TaxTMI 
TaxTMI 
2025 (7) TMI 289
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....sed in IA No. 2620/2023 in CP (IB) No. 2043/ MB/ C-II/ 2018 by National Company Law Tribunal, Mumbai Bench (Court-II) ("Adjudicating Authority") which classified the Appellant as Unsecured Creditors instead of Secured Financial Creditor. 2. Shorn of unnecessary details, it is noted that the Corporate Insolvency Resolution Process ('CIRP') was initiated against the Corporate Debtor by the Adjudicating Authority vide order dated 16.03.2022 subsequent to which the IRP published Form-A on 24.03.2022. The Appellant filed the claims in Form C with IRP on 04.04.2022 which were admitted in full by Resolution Professional without indicating whether these are secured or unsecured. 3. The Appellant also submitted that he received final Resolution Plan dated 16.12.2022 from the Respondent vide an email dated 20.12.2022 when the Appellant came to know that he has been classified as Unsecured Creditor instead of Secured Financial Creditor. Aggrieved by the same, the Appellant filed an IA but by the time, the Corporate Debtor had moved into liquidation proceeding vide order dated 19.05.2023 passed by the Adjudicating Authority. 4. The Appellant subsequently filed an IA No. 2620/2023 in CP (IB)....
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....It is the case of the Respondent that the Appellant was rightly classified as Unsecured Financial Creditor since the charge was not registered with the RoC under Section 77 of the Companies Act, 2013 and it was only registered with the CERSAI. The Respondent highlighted that Section 77 (3) of the Companies Act, 2013 starts with non-obstante clause which reads "notwithstanding anything contained in any other law for the time being in force", as such the Companies Act, 2013 prevailed over the Code and its regulations. 12. The Respondent emphasized that he was duty bound to follow the provision of Section 77 (3) of the Companies Act, 2013 as the word 'shall' has been used which gives pre-eminence and pre-dominance over provisions of the Code and Liquidation Regulations. 13. It is further the case of the Respondent that Section 77 of the Companies Act, 2013 is a specific provision which deals with the particular situation and therefore in any event is always over-riding the special laws like the Code. The Respondent also pleaded that Section 77(1) and (3) of the Companies Act, 2013 are without any ambiguity and overrides Regulation 21 of the IBBI (Liquidation Process) Regulations, 20....
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.... have to give way to the provisions of the Parent Act i.e. Section 255 of the Code, which has given more weightage to Section 77 (3) of the Companies Act, 2013. 17. The Respondent tried to elaborate the difference between the role of CERSAI and ROC and stated that with ROC, instrument creating charge is also registered and a Certificate is issued whereas, with CERSAI only details of the Charge are uploaded, and no document/instrument is provided. The Respondent stated that provisions relating to CERSAI, incorporated in Section 20 (4) of the SARFAESI Act, 2002 is only in addition to and not in derogation to the provisions of the Companies Act, 2013 and any other law, and it shall not affect the priority of charges or validity thereof under those Acts or laws. 18. In the opinion of the Respondent the Committee of Creditors ('CoC') exercising its commercial wisdom has taken a conscious decision that Appellant cannot be treated as Secured Financial Creditor and same should be respected. 19. Concluding his pleadings, the Respondent requested this Appellate Tribunal to dismiss the appeal. Findings 20. We have heard the argument of all the concerned parties and perused the record mad....
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....security interest and permit the secured creditor to realise only such security interest, the existence of which may be proved either- (a) by the records of such security interest maintained by an information utility; or (b) by such other means as may be specified by the Board. (4) A secured creditor may enforce, realise, settle, compromise or deal with the secured assets in accordance with such law as applicable to the security interest being realised and to the secured creditor and apply the proceeds to recover the debts due to it. (5) If in the course of realising a secured asset, any secured creditor faces resistance from the corporate debtor or any person connected therewith in taking possession of, selling or otherwise disposing of the security, the secured creditor may make an application to the Adjudicating Authority to facilitate the secured creditor to realise such security interest in accordance with law for the time being in force. (6) The Adjudicating Authority, on the receipt of an application from a secured creditor under sub- section (5) may pass such order as may be necessary to permit a secured creditor to realise security interest in accorda....
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.... 15.12.2016) (Emphasis Supplied) 27. We look into Section 77 of the Companies Act, 2013 which reads as under:- "Section 77 in The Companies Act, 2013 77. Duty to register charges, etc.-(1) It shall be the duty of every company creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the particulars of the charge signed by the company and the charge holder together with the instruments, if any, creating such charge in such form, on payment of such 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- (a) in case of charges created before the commencement of the Companies (Amendment) Act, 2019, within a period of three hundred days of such creation; or (b) in case of charges created on or after the commencement of the Companies (Amendment) Act, 2019, within a period of sixty days of such creation, on payment of such additional fees as may be prescribed: Provided further that if the registration is not made wit....
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....by a charge." (Emphasis Supplied) 28. Now, we shall go into Section 20 of SARFAESI Act, 2002 which reads as under :- "Section 20: Central Registry. (SARFAESI Act, 2002) 20. (1) The Central Government may, by notification, set up or cause to be set up from such date as it may specify in such notification, a registry to be known as the Central Registry with its own seal for the purposes of registration of transaction of securitisation and reconstruction of financial assets and creation of security interest under this Act. (2) The head office of the Central Registry shall be at such place as the Central Government may specify and for the purpose of facilitating registration of transactions referred to in sub-section (1), there may be established at such other places as the Central Government may think fit, branch offices of the Central Registry. (3) The Central Government may, by notification, define the territorial limits within which an office of the Central Registry may exercise its functions. (4) The provisions of this Act pertaining to the Central Registry shall be in addition to and not in derogation of any of the provisions contained in the Registration Act, 1908 (....
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....t, if any, that has been disbursed against the consideration for the time value of money and the Secured Financial Creditor is a financial creditor whose debt is secured by a charge on the assets of the corporate debtor. Being "secured" give creditors a higher priority in the event of insolvency or liquidation of the Corporate Debtor compared to unsecured creditors. 33. We also take into consideration that a charge is essentially a security interest created by a company on its assets (movable or immovable, tangible or intangible) in favour of a lender to secure a debt. It can be a mortgage, hypothecation, pledge, etc. We have already noted that RoC is responsible for registering charges created by the companies and maintaining records related to them, including charges created by companies. We consciously note that Section 77 of the Companies Act, 2013 mandates every company creating a charge on its property or assets (whether in India or outside) to register the particulars of the charge and the instrument creating it with the RoC. The registration typically needs to be done within 30 days of the charge's creation, with provisions for extended periods subject to additional fe....
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....e Code vis-à-vis in the Companies Act, 2013. A "non-obstante clause" signifies that the provision it introduces will prevail over any other law that might be inconsistent with it. 39. We observe that Section 77(3) of the Companies Act, 2013 begins with a non-obstante clause, i.e. "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 a liquidator or any other creditor unless it is duly registered under sub- section (1) and a certificate of registration is issued by the Registrar." We need to understand that while CERSAI registration is crucial for lenders' for exercising rights under SARFAESI Act, 2002 and it may not relieve a company from its statutory obligation to register charges with the RoC under Section 77 of the Companies Act, 2013. For a financial creditor to claim the full benefits and priority of being a "Secured Financial Creditor" in CIRP or Liquidation process, registration of the charge with the RoC under Section 77 of the Companies Act, 2013, is generally considered indispensable. 40. On the other hand, we also observe that Section 255 of the Code is crucial becaus....
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....r harmonious construction and interpret laws harmoniously. Thus, there may exist the interplay between: * Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016 * Section 77 of the Companies Act, 2013 * Section 20 of SARFAESI Act, 2002 43. Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016 have been framed by the IBBI under the powers granted by the Code and provide the detailed procedural framework for the liquidation process. We note that Regulation 21 is relating to Proof of Claim by a Secured Creditor. This regulation deals with how a secured creditor submits its claim during liquidation. It requires a secured creditor to submit proof of their security interest, including evidence of its creation. 44. On the other hand, Section 77 of the Companies Act, 2013 mandates the registration of charges created by companies with the RoC and Section 77(3) stipulate that, "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 a liquidator or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration is issued by the Registrar."....