeating his claim as 'secured creditor' and has also referred to the Recovery Certificate issued by the DRT. On 28th December, 2020, when Liquidator addressed an email to all the stakeholders of the Corporate Debtor informing them about the distribution of amounts realized out of proceeds of the sale of assets of the Corporate Debtor, an Application was filed by the Appellant. 14. Section 42 of the IB Code, provides for an Appeal against the decision of the Liquidator, which is to the following effect: "42. Appeal against the decision of liquidator. - A creditor may appeal to the Adjudicating Authority Company Appeal (AT) (Insolvency) No. 470 of 2021 10 against the decision of the liquidator accepting or rejecting the claims within fourteen days of the receipt of such decision." 15. The present was not a case where the claim of the Appellant of dues was rejected by the Liquidator altogether. The claim of the Appellant claiming an amount was accepted, but the Appellant ....
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....Application filed under Section 60 subsection (5). 18. We are thus of the considered opinion that the Application filed by the Appellant under Section 60 sub-section (5) was fully entertainable and it could not have been rejected on the ground that it has not been filed within 14 days as provided under Section 42. Section 42 was clearly inapplicable, since no Appeal was filed by the Appellant. The Adjudicating Authority thus, committed error in rejecting the Application as barred by time. 19. Now we come to the second reason given by the Adjudicating Authority in rejecting the Application, that is, non-registration of charge under Section 77 of the Companies Act, 2013. 20. The Companies Act, 1913, the Companies Act, 1956 and the Companies Act, 2013, all contain provisions pertaining to registration of charge. Sub-section (3) of Section 77 of Companies Act, 2013 begins with non-obstante clause providing that no charge created by a company shall be taken into account by the Liquidator unless it is duly registered under sub-section (1) of Section 77 and certificate of registration of such charge is given by the Registrar under sub-section (2). The scheme as contained in sub-s....
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....ished in pursuant of order of the High Court, which cannot be said to be a charge created by the Company, hence Section 125 of the Companies Act was not applicable. In paragraph 19, following was held: "19. The fallacy in the argument of Mr. Mookherjee, in my view, is that after the passing of the order of S.K. Roy Chowdhury J. (as his Lordship then was), dated August 1, 1978, the position with regard to the security assumed a completely different complexion. By that order, as I have already indicated, the claim of the petitioningcreditor was settled at a certain amount. A mode for payment of that money was indicated. Then there is a default clause. That default clause contained a twin option either of initiating a fresh winding up proceeding or of executing the balance as a decree of court. It is only in the event of an option being exercised in favour of the last contingency, viz., in the event of the execution as a decree of court, that the security which was furnished pursuant to the order of R.M. Dutta J. would be a security for the applicant company for the satisfaction of the decree and would be the security for the decree until the decretal dues were paid. Thus, th....
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....uch sale shall be applied in payment of the amount due under the decree, and the balance if any, shall be paid to the 1st defendant and that if the money realised by the sale of the plaint schedule property is insufficient for payment of the decree debt in full, the plaintiff shall be at liberty to apply for a personal decree against Defendants 2 to 5 for the balance and that the defendants will suffer cost hitherto incurred."" After noticing the contents of the Decree, Hon'ble Supreme Court observed that right of the Company to deposit the decree amount was available till 28th August, 1982 and thereafter the matter had passed from the domain of the contract to that of judgment. In paragraph 16, following has been laid down: 16. From the above discussion, it follows that the right of the respondents including the Company represented by the Official Liquidator to deposit the decree amount was available till 28-8-1982. In other words, the right to recover the amounts pursuant to the contract-creating charge, even under the terms of the decree was available till the said date and thereafter "the matter had passed from the domain of the contract to that of judgment". The....
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....nt of decree amount the sale order would take effect. In this case, admittedly the decree amount was not paid before 28-8-1982, as such the matter had passed from the domain of contract to the realm of the judgment. The Official Liquidator filed application on 21-3-1983 seeking to declare the decree as void. By that date, what was operative in the decree was not a mere unregistered charge but an order for sale of mortgaged property for realisation of decree amount. The preliminary decree cannot therefore be said to be void and inoperative." The ratio of the above judgments of the Hon'ble Apex Court is that when charge though unregistered forms part of a decree, in executing the Decree, the plea of charge not being registered does not hold any water. 24. We may also refer to another judgment of the Hon'ble Supreme Court, that is, (2006) 10 SCC 709 - Kerala State Financial Enterprises Ltd. vs. Official Liquidator, High Court of Kerala, where the Hon'ble Supreme Court referring to the judgment of Indian Bank (supra) held that Section 125 of the Companies Act may not be applicable in a case where decree has already been passed. 25. The present is a case where Debt Recovery Tri....
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.... documentary evidence on record it is clear that no 'Charge' has been registered under the provisions of Section 77(1) of the Companies Act, 2013, in relation to the Subject Property. The Liquidator has rightly referred to Regulation 21 of IBBI (Liquidation Process) Regulation, 2016 and observed that the Appellants 'Claim' was not supported by any evidence as prescribed under the said Regulation. It is also an admitted fact that the 'Charge' was not registered under Central Registry of Securitization Asset Reconstruction and Security Interest of India. We are keeping the ratio of the aforenoted Judgements of the Hon'ble Supreme Court and Section 52(3) of the Code read with Regulation 21(c) of the (Liquidation Process), Regulations, 2016, in view. We are of the considered opinion that the contentions of the Learned Counsel appearing for the Appellant that Registration with Motor Vehicle Authority under Section 51 of the Motor Vehicles Act, 1988 would suffice, cannot be sustained. Section 51(1) of the MV Act, 1988 only provides for "entry" in the Certificate of Registration regarding the agreement. The Section provides how to deal with the entry. To reiterate, in the instant case....
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.... a judgment of the Bombay High Court in (2016) SCC OnLine Bom 7005 - Fine Platinum (India) Ltd. & Anr. vs. Indusland Bank Ltd. & Ors., wherein Bombay High Court had occasion to consider the provisions of Recovery of Debt Due to Banks and Financial Institutions, 1993 and held that recovery certificate issued under the 1993 Act is a formal expression of the adjudication. In paragraph 30, following has been laid down: "30. .......Considering the scheme of the RDDBI Act, more precisely the provisions of Section 19 and Rule 12(5) of the Rules of 1993, we are of the view that recovery certificate is akin to decree in a suit....." 31. Hon'ble Supreme Court in Sesh Nath Singh v. Baidyabati Sheoraphull Co-operative Bank Ltd. (2021) SCC OnLine SC 244 had occasion to consider the nature of proceeding under the SARFAESI Act, 2002. The Hon'ble Supreme Court in the said case held that proceedings under SARFAESI Act, 2002 are civil proceedings in a Court. 32. The judgment of the Hon'ble Supreme Court in Indian Bank (supra), thus, fully support the submissions of the learned Counsel for the Appellant. There being adjudicatory order of the Debt Recovery Tribunal in favour of the Appe....