TaxTMI 
TaxTMI 
2024 (4) TMI 727
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....ppeal has been filed. 2. Brief facts necessary to be noticed for deciding the Appeal are: (i) Punjab & Maharashtra Co-operative Bank Ltd. (erstwhile Lender/ "PMC Bank") sanctioned mortgage overdraft facility to the Corporate Debtor vide Sanction letter dated 04.11.2011 and 17.01.2013. Various documents creating security interest in favour of the PMC Bank was executed including mortgage of immovable property situated at Village Thrikkakara, Tulka Kannyanur, district Ernakulam in the name of Blue Star Realtors Pvt. Ltd. and mortgage of land situated at Village Deewannmn and Chulne, Taluka Vasai, District Thane of Mr. Rakesh Kumar Wadhawan. (ii) The Corporate Debtor being unable to repay the overdraft amount, the account was declared as Non-Performing Asset ('NPA'). (iii) The Ministry of Finance vidts its Gazette Notification amalgamated PMC Bank with the Appellant. (iv) The Adjudicating Authority vide order dated 15.02.2023 initiated Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor. (v) In pursuance to the publication made by the Resolution Professional ("RP"), Appellant field its claim on 03.03.2023. In the List of Creditors published by IRP, ....
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.... appearing for the Appellant; Shri Arun Kathpalia, learned Senior Counsel appearing for RP; and Shri Aman Mali, learned Counsel appearing for Respondent No.2. 4. The learned Counsel for the Appellant challenging the order passed by the Adjudicating Authority submits that Appellant being secured creditor, approval of the Resolution Plan is in contravention of Section 30, sub-section (2) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC"). It is further submitted that CIRP 180 days of period got completed on 13.08.2023, whereas the Plan was approved on 23.08.2023 with 79.61% vote share, in which Appellant has abstained. The period of CIRP having come to an end on 13.08.2023, the approval of the Plan after expiry of the CIRP period is contrary to the provisions of the IBC and deserved to be set aside on this ground alone. The Appellant is secured Financial Creditor of the Corporate Debtor and the RP without considering the scheme of the IBC has raised objection that there is no registration of charge under Section 77 of the Companies Act, 2013 filed by the Appellant and the Appellant cannot be treated as secured creditor. It is submitted that the Adjudi....
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....tiation of CIRP and after the Appellant having declared as unsecured creditor, the Appellant took steps for filing CHG-1 Form with Registrar of Companies on 26.10.2023, clearly indicates that the Appellant was well aware that he is not a secured creditor. The Appellant could not have created charge over book debts of the Corporate Debtor in CERSAI portal after initiation of CIRP, which does not in any manner help the Appellant. In pursuance of the order of the Adjudicating Authority dated 08.01.2024, the RP reverified the claim of the Appellant and has come to the opinion that there are no document to prove creation of any security interest in favour of the Appellant. Hence, the Appellant was declared as unsecured creditor by letter dated 30.01.2024. Thus, the order dated 08.01.2024 was fully complied with and the Appellant having been declared unsecured creditor, approval of Resolution Plan, treating the Appellant as unsecured creditor does not suffer from any error. It is submitted that in any view of the matter, the Appellant has failed to prove that any security interest was created in the assets of the Corporate Debtor in favour of the PMC Bank. Hence, no error has been commit....
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....ent On Demand/ Annual renewal Penal Interest 2% on overdrawn Amount Inspection Yearly Sureties Mr. Rakesh Kumar Wadhawan SUBJECT TO COMPLIANCE OF FOLLOWING TERMS & CONDITIONS:- 1. All Terms and Conditions to be observed and documents to be submitted 2. Conditions for Mortgage of Property: * Mortgage of property to be put through as per Bank's procedure and requirement. * Our Bank's charge to be noted in Recover of Right (7/**** * All Original Title deeds pertaining to the said property should be submitted such as Chain of agreements, July transferred in name of Owners' name, registration and stamp duty paid receipts etc. * Inspection of property will be done by Bank official and cost for the same to be borne by applicant. * To ensure that all conditions stated in legal opinion report obtained for the said property for sustaining a clear and marketable title on the property are compiled with. * Bank will register mortgage charge at Central Registry established under SARFAESI Act 2002. For creation and for any subsequent modification of security interest in favour of Bank, charges to be borne by the borrower. 3. ....
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.... invalidate such insurance during the currency of the advance. 12. In case of default in repayment of the Principle amount or interest amount thereon or any of the agreed Principle/ Interest or both of the limit on due date/s by the borrower, the Bank and/ or the RBI will have an unqualified right to disclose or publish the borrower name or the name of borrower company/ unit and its directors/ partners/ proprietors as defaulter in such manner and through such medium as the Bank or the name of the borrower company/ unit and its directors/ partner/ proprietors as defaulter in such manner and through such medium as the Bank or RBI in their absolute discretion may think fit. Acknowledgment: Please return to us the duplicate copy of this letter duly signed by the Director in Token of the acceptance of the terms and conditions stipulated herein above. Yours faithfully, Sd/- I/We accept the above Terms and conditions M/s. Privilege Industries Limited. For PRIVILEGE INDUSTRIES LTD. Sd/- Director Authorised Signatory Sd/- Surety" 9. The above Sanction Letter itself refers to security by mortgage of immovable property and mortgage of land by M/s Blue Star R....
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....h as Chain of agreements, duly transferred in name of Owners' name, registration and stamp duty paid *** etc. e. Property owner should give an undertaking to our bank that during the pendency of the limit they will not deal with, dispose off, or part with or create any third party interest or induct any third party in the said property until an intimation is given by the Bank to that effect. Further Company should incorporate the clause for crediting the ***********(not readable)*** 3. Stamp & document charges as per State Stamp Act will have to be borne by you. 4. The rate of interest applicable for the sanctioned mortgage overdraft limit is 16.00% p.a. Floating rate (Monthly rest) or as per RBI directives from time to time. 5. Incidental & Service charges of Rs.1,00,000/- + service tax & Educess @ 12.30% should be borne by borrower; ***** ***** Valuation charges and any other related charges in respect of the said properties. b. That the funds will not be utilized for speculative purposes. c. That cheque will not be utilized for speculative purposes. d. That the account will be operated within the sanctioned limit. Acknowledgement: Please return t....
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....e Appellant, during his submissions has referred to a letter given by Corporate Debtor dated 04.11.2011, which is claimed to be letter of Lien and Set-off. According to the Appellant, by the said letter, security shall be created on the debt of the Corporate Debtor. The letter is also part of the record, which is as follows: To, The Manager, Punjab & Maharashtra Co-op Bank Ltd. (Multi -State Scheduled Bank) ___ Branch Dear Sir, In consideration of your from time to time making advance to me/us and/or giving me/us banking accommodation and facilities by way of loan/overdraft/ cash credit, I/We agree with you as follows: 1. That you may hold all securities to me/us (which may now be in your possession or which may any time thereafter come into your possession) and the proceeds thereof respectively not only for the specific advance made thereon but also as collateral security for any others monies now due or which may at any time be due from me/us to you, whether singly or jointly with another or others. 2. That in addition to any general lien similar right to which you as bankers may be entitled by taw, you may at any time and without notice to me/us combine....
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....such additional fees as may be prescribed: Provided further that if registration is not made within a period of three hundred days of such creation, the company shall seek extension of time in accordance with section 87: Provided also that any subsequent registration of a charge shall not prejudice any right acquired in respect of any property before the charge is actually registered. (2) Where a charge is registered with the Registrar under subsection (1), he shall issue a certificate of registration of such charge in such form and in such manner as may be prescribed to the company and, as the case may be, to the person in whose favour the charge is created. (3) Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration of such charge is given by the Registrar under subsection (2). (4) Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of the money secured by a charge." 15. The learned Counsel for the Appellant submits that d....
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....ensee shall ensure that this is entered in an agreement with new applicant."" 17. In paragraphs 45 and 46 notes the creation of charge over the assets, which are as follows: "45. As previously stated above, the corporate debtor entered into an agreement with Pvvnl for supply of electricity on 11-2-2010 which provided that outstanding electricity dues would constitute a "charge" on its assets. [ Clause 5 of the agreement, extracted at para 2.] This was in accordance with Clause 4.3(f)(iv) of the 2005 Code. Clause 8 of the agreement [ Clause 8 of the agreement read as follows: "This agreement shall be governed by the Electricity Act, 2003 with all its amendments, various other laws of India for the time being in force, but not limited to various regulations of UPERC, as applicable to the State of U.P. and shall be subject to the jurisdiction of the Court subordinate to the High Court of Judicature at Allahabad."] also mentioned that the parties would be governed by the 2003 Act. 46. A recent ruling of this Court in K.C. Ninan v. Kerala SEB [K.C. Ninan v. Kerala SEB, (2023) 14 SCC 431 : 2023 SCC OnLine SC 663] examined the circumstances in which such a "charge" could be constit....
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.... fees and in such manner as may be prescribed, with the Registrar within thirty days of its creation : Provided that the Registrar may, on an application by the company, allow such registration to be made within a period of three hundred days of such creation on payment of such additional fees as may be prescribed: Provided further that if registration is not made within a period of three hundred days of such creation, the company shall seek extension of time in accordance with Section 87: Provided also that any subsequent registration of a charge shall not prejudice any right acquired in respect of any property before the charge is actually registered. (2) Where a charge is registered with the Registrar under subsection (1), he shall issue a certificate of registration of such charge in such form and in such manner as may be prescribed to the company and, as the case may be, to the person in whose favour the charge is created. (3) Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator or any other creditor unless it is duly registered under sub-section (1) and a ce....
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.... to property, created in favour of, or provided for a secured creditor by a "transaction which secures payment or performance of any obligation and includes mortgage, charge, hypothecation, assignment and encumbrances or any other agreement or arrangement securing payment or performance of any obligation of any person", no transaction has been placed on record, under which a security interest is created in favour of the Corporate Debtor with regard to assets of the Corporate Debtor. As noted above, mortgages of immovable property and non-agricultural land were mortgages, which were referred in Sanction Letter, were mortgages by Guarantors and no assets of the Corporate Debtor was mortgaged to the Appellant. The Sanction Letter cannot be said to be a transaction, which secures payment or performance of an obligation. 21. The learned Counsel for the Appellant has also referred the judgment of the Hon'ble Supreme Court in State Tax Officer vs. Rainbow Papers Limited - (2023) 9 SCC 545. In the above case, Hon'ble Supreme Court was considering Section 48 of the Gujarat Value Added Tax Act, 2003, which has been quoted in paragraph 2 of the judgment, which is as follows: "2. The short ....
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....icating Authority in the impugned order has noted Form-H, where at Item No.15, the RP has stated following : Sl. No. Particulars Description 1 Name of CD Privilege Industries Limited 2 Date of Initiation of CIRP February 15, 2023 3 Date of Appointment of IRP February 15, 2023 (order reeived on February 20, 2023) 4 Date of Publication of Public Announcement February 22, 2023 5 Date of Constitution of CoC March 14, 2023 6 Date of First Meeting of CoC March 20, 2023 7 Date of Appointment of RP March 31, 2023 (order received on April 18, 2023) 8 Date of Appointment of Registered Valuers April 28, 2023 9 Date of Issue of Invitation for EoI May 6, 2023 10 Date of Final List of Eligible Prospective Resolution Applicants May 29, 2023 11 Date of Invitation of Resolution Plan May 6, 2023; May 25, 2023; June 28, 2023; July 5, 2023 12 Last Date of Submission of Resolution Plan July 21, 2023 13 Date of Approval of Resolution Plan by CoC August 23, 2023 14 Date of Filing of Resolution Professional with Adjudicating Authority August 30, 2023 15 Date of Expiry of 180 days of CIRP September 4, 2023 (consi....