TaxTMI 
TaxTMI 
2022 (1) TMI 214
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....d 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 Company Appeal (AT) (Insolvency) No. 470 of 2021 3 issued not....
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....f 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 the claim of the Appellant. Section 77 sub-section (3) of the Companies Act,....
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....itor 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 contained in the Chapter VI, "Registration of Charges". Section 77, sub-section (1), (3) and (4) read as: "77. Duty to register charges, etc.- (....
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....ation 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 was classified as 'unsecured creditor'. Section 60 sub-section (5) empowers the Adjudicating Authority to entertain or dispose of any Application by or against the corporate debtor or corporat....
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....n 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-section (3) of Section 77 was also present in earlier Companies Act and similar provision came for consideration before different High Courts as well as Hon'ble Supreme Court, which we shall notice hereinafter. 21. Section 109....
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....f 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, the benefit of the security in so far as the applicant company is concerned is entirely the creature of the order of Roy Chowdhury J. dated August 1, 1978. This can, in my view, by no stretch of imagination, be called a charge created "by a compan....
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....ll, 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 Hon'ble Supreme Court also approved the judgment of Bombay High Court in Suryakant natvarlal Surati v. kamani Bros. Ltd. (1985) 58 Comp Cas 121, where Section 125 of the Companies Act was held to be inapplicable. In paragraph 18-19, following was laid down: "18. In....
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.... 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 Tribunal has allowed the O.A. No.274 of 2016 filed by the Appellant under the provisions of Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Debt Recovery Tribunal passed the following order on 26th April, 2017 "ORDER 1) I hereby allow thi....
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....s '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, as the 'Security Interest' was neither registered with the 'Information Utility'; nor under Section 125 of the Companies Act, 1956/Section 77 of the Companies Act, 2013; no Application was preferred under Section 87 of the Companies Act, 2013; 'Charge' was not registered in the Securitisation Asset Reconstructio....