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TMI Blog2020 (10) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the Certificate of Registration of Charge issued by the ROC under Section 77 of the Companies Act 2013/Section 125 of the Companies Act 1956, or, if there is any proof of Registration of Charge with Central Registry of Securitization Asset Reconstruction and Security Interest of India. The Appellant does not claim has not shown that Security Interest claimed by the Appellant is covered under any of the above clauses of Regulation 21 - The material on record does not show evidence that on failure of the Corporate Debtor under Section 77, Appellant had exercised their choice of registering the Charge under Section 78. Apart from the fact that the words of the statute are themselves precise and unambiguous and not in conflict with any other provisions of the Code or any other Act, (keeping in view the facts and circumstances of the instant case) read together with the objective of the statute and the Plain and unambiguous words of the relevant provisions, we are of the considered opinion that the Learned Adjudicating Authority has correctly applied the law - From the documentary evidence on record it is clear that no Charge has been registered under the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idator rejecting the Claim of the Appellant. 2. The facts in brief are that the Company (under Liquidation) namely Shree Balaji Printopack Pvt. Ltd. executed a Loan and Hypothecation Agreement on 25.11.2013, for an amount of ₹ 36,00,000/- payable in 84 monthly instalments of ₹ 61,964/- each from 15.12.2013 to 15.11.2020, for the purchase of an AUDI Q3 TDI 2.0 vehicle. It was stated by the Appellant that they have security of the vehicle in terms of Sections 52 and 53 of the Insolvency and Bankruptcy Code, 2016. It was averred that a demand of ₹ 21,83,819.18/- was made which was not paid and hence there was a default and the amount became due and payable . 3. The Learned Adjudicating Authority had appointed a Liquidator vide Order dated 03.04.2019 and Claims were invited from the Creditors as per the provisions of the Code. The Applicant namely, M/s. Volkswagen Finance Pvt. Ltd. filed its claim on 22.07.2019 with the copies of the Loan Agreement, the Hypothecation Deed, the Demand Letter and the Registration Certificate of the vehicle together with the invoices concerned for the consideration of the Liquidator. The Applicant had informed the Liquidator t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of registration of such charge is given by the Registrar under sub-Section (2). 14. In connection with the above, it is relevant to refer to the judgement passed by the Hon ble High Court of Kerala in Kerala State Financial Enterprises V/s. Official Liquidator, reported in (2006) 133 Company Case 912 (Kerala), wherein it has been held that if, the charge had not been registered under Section 125 of the Companies Act 1956, then, undisputedly the Appellant has to be considered as an Unsecured Creditor and has to be in que with other creditors to receive its dues as and when assets of the company are collected by the Official Liquidator for distribution in accordance with law . The said judgement was upheld by the Hon ble Apex Court on the Appeal filed as reported in (2006) 133 Company Case 915 (SC). A similar view was taken by the Hon ble High Court of Bombay in Antifraction bearings Corporation Ltd Anr. V/s. State of Maharashtra Ors., reported in AIR 1999 Bom 37. 15. From the discussion made above, it is concluded that no charge has been registered under the provisions of Section 77(1) of the CA, 2013 in relation to the Subject Property. This is also confirmed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Judgement of the Hon ble Apex Court in Brilliant Alloys Pvt. Ltd. V/s. Mr. S. Rajgopal and Ors., 2018 SCC Online SC 3154, in support of his submission that the Regulation 21 starts with the word may and that the Regulation has to be read with the main provisions of IBC, which the Learned Adjudicating Authority had failed to do so by not making any attempt to harmonise the two provisions of the Regulations and the Code on one hand and the Motor Vehicles Act, 1988 on the other. 7. He further contended that Section 77 (1), 77 (2) require that Charge is to be registered, but nowhere categorises on what items the Charge is to be registered by a Company or a Financial Institution. Section 77 (3) states that unless Charge is registered, the claim would not be considered and read with Section 77 (4) and Section 79, it is made clear that non-Registration of Charge does not impact the original contract and Security so created. He submitted that the Learned Adjudicating Authority failed to adopt a Harmonious Construction of the MV Act and the IBC Code. He placed reliance on the decision of the Constitution Bench of the Hon ble Supreme Court in Sri Venkataramana Devaru a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to provide any proof through the records available with an Information Utility as mandated under Section 52(3)(a) of the Code read with Regulation 21(a) of IBBI (Liquidation Process) Regulation 2016 and submitted that non-Registration of Charge under Section 125 of the Companies Act, 1956/Section 77 of the Companies Act, 2013 makes a Creditor an Unsecured Creditor . 9. Learned Counsel for the Respondent relied on the Judgment of the Hon ble Supreme Court in Kerala State Financial Enterprises Ltd. V/s. Official Liquidator, High Court of Kerala, (2006) 10 SCC 709, in which the Hon ble Apex Court, while confirming the Order of the Hon ble High Court of Kerala observed that ordinarily a Charge should be registered in terms of Section 125 of the Act and if the charges are not registered the same would be void against the Liquidator or Creditors . He also drew our attention to the Judgement of the Hon ble Supreme Court in Oil and Natural Gas Corporation Ltd. V/s. Official Liquidator of Ambica Mills Co. Ltd. and Ors., (2015) 5 SCC 300 in which the Hon ble Apex Court while placing reliance on Indian Bank V/s. Official Liquidator, Chemmeens Exports (P) Ltd. and Ors., (1998) 5 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breach or default is not remedied by the Borrower to the satisfaction of VWFPL, without any notice and without assigning any reason and at the risk and expense of the Borrower and if necessary as attorney for and in the name of the Borrower, be entitled (without prejudice to any other rights and remedies) exercise such rights and remedies, including (but not limited to): (i) to enter into and upon the premises of the Borrower and/or other person who then has possession of the Assets, (ii) to seize, recover, collect, withdraw, receive the Assets and/or any income, profits and benefits thereof without interruption or hindrance by the Borrower and/or by any person(s), (iii) to remove, and/or sell by public auction or by private contract, dispatch or consign for realization or otherwise dispose of or deal with all or any part of the Assets and enforce, realize, settle, compromise and deal with any right or claims relating thereto without being bound to exercise any of these powers or be liable for any losses in the exercise or non-exercise thereof, (iv) to be freed and discharged and well and sufficiently saved and kept harmless and indemnified of, from and against all former and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t subject to such security interest to be realised. (3) Before any security interest is realised by the secured creditor under this section, the liquidator shall verify such security interest and permit the secured creditor to realise only such security interest, the existence of which may be proved either- (a) by the records of such security interest maintained by an information utility; or (b) by such other means as may be specified by the Board. (4) A secured creditor may enforce, realise, settle, compromise or deal with the secured assets in accordance with such law as applicable to the security interest being realised and to the secured creditor and apply the proceeds to recover the debts due to it. (5) If in the course of realising a secured asset, any secured creditor faces resistance from the corporate debtor or any person connected therewith in taking possession of, selling or otherwise disposing off the security, the secured creditor may make an application to the Adjudicating Authority to facilitate the secured creditor to realise such security interest in accordance with law for the time being in force. (6) The Adjudicating Authority, on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of security interest is ascertained from records available with the Information Utility as per the Code; through the Certificate of Registration of Charge issued by the ROC under Section 77 of the Companies Act 2013/Section 125 of the Companies Act 1956, or, if there is any proof of Registration of Charge with Central Registry of Securitization Asset Reconstruction and Security Interest of India. 18. At this juncture, it is also relevant to reproduce the definition of Information Utility as defined under Section 3 (21) of the Code which is as follows; (21) information utility means a person who is registered with the Board as an information utility under section 210; (Emphasis Supplied) 19. The Appellant does not claim has not shown that Security Interest claimed by the Appellant is covered under any of the above clauses of Regulation 21. 20. It is the Appellant s case that Charge registered under Section 51 of the MV Act 1988, was duly recognised under Section 125 of the Companies Act 1956. For better understanding of the case, Section 125 of the Companies Act 1956 is reproduced as hereunder; 125. CERTAIN CHARGES TO BE VOID AGAINST LIQUIDAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue diligence, have been received in India, shall be substituted for thirty days after the date of the creation of the charge, as the time within which the particulars and instrument or copy are to be filed with the Registrar. (6) Where a charge is created in India but comprises property outside India, the instrument creating or purporting to create the charge under this section or a copy thereof verified in the prescribed manner, may be filed for registration, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situate. (7) Where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the instrument for the purpose of securing an advance to the company shall not, for the purposes of this section, be treated as a charge on those book debts. (8) The holding of debentures entitling the holder to a charge on immovable property shall not, for the purposes of this section, be deemed to be an interest in immovable property. (Emphasis Supplied) 21. Even Section 125(4)(e) clearly shows that Charge not being P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce, no charge created by a company shall be taken into account by the liquidator 5[appointed under this Act or the Insolvency and Bankruptcy Code, 2016 (31 of 2016), as the case may be,] or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration of such charge is given by the Registrar under sub-section (2). (4) Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of the money secured by a charge. (Emphasis Supplied) 78. Application for registration of charge.- Where a company fails to register the charge within the period specified in section 77, without prejudice to its liability in respect of any offence under this Chapter, the person in whose favour the charge is created may apply to the Registrar for registration of the charge along with the instrument created for the charge, within such time and in such form and manner as may be prescribed and the Registrar may, on such application, within a period of fourteen days after giving notice to the company, unless the company itself registers the charge or shows sufficient cause why such charge should not be registered, allow such re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as argued that the Appellant had given loan to the Corporate Debtor sometime in 2012 and against the loan provided, Title Deed of Anuj Chambers belonging to the Corporate Debtor were handed over to the Appellant and thus it is stated that the equitable mortgage had been created. Learned Counsel states that when CIRP started, the Appellant filed the claim before the Resolution Professional- Respondent No. 1 but the Resolution Professional treated the Appellant as Unsecured Claimant on the basis that the Charge was not created under Section 77 of the Companies Act, 2013. It is argued that in spite of this, the Appellant applied to ROC on 05.12.2018 for registering its charge and when ROC pointed out that Delay Condonation Application was required, the same was filed on 19.07.2019 and the Charge has now been registered on 03.10.2019. Submission of the learned Counsel for the Appellant is that the Appellant should be treated as Secured Financial Creditor . .......... 5. Learned Counsel for the Respondent No. 2 referred to Sections 77 and 78 of the Companies Act, 2013 to submit that when a Charge is created, the Company creating Charge and Charge holder both are required to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidation of the company as the charge becomes void against the liquidator and the creditor, yet he will be entitled to recover the debt due by the company on a par with other unsecured creditors. It is also evident that Section 125 applies to every charge created by the company on or after 1-4-1914. But where the charge is by operation of law or is created by an order or decree of the court, Section 125 has no application. It was then held by this Tribunal; 9. It is thus clear 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such an exercise need be carried out, only when the words are unintelligible, ambiguous or vague. 28. It is trite law that if the words of a Statute are themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. (Emphasis Supplied) 28. Apart from the fact that the words of the statute are themselves precise and unambiguous and not in conflict with any other provisions of the Code or any other Act, (keeping in view the facts and circumstances of the instant case) read together with the objective of the statute and the Plain and unambiguous words of the relevant provisions, we are of the considered opinion that the Learned Adjudicating Authority has correctly applied the law. 29. From the documentary evidence on record it is clear that no Charge has been registered under the provisions of Section 77(1) of the Companies Act 2013, in relation to the Subject Property. The Liquidator has rightly referred to Regulation 21 of IBBI (Liquidation Process) Regulation, 2016 and observed that the Appellants Claim was not supported by any evidence as prescribed under the said Regulation. It is also a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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