2011 (6) TMI 673 - HC - Companies Law

Winding up - Interest on loan secured debt - hypothecation. - creation / registration of charge - held that - The interest accrued on two loans have been shown as a separate account called the funded interest account . - No amount has been advanced afresh to the company in liquidation. - Therefore, there is no modification of the charge which is required to be informed to the Registrar as provided under section 135 of the Act. Since the funded interest account is nothing but interest due on two term loans for which charge has already been created and placed on record, no further charge is required to be placed on record with the Registrar of Companies. The order passed by the official liquidator rejecting the claim of the appellant with regard to Rs. 33,12,717 as secured debt cannot be sustained.

Summary

Issues:
1. Official liquidator's rejection of appellant's claim as secured debt.

Analysis:
The case involved an appeal against the official liquidator's order rejecting the appellant's claim to treat a sum of Rs. 33,12,717 as secured debt. The appellant, Andhra Pradesh State Financial Corporation, had provided term loans to a company, which failed to repay within the stipulated time. The loans were rescheduled, and interest due was transferred to a funded interest account. The company was later directed to be wound up, and the official liquidator called for creditors' claims. The appellant filed its claim, which was partially treated as secured and unsecured debt by the official liquidator, leading to the appeal.

The main issue for adjudication was whether the funded interest account could be considered a separate loan account requiring notification to the Registrar of Companies under section 135 of the Companies Act, 1956. The appellant had registered a charge over the properties for the term loans provided, including the accrued interest transferred to the funded interest account. The court examined the charge register and concluded that the funded interest account represented interest accrued on the term loans, not a separate loan. As the charge already covered the principal amount and interest, no additional registration was necessary for the funded interest account. Therefore, the court held that the funded interest account should be treated as secured debt, overturning the official liquidator's decision.

In the judgment, the court emphasized that the funded interest account was merely interest due on the term loans for which a charge had already been registered. Since no fresh amount was advanced, and the charge covered both principal and interest, the court found no requirement to inform the Registrar of Companies about the funded interest account. Consequently, the court allowed the appeal, setting aside the official liquidator's order and ruling that the funded interest amount of Rs. 33,12,717 should be treated as secured debt in relation to the funded interest loan account.