TaxTMI 
TaxTMI 
2026 (8) TMI 1612
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....in CP (IB) No. 59 of 2019. Mr. Bijay Murmuria, who is the authorized Insolvency Professional of Sumedha Management Solutions Private Limited; Liquidator of Doshion Private Limited (Corporate Debtor), is the Respondent No.1 herein. Areion Finserve Private Limited, is the Respondent No.2 herein. IDBI Bank Limited is the Respondent No.3 herein. Bank of Baroda is the Respondent No.4 herein. Bank of Maharashtra is the Respondent No.5 herein. Mr. Ashit Dhirajlal Doshi, who was the erstwhile director of the Corporate Debtor and are presently directors of Appellant, is the Respondent No.6 herein. Mr. Rakshit Dhirajlal Doshi, who is the erstwhile director of the Corporate Debtor and are presently directors of Appellant, is the Respondent No.7 herein. Raj Radhe Finance Ltd. is the Respondent No.8 herein. 2. The Appellant submitted that the controversy involved in the present Appeal concerns the property bearing House No. 9, Sigma Corporate Park, Bodakdev, Ahmedabad (hereinafter referred to as the "Sigma-9 Property"), which has remained continuously mortgaged in favour of Bank of Maharashtra and its lawful assignees. The Appellant submitted that the Adjudicating Authority....
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....of the equitable mortgage came to be executed on 16.01.2013. The Appellant contended that this very transaction clearly establishes that Bank of Maharashtra continued to retain the first mortgage while merely consenting to the creation of a subordinate security interest in favour of the consortium lenders. At no point of time was Bank of Maharashtra divested of its existing security rights. 7. The Appellant further submitted that during the year 2014 the consortium lenders undertook a comprehensive restructuring of their respective credit facilities. Dena Bank, by sanction letter dated 12.09.2014, restructured and revised its financial assistance aggregating Rs. 87.77 Crores under fresh contractual terms and conditions. Similarly, IDBI Bank, by sanction letter dated 20.08.2014, sanctioned revised facilities aggregating Rs. 93.48 Crores under an altogether new set of contractual arrangements. The Appellant submitted that these restructuring exercises fundamentally altered the earlier lending arrangements and necessarily required fresh perfection of security interests in accordance with law. 8. The Appellant submitted that recognizing this legal position, the Corporate Debtor i....
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....cility as an independent event resulting in extinction of Bank of Maharashtra's priority. It was contended that the discharge of the earlier facility and execution of the fresh mortgage constituted one indivisible commercial restructuring transaction. The mortgage created on 20.03.2015 did not arise after an interruption of security but formed part of a continuous chain of secured transactions ensuring uninterrupted security in favour of Bank of Maharashtra. 13. The Appellant further submitted that immediately thereafter, by internal communication dated 06.04.2015, Bank of Maharashtra, Pune expressly instructed its Ahmedabad Branch not to cede any second charge over the Sigma-9 Property without obtaining prior approval from the competent authority. The Appellant contended that this contemporaneous internal correspondence assumes considerable significance since it unequivocally establishes that no fresh second pari passu charge was ever approved after restructuring of the consortium facilities. It was specifically submitted that no fresh Memorandum recording extension of equitable mortgage or tripartite agreement was ever executed after March 2015 in favour of the consortium ....
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....y the consortium banks and without consideration of the subsequent restructuring documents, the internal communications of Bank of Maharashtra or the absence of any fresh tripartite agreement after restructuring. It was further submitted that the Appellant was not a party to those proceedings and, therefore, such observations cannot bind the Appellant or determine its proprietary rights. 16. The Appellant further submitted that the Debts Recovery Tribunal, Ahmedabad, by its subsequent order dated 08.11.2019 in O.A. No. 282 of 2017, proceeded to hold that upon liquidation of the earlier loan advanced by Bank of Maharashtra, the consortium lenders automatically stepped into the shoes of the first charge holder and that any subsequent mortgage created in favour of Bank of Maharashtra would remain subordinate to the rights of the consortium banks. The Appellant submitted that the aforesaid findings were rendered on an erroneous factual premise and on account of suppression of material facts. The Debt Recovery Tribunal failed to appreciate that the earlier facility granted by Bank of Maharashtra was discharged simultaneously with the execution of a fresh registered mortgage dated 20.....
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....(OTS), it approached Respondent No. 2, Aerion Finserve Private Limited, seeking financial assistance for part funding of the settlement amount. Pursuant thereto, Respondent No. 2 issued a sanction letter dated 14.09.2023 sanctioning financial assistance of Rs. 7 Crores to the Appellant for facilitating payment of the OTS amount aggregating approximately Rs. 25 Crores, including delayed payment interest. 21. The Appellant submitted that shortly thereafter, by order dated 03.10.2023 passed in I.A. No. 769 of 2021, the Adjudicating Authority directed liquidation of the Corporate Debtor. Consequent upon the liquidation order, a public announcement in Form B came to be published on 11.10.2023 inviting claims from creditors and other stakeholders. The Appellant submitted that commencement of liquidation proceedings did not enlarge the liquidation estate nor did it confer jurisdiction upon the Liquidator to invalidate pre-existing registered mortgages or adjudicate competing proprietary rights amongst secured creditors. 22. The Appellant further submitted that on 17.10.2023, Respondent No. 2 duly registered its charge over the Sigma-9 Property with the Central Registry of Securitisa....
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....resh application. Subsequently, Respondent No. 2 assigned the debt together with the corresponding security interest to Raj Radhe Finance Limited by Assignment Agreement dated 02.05.2025. The Appellant submitted that upon execution of the said Assignment Agreement, Raj Radhe Finance Limited stepped into the shoes of the original secured creditor and became entitled to every proprietary, contractual and statutory right earlier vested in Bank of Maharashtra and thereafter in Aerion Finserve. 27. The Appellant submitted that the assignment transactions neither created any fresh mortgage nor altered the nature of the existing security interest. They merely transferred the rights of the original secured creditor to its lawful assignee in accordance with settled principles governing assignment of debts and actionable claims. Consequently, the validity and priority of the mortgage continued unaffected notwithstanding the subsequent assignments. 28. The Appellant submitted that after withdrawal of I.A. No. 275 of 2025, the Respondent No. 1/Liquidator instituted amended I.A. No. 440 of 2025 under Section 60(5) of the Code, read with Rule 11 of the National Company Law Tribunal Rules, ....
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....525 of 2026 seeking amendment of I.A. No. 440 of 2025 by incorporating an additional prayer directing Raj Radhe Finance Limited to hand over the original title deeds relating to the Sigma-9 Property. The Appellant contended that this amendment further enlarged the scope of the proceedings by seeking reliefs directly affecting ownership documents and proprietary interests, matters which lie completely outside the statutory powers conferred upon the Liquidator under Sections 35 and 36 of the Code. 32. The Appellant further submitted that the jurisdiction conferred under Section 60(5) of the Code is intended to facilitate effective conduct of the insolvency resolution and liquidation process. It is neither intended nor designed to substitute the jurisdiction of civil courts or other competent fora in matters involving adjudication of title or competing proprietary claims. 33. The Appellant contended that the Adjudicating Authority also failed to appreciate that the Liquidator merely functions as a statutory custodian of the assets of the Corporate Debtor. Under Sections 35 and 36 of the Code, the Liquidator is obligated to preserve, protect and realise the liquidation estate in ....
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....r declared subordinate merely on assumptions regarding the earlier lending arrangements. Equally, if the consortium lenders claimed continuation of a second pari passu charge after restructuring of their facilities, it was incumbent upon them to demonstrate compliance with the statutory requirements governing creation and registration of such charge. The Appellant submitted that the absence of any fresh registration or supporting security documentation after restructuring clearly demonstrates that no enforceable second pari passu charge survived in favour of the consortium lenders. 37. The Appellant further submitted that the Adjudicating Authority failed to appreciate the settled legal principle governing assignment of debts and securities. Upon execution of the Registered Assignment Deed dated 27.10.2023 by Bank of Maharashtra in favour of Aerion Finserve Private Limited, every proprietary, contractual and statutory right attached to the mortgage stood lawfully assigned. Subsequently, upon execution of the Assignment Agreement dated 02.05.2025 in favour of Raj Radhe Finance Limited, the assignee acquired all the rights, title and interest previously vested in the assignor. The....
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....uch fresh mortgage could never inherit the priority attached to the earlier discharged security. 42. The Respondent No. 1 submitted that Bank of Maharashtra subsequently assigned its debt in favour of Areion Finserve, which in turn assigned the same to Raj Radhe Finance Limited. However, neither Bank of Maharashtra nor its assignees lodged their claim before the Liquidator within the prescribed time nor exercised the statutory option available under Section 52 of the Code, read with Regulation 21A. The Respondent No. 1 contended that Areion Finserve filed its claim only on 06.07.2024, approximately 240 days after commencement of liquidation, and the said claim was rightly rejected. It was further stated that IA No. 231 of 2025, IA No. 341 of 2025 and IA No. 1137 of 2025, challenging such rejection, were all dismissed and have remained unchallenged, thereby attaining finality. The Respondent No. 1 further submitted that liquidation commenced on 03.10.2023, the last date for submission of claims was 08.11.2023, and the statutory thirty-day period prescribed under Regulation 21A(1) also expired without any intimation from the secured creditor regarding its intention to realise the ....
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....ctions, and a fresh mortgage securing the debt of a different borrower could not inherit the priority attached to the discharged security. The Respondent No. 1 also contended that the DRT's finding recognising the consortium as the first charge holder remains operative and binding since it has never been stayed, and the pendency of a review petition filed by the Appellant cannot dilute or eclipse the binding effect of that adjudication. It was further submitted that the Adjudicating Authority independently arrived at the very same conclusion on the basis of the documentary evidence available on record. 45. The Respondent No. 1 submitted that the security interest claimed by the Appellant's assignees stood extinguished and merged into the liquidation estate by operation of law. It was contended that neither Bank of Maharashtra nor its assignees exercised the statutory option under Section 52 within the mandatory thirty-day period prescribed by Regulation 21A, and consequently the deeming fiction under Regulation 21A(3) automatically came into operation. The Respondent No. 1 stated that no avoidance proceedings under the Code were either necessary or initiated because the ....
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....a Engineers Limited, addressed correspondence to the assignor only five days after the judgment dated 21.06.2024 passed in IA Nos. 63 of 2022 and 94 of 2022, whereby the tenants had been directed to vacate and hand over possession of the Corporate Debtor's properties. The Respondent No. 1 stated that Respondent Nos. 6 and 7 are the erstwhile directors of the Corporate Debtor as well as the present directors of Gondwana Engineers Limited, and that Gondwana Engineers Limited had itself been directed to vacate Sigma-9 by order dated 21.06.2024. It was therefore contended that the present Appeal is merely a continuation of the deliberate obstruction caused by the suspended management through its alter ego with the sole object of delaying liquidation and preventing the successful realisation of the assets of the Corporate Debtor. 48. Concluding arguments, the Respondent No.1 requested this Appellate Tribunal to dismiss the present Appeal. Findings 49. At the outset, we note that the core controversy concerns the inter se priority of competing charges over an immovable property i.e. the Sigma-9 Property, owned by the Corporate Debtor, as between (a) a second pari-passu equit....
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....ssued a No Due Certificate closing the Corporate Debtor's 2010 Loan Against Property account; on the very same day, Gondwana Engineers Limited ("the Appellant") executed a fresh, independent Simple Mortgage Deed in favour of BOM over the Sigma-9 Property, securing the Appellant's own separate credit facilities, with the Corporate Debtor furnishing the property as guarantor-mortgagor. 06.04.2015 BOM, Pune Branch informed BOM, Ahmedabad Branch that no second charge on the Sigma-9 Property was to be ceded without approval of the competent authority. 08.05.2017 Bank of Baroda instituted O.A. No. 282 of 2017 before the Debts Recovery Tribunal, Ahmedabad ("DRT"). 17.10.2018 The DRT, in S.A. No. 154/2017, upheld Bank of Baroda's symbolic possession under Section 13(4) of the SARFAESI Act, 2002, recording that a second charge in its favour over the Sigma-9 Property was not in dispute. 08.11.2019 The DRT, Ahmedabad, in O.A. No. 282 of 2017, held that IDBI Bank and Dena Bank (BOB) became first charge-holders over the Sigma-9 Property upon discharge of BOM's facility, and that any subsequent loan by BOM would rank subordinate thereto. 2020 The Appellant filed Rev....
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....filed I.A. No. 525(AHM)2026 seeking amendment of I.A. No. 440 of 2025 for a consequential direction for handover of the original title deeds of the Sigma-9 Property. 30.06.2026 The Adjudicating Authority passed the impugned Common Order disposing of I.A. Nos. 440(AHM)2025, 1137(AHM)2025 and 525(AHM)2026. 17.06.2026 The Liquidator issued a notice (with corrigendum) for auction of the Corporate Debtor's properties, including the Sigma-9 Property, fixed for 20.07.2026. 16.07.2026 The present appeal, together with applications for ad-interim stay of the impugned order and of the proposed auction, came to be filed. 51. The Adjudicating Authority framed four issues for determination, namely: (i) whether IDBI Bank and BOB acquired first charge over the Sigma-9 Property upon discharge of BOM's earlier dues, and the nature and effect of the mortgage subsequently created by the Appellant in favour of BOM; (ii) whether the assignment of debt by BOM to Areion Finserve, and thereafter to Raj Radhe Finance, conferred any rights on the assignees and required adjudication of the validity of those assignments; (iii) whether BOM and its assignees failed to exercise the option to....
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....e Code were left open. 53. Having heard the matter and perused the paper-book, including the impugned order in its entirety, the said grounds resolve themselves into the following six Issues, which alone require determination and are dealt with issue-wise below: ISSUE NO. (1) Whether I.A. No. 440(AHM)2025 involved adjudication of matters beyond the jurisdiction of the Adjudicating Authority under Section 60(5) of the Code. ISSUE NO. (2) Whether the Adjudicating Authority erred in holding that the second pari-passu charge of IDBI Bank and BOB ranks in priority over the Simple Mortgage Deed dated 20.03.2015 in favour of BOM ISSUE NO. (3) Whether the absence of registration of the IDBI Bank/BOB charge with the Registrar of Companies ("ROC")/CERSAI, and the alleged non-consideration of Sections 77 and 79 of the Companies Act, 2013, renders the impugned order perverse or per incuriam. ISSUE NO. (4) Whether the pendency of Review Application No. 1 of 2020 against the DRT order dated 08.11.2019 detracts from the impugned order. ISSUE NO. (5) Whether the impugned order suffers from internal inconsistency in simultaneously including the Sigma-9 Property in the liquidation ....
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.... perfected for want of registration and could not prevail over the mortgage traceable to BOM. Having invited an adjudication on the very question of priority and having failed on merits, it is not open to the Appellant to contend for the first time before this Appellate Tribunal that the forum it invoked lacked jurisdiction to decide what it was asked to decide. 58. On the issue that the Adjudicating Authority travelled beyond the pleadings, we note that the reliefs sought in I.A. No. 440(AHM)2025 (extracted at paragraph 2 of the impugned order) expressly sought declarations as to the character of the Sigma-9 Property and the legality of the charges created by the assignment deeds qua that property. Determination of the underlying priority of mortgages was a necessary and inseverable incident of granting or refusing those very declarations; it cannot be said that relief was granted beyond the prayers. Issue No. 1 is accordingly answered against the Appellant. Issue No. (2) Whether the Adjudicating Authority erred in holding that the second pari-passu charge of IDBI Bank and BOB ranks in priority over the Simple Mortgage Deed dated 20.03.2015 in favour of BOM? 59. The un....
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....utiny of the parties and facilities involved. The 2010 facility was a Loan Against Property extended to the Corporate Debtor; the 2015 facility was an altogether different credit exposure extended to the Appellant, with the Corporate Debtor merely a guarantor. A restructuring that is "composite" only in the loose commercial sense of involving affiliated customers of the same bank does not, without more, operate in law to preserve a priority that depends on continuity of the very right, not continuity of the banking relationship. Indeed, BOM's own letter dated 19.03.2015 required that the 2010 facility "be closed before implementation" of the fresh sanction - contemplating sequential closure and fresh creation, not seamless continuation. The composite-transaction argument does not, therefore, assist the Appellant. 63. The Appellant's reliance on BOM Pune's internal communication dated 06.04.2015 to BOM Ahmedabad, asserting that no second charge was to be ceded without approval of competent authority was correctly held immaterial, since that communication post-dates, and could not retrospectively unwind, rights that had already vested in IDBI Bank and BOB with effect from 16.0....
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....hat the impugned order, by not adverting to Sections 77 and 79 of the Companies Act, 2013, is perverse. 67. We find that this conflates two distinct legal consequences. Registration of a charge under Section 77 of the Companies Act, 2013 operates as constructive notice to persons dealing with the company and, under sub-section (3) thereof, renders an unregistered charge liable to be disregarded by the liquidator and by other creditors of the company. It is not, however, the mode of creation of the charge; the charge here was created by the underlying contract, the equitable mortgage effected through the NOC dated 10.09.2012 and the Memorandum dated 16.01.2013 and continues to bind the immediate parties to that transaction and those claiming through them with notice of it, regardless of registration. Sections 77 and 79 of the Companies Act, 2013 exist to protect the liquidator and other creditors dealing with the company without notice of an unregistered charge; they were not enacted to confer, upon a subsequent chargee who otherwise had notice (actual or constructive) of an earlier charge, a priority it could not otherwise claim. 68. We observe that it is the Liquidator, the ....
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....tinues to bind the parties until set aside or stayed. The Adjudicating Authority was, therefore, correct to proceed on the footing that the findings in the order dated 08.11.2019 continued to hold the field. 72. In any event, the finding on priority does not rest solely, or even principally, on the DRT's order; it independently follows from the documentary chronology the NOC dated 10.09.2012, the Memorandum dated 16.01.2013, the No Due Certificate dated 20.03.2015 and the contemporaneous Simple Mortgage Deed read with Section 48 of the Transfer of Property Act, 1882, as discussed under Issue No. 2 above. The DRT order was relied upon only as independent corroboration and not as the foundation of the finding. The pendency of the review therefore furnishes no ground to disturb the impugned order. Issue No. 4 is accordingly answered against the Appellant. Issue No. 5: Whether the impugned order suffers from internal inconsistency in simultaneously including the Sigma-9 Property in the liquidation estate and declining to set aside the assignment deeds dated 27.10.2023 and dated 02.05.2025? 73. It is the case of the Appellant that the impugned order is self-contradictory in ....
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.... Appellate Tribunal? 77. It remains to consider whether the dismissal of I.A. No. 1137(AHM)2025 and the directions in I.A. No. 525(AHM)2026 call for interference, on the Ground that rejection of a claim does not extinguish a mortgage and that no prejudice was caused to the liquidation process by the delay in question. 78. We need to appreciate that IA No. 1137(AHM)2025 was preferred by Raj Radhe Finance Limited, as assignee of Areion Finserve, challenging the Liquidator's rejection of Areion Finserve's claim under Section 42 of the Code. Raj Radhe Finance, as assignee, could acquire no better title to press that claim than Areion Finserve itself possessed. The delay and non-compliance with Regulation 21A that justified rejection of Areion Finserve's claim equally infects the claim as pressed by its assignee. The dismissal of I.A. No. 1137(AHM)2025 calls for no interference, and, in any event, it is Respondent No. 8 who is directly bound by that dismissal; the Appellant does not, beyond what is already covered under Issue No 1 to 5 above, make out any independent ground of challenge to this part of the impugned order. 79. on the issue that rejection of a claim does not exti....