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2024 (3) TMI 459 - AT - Insolvency and BankruptcyCIRP - Unsecured Financial Creditor or not - Non-registration of charge before the Registrar of Companies - the mortgaged property, will form part of the Liquidation Estate or not - mortgage rights over secured assets - failure to fulfil the requirements as per Section 52 of the Code r/w Regulation 21 of the Liquidation Process Regulations - HELD THAT - This Tribunal keeping in mind of the prime fact that Right to recover the money, lent by enforcing a mortgage is a Right to enforce, an interest in the property and that the claim of the First Charge Holder, shall prevail over the claim of the Second Charge Holder, and the Appellant / Petitioner, can very well enforce the Security Interest, resting on Section 58(f) of the Transfer of Property Act, 1882 and Rule 8 of the Security Interest (Enforcement) Rules, 2002, comes to a resultant conclusion that mortgage, is the result of the Act of Parties, where the Transfer of Ownership Interest, in a particular Immoveable Asset is created, and that the conclusion arrived at by the Adjudicating Authority / Tribunal, in upholding the decision of the Liquidator, in classifying the Appellant / Petitioner / Bank, as an Unsecured Financial Creditor, is an illegal and an invalid one, in the eye of Law and in the Liquidation Proceedings, the Appellant /Bank, is to be treated as Secured Creditor, as held by this Tribunal. In addition, the non-registration of the Mortgage, as per Section 77 of the Companies Act, 2013, is not a sufficient / enough ground, to come to an opinion, that the Appellant, is not a Secured Creditor. In reality, the rights of a Mortgagee, under the Transfer of Property Act, 1882 and the SARFAESI Act, are not to be diluted, in terms of Regulation 21 of IBBI (Liquidation process) Regulations, 2016. It cannot be lost sight of the fact that CERSAI Registration, became mandatory, only in February, 2020, much after the Mortgage, was created in the instant case. Further, the fact remains that the Mortgage, was registered in the Office of S.R.O., Thovalai, Kanyakumari District, Tamil Nadu, which is again a Public Office, providing information, on the Mortgages, registered in it. Suffice it for this Tribunal, to unhesitatingly, to hold, that the Appellant s rights, in holding a Valid Mortgage Right, over the Secured Assets, is to be protected, by any means whatsoever The impugned order upholding the decision of the Liquidator, in classifying the Appellant/Petitioner, as an Unsecured Financial Creditor, is an invalid and illegal one and the same is set aside, by this Tribunal, to secure the ends of Justice - appeal allowed.
Issues Involved:
1. Legality of the communication by the Liquidator regarding the classification of the Appellant as an "Unsecured Financial Creditor." 2. Validity of the mortgage rights of the Appellant under the Transfer of Property Act, 1882 and SARFAESI Act, in light of non-registration under Section 77 of the Companies Act, 2013. Summary: Issue 1: Legality of Liquidator's Communication The Appellant challenged the Liquidator's decision communicated via email on 01.07.2022, which classified the Appellant as an "Unsecured Financial Creditor" due to the non-registration of the charge before the Registrar of Companies. The Liquidator based this decision on Section 77(3) of the Companies Act, 2013, which states that no charge created by a company shall be taken into account unless it is duly registered. The Appellant argued that their mortgage rights, conferred under the Transfer of Property Act, 1882, should not be negated by the non-registration of the charge. Issue 2: Validity of Mortgage Rights The Appellant contended that their mortgage rights, established by a registered Mortgage Deed (MOD) on 07.07.2015, should be recognized despite the charge not being registered with the Registrar of Companies. They argued that the Transfer of Property Act, 1882, and SARFAESI Act provide absolute rights to the Mortgagee, which should prevail over the requirements of the Companies Act, 2013. The Appellant also cited the decision in ICICI Bank Ltd. Vs. SIDCO Leathers Ltd., which supports the precedence of the first charge holder's rights over the second charge holder. Tribunal's Findings: The Tribunal concluded that the non-registration of the mortgage under Section 77 of the Companies Act, 2013, does not invalidate the Appellant's status as a "Secured Creditor." The Tribunal emphasized that the rights of a Mortgagee under the Transfer of Property Act, 1882, and SARFAESI Act should not be diluted by the requirements of Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016. The Tribunal also noted that CERSAI registration became mandatory only in February 2020, after the mortgage was created. Disposition: The Tribunal set aside the Impugned Order dated 14.06.2023, passed by the Adjudicating Authority/NCLT, Division Bench-II, Chennai, which had upheld the Liquidator's decision to classify the Appellant as an "Unsecured Financial Creditor." The Tribunal allowed the Appellant's appeal, recognizing their status as a "Secured Creditor" and protecting their mortgage rights over the secured assets. The connected pending IAs, if any, were closed.
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