2019 (12) TMI 1489 - AT - Companies Law

Approval of Resolution Plan - registration of charges - requirement to register the Charge within given period of 30 days from the date of creation of Charge - Sections 77 and 78 of the Companies Act, 2013 - HELD THAT - The CoC had made it clear that in absence of Charge being registered, the Appellant could not be treated as Secured Financial Creditor. Although the transaction is stated to be of 2012, it is clear that the Charge was not got registered either by the Corporate Debtor or the Appellant till now on 03.10.2019 which is after the Resolution Plan was approved on 04.07.2019. Section 77 of the Companies Act, 2013 required the Charge to be registered and the Appellant had an option to resort to even Section 78 of Companies Act, 2013, if there were any grievances. Not having done so, when CIRP started trying to rely on the equitable mortgage without a charge created, we do not find there was any error in the CoC meetings which in its wisdom did not recognize creation of security. The transaction did not even reflect in the Books of Account of the Corporate Debtor. Appellant should be happy that it has been at least treated as Financial Creditor. Appellant took no actions since 2012 and till late stage of CIRP. Charge registered after Resolution Plan is approved cannot be considered. There are no reason to interfere in the Appeal directly filed without subject having been taken up with the Adjudicating Authority at any earlier time nor when the Resolution Plan was being discussed - appeal dismissed.

Summary

Issues:
1. Classification of the Appellant as a Secured Financial Creditor in the Resolution Plan.
2. Interpretation of Sections 77 and 78 of the Companies Act, 2013 regarding registration of charges.
3. CoC's decision on the Appellant's status as a Secured Financial Creditor.
4. Appellant's failure to take timely action in registering the charge.

Analysis:
1. The main issue in this case revolves around the classification of the Appellant as a Secured Financial Creditor in the Resolution Plan. The Appellant argued that they should have been treated as a Secured Financial Creditor due to an equitable mortgage created in 2012. However, the Resolution Professional and CoC determined that the charge was not registered, leading to the Appellant being classified as an Unsecured Financial Creditor.

2. The legal interpretation of Sections 77 and 78 of the Companies Act, 2013 played a crucial role in the decision-making process. These sections require both the company and the charge holder to register the charge within a specified period. The failure to register the charge within the stipulated timeframe can impact the creditor's status. The Respondent referred to relevant case law to support their argument that the Appellant could not benefit from the charge due to non-registration.

3. The CoC's deliberations in the 3rd and 9th meetings highlighted the reasons for considering the Appellant as an Unsecured Financial Creditor. The CoC emphasized the importance of charge registration and noted that the Appellant's claim could not be treated as secured without proper registration. The CoC's decision was based on legal provisions and factual circumstances surrounding the charge creation.

4. The Appellant's inaction in registering the charge since 2012 and only doing so after the Resolution Plan was approved raised questions about the timing and validity of the registration. The Tribunal found that the Appellant had sufficient time to address the registration issue but failed to do so promptly. The delayed registration post-approval of the Resolution Plan was deemed unacceptable, and the Appellant's argument for Secured Financial Creditor status was rejected.

In conclusion, the Tribunal dismissed the appeal, emphasizing that the Appellant's failure to address the charge registration issue in a timely manner led to their classification as an Unsecured Financial Creditor. The decision was based on legal provisions, CoC's discussions, and the Appellant's lack of proactive action.