2022 (4) TMI 939 - Tri - Insolvency and Bankruptcy

Admission of claim as unsecured financial debt - subsistence of security interest has not been proved by the applicant bank in a manner prescribed under the Code - Financial Debt or not - HELD THAT - From Section 52(3) of the Code read with Regulation 21 provides that the proof of security interest is ascertained from records available with the 'Information Utility' as per the Code, through Certificate of Registration of 'Charge' issued by the ROC under section 77 of the Companies Act, 2013 or if there is any proof of Registration of 'Charge' with CERSAI. In the present case, it is observed from the documents on records that the applicant had mentioned about realising the security interest in claim Form D filed on 26.05.2021. The proofs of security interest was not available when the applicant submitted its claim form which is mandated by Regulation 21 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The liquidator after verification of the claim Form D and other documents annexed therein had observed that the charge was not registered and sent a mail communication to the applicant on 03.07.2021. From the facts provided it is evident that the liquidator was not provided with the proof of registration of security interests during the period stipulated as per Regulation 30 and the liquidator classified the applicant as unsecured creditor based on the information as provided by the applicant. Thus with regard to the vehicle loans the liquidator has acted correctly by classifying applicant as unsecured and not allowing to realise their security interest. Amount advanced by the applicant to the group companies of the corporate debtor on the security of FDRs based on a letter of authorisation granted by the corporate debtor - HELD THAT - Based on the documents placed on records the letters granted by the corporate debtor to the applicant bank are mere authorisations to extend loans to the borrowing companies and no guarantee extended by the corporate debtor and to that extent there exists no payment obligation on the corporate debtor - In the present case, the applicant bank had disbursed money to borrowing companies and no guarantee deed was executed by the corporate debtor and as such there is no payment obligation on the corporate debtor for the default committed by the borrowing companies. Application dismissed.

Summary

Issues Involved:
1. Whether the applicant was a 'Secured Financial Creditor' in the absence of the 'charge' being registered with the Registrar of Companies (ROC) under section 77(1) of the Companies Act, 2013 with respect to the vehicle loan.
2. Whether the amount advanced by the applicant to the group companies of the Corporate Debtor on the security of Fixed Deposit Receipts (FDRs) falls within the definition of financial debt, thereby making the applicant a financial creditor of the Corporate Debtor.

Issue-wise Detailed Analysis:

1. Secured Financial Creditor Status for Vehicle Loan:
The applicant, a nationalized bank, advanced vehicle loans to the Corporate Debtor. The liquidator rejected the applicant's claim as a secured financial creditor because the charge on the vehicle loan was not registered with the ROC under section 77(1) of the Companies Act, 2013. The Tribunal noted that under Section 52(3) of the Insolvency and Bankruptcy Code (IBC) read with Regulation 21 of the Liquidation Process Regulations, 2016, a secured creditor must prove the security interest through records available with an information utility, a certificate of registration of charge issued by the ROC, or proof of registration with CERSAI. The Tribunal found that the applicant failed to provide proof of security interest at the time of submitting its claim in Form D on 26.05.2021. The security interest on the vehicle was registered with CERSAI only on 07.07.2021, which was after the claim submission. Therefore, the liquidator acted correctly in classifying the applicant as an unsecured creditor and not allowing the realization of the security interest.

2. Financial Debt Status for Loans to Group Companies:
The applicant bank advanced loans to the group companies of the Corporate Debtor against the security of FDRs. The Corporate Debtor provided letters authorizing the use of FDRs as collateral but did not execute any guarantee deeds. The liquidator rejected the applicant's claim for these loans, stating that the loans did not constitute a financial debt of the Corporate Debtor. The Tribunal referred to the Supreme Court's judgment in Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis Bank and Others, which held that mere security interest over the assets of the Corporate Debtor does not grant the status of a financial creditor unless there is a debt or payment obligation from the Corporate Debtor. Since the Corporate Debtor did not owe any financial debt to the applicant and no guarantee deed was executed, the Tribunal upheld the liquidator's decision.

Conclusion:
The Tribunal dismissed both Interlocutory Applications IA/777(CHE)/2021 and IA/778(CHE)/2021, concluding that the liquidator was justified in rejecting the applicant's claims on the grounds that the applicant was not a secured financial creditor for the vehicle loan due to the lack of registered charge and that the loans advanced to the group companies did not constitute a financial debt of the Corporate Debtor.